When You Still Owe the Bank During an Eminent Domain Process

There is no disputing that a mortgage, loan, or home equity line of credit on your property can make the eminent domain process more complicated. In the event you owe money on your property, the lender (i.e., the mortgage company) usually holds priority over you, the borrower.

Even if you owe a debt to a bank or lender, however, you still have legal rights. An experienced eminent domain lawyer could explore your legal options and work to protect your financial future. For help when you still owe the bank during an eminent domain process, contact an attorney today.

Identifying Encumbrances in an Eminent Domain Process

Before the government files a condemnation action, an eminent domain lawyer may conduct a lien check on the subject property. A lien check will reveal existing mortgages and any other encumbrances on the property. The lawyer may also ask for a copy of the government’s title search.

If the government has already filed a condemnation action, the banks and other lending institutions are usually named in the legal complaint. A lawyer can then contact the bank and see if the bank will agree to an option that benefits the landowner.

Payoff Option

In some instances, the government may offer the landowner more than the amount that they owe on the property. When that happens, the lawyer may ask the bank to supply an updated payoff quote and then pay off the debt completely. At that point, the bank does not have a legal interest in the condemnation lawsuit proceeds, and the landowner could freely pursue additional compensation.

Waiver Option

When the government’s initial offer is low, such as when the seizure only involves a small portion of land, an eminent domain lawyer may be able to convince the bank to waive any interest in the initial offer proceeds, as well as any interest in the lawsuit proceeds. If the bank agrees to waive its interest, this does not mean that the bank is forgiving the loan, but it may still be financially advantageous to the property owner.

Partial Waiver Option

If a full waiver option is unavailable to a landowner who still owes the bank money, an eminent domain lawyer may be able to obtain a partial waiver. To obtain a partial waiver, the lawyer must review the property deed of trust. Many deeds lay out what the bank will receive in the event of “damage” to the subject property.

The lawyer may be able to convince the bank to accept a portion of the government’s initial offer and waive any interest in future proceeds from the condemnation lawsuit. In other instances, the bank may accept the full amount of the government’s initial deposit and waive any interest in the condemnation lawsuit proceeds.

Refinancing Option

One final option is for the landowner to deposit any money received from the government in the bank, helping to pay down the outstanding loan amount which they still owe. At that point, the landowner may be able to refinance their loan, helping them decrease their monthly payments or pay off their loan more quickly.

Talk to an Experienced Attorney if You Still Owe the Bank Money

If you are a party to eminent domain proceedings, you always have legal options, even if you hold significant debt on the property in question. A skilled eminent domain lawyer could review those options with you and work towards obtaining the maximum compensation for your property. When you still owe the bank during an eminent domain process, contact an accomplished attorney.