I’m involved in a number of Nashville foreclosures right now, and here are some details for some pending sales for anyone looking to buy. (As always, the typical disclaimer: Nothing in this post, of course, is designed to give you legal or factual advice about these sales.)
(1) 1018 Riverwood Boulevard, Hermitage TN: June 21, 2022 at 10 am (thisTuesday). Sale to be conducted by Republic Bank, from an alleged second lien position, subject to a first from 2011 in the original amount of $178,837. Zillow Value: $490,600.
(2) 810 Bellevue Road, Unit 214, Nashville, TN 37221: June 22, 2022 at 10 am (thisWednesday). Sale to be conducted by HOA, from an alleged second lien position, subject to a first from 2003 in the original amount of $76,500. Zillow Value: $222,400.
(3) 1011 Murfreesboro Road, #A-4, Franklin, Tennessee 37064: June 22, 2022 at 1 pm (thisWednesday). Sale to be conducted by HOA, from an alleged second lien position, subject to a first from 2012 in the original amount of $56,500. Zillow Value:$359,500.
Please let me know if you would like additional information on any of these. I am the attorney for a creditor involved, and, as a result, I will be limited in what information and guidance that I can provide.
As with all distressed real estate sales, buyer beware, and hire a lawyer.
In the depths of the COVID-19 pandemic in June 2020, I bought a truck. And not just any truck, but a brand new 4×4 that was way bigger than the late model Nissan Leaf that I traded in.
When we returned to a semblance of normal life in the spring of 2021 (i.e. when Courts began to require in-person appearances), I realized how much I hated driving a truck on downtown streets.
Well, the actual realization occurred at the top level of the Williamson County Judicial Center parking lot, when there were no parking spots and I had to turn my giant truck around in a tight space and find street parking. I’ll yada yada the parts about me backing into a tree while parallel parking a few minutes later and, by the end of the day, getting a Carvana purchase offer.
But, long story short, Carvana gave me a no-questions/no-fuss offer on my (fixed) truck, in a process that was weirdly easy. I was used to having to run a newspaper ad and have strangers come to my house for test drives (or, worse, dealing with a used car salesman).
That’s their business model–disrupt the traditional market by making an onerous process so easy.
Which is exactly what Zillow was doing in real estate, and which ended in failure.
But don’t think that Zillow’s failure is an indictment of the business model. It’s alive and well in the Nashville market.
When I look at the recent property transactions in the Nashville Ledger, all I see are weird LLCs, buying lots and lots of properties. Look at the picture below. Sfr Xii Nashville Owner 1 LP. Opendoor Property Trust I. Mile High Borrower 1 Value LLC.
My personal favorite is the buyer named “Rich af LLC,” the new owner of some prime real estate on 1st Avenue.
The business model is straight-forward. These buyers approach owners with a quick, no-fuss, cash offer, and, then, they hope to flip the properties (after renovations or maybe not), safe in the assumption that the Nashville real estate market is going to justify their confidence.
Zillow’s failure drew a lot of national attention, but, if the past 60 days of transactions are any indication, the business model is alive and well in Middle Tennessee. In fact, Zillow’s crash and burn appears to be good for Nashville property investors–not only is there one less competitor, but there’s an assumption (among property owners) that “buying low/selling high” isn’t a viable business, and they’re lucky to get quick-cash offers on their properties.
When Carvana offered me nearly 95% of retail value for my 10 month old truck, I was surprised (and couldn’t get it there fast enough). I kept waiting to find out what the catch was–would there be some secondary negotiation or some other trick? (There wasn’t.)
I suspect Carvana was confident that they’d easily find a buyer in a great selling market, and I’m betting that’s what these Nashville property investors are doing too.
Per the Zillow information, the house was built in 2005, is in a phenomenal school district, and, based on my site visit, is vacant.
My bank client is the second priority lien holder. This is a “judicial foreclosure” because the third-priority lien holder is the United States government. As a result, any sale will be subject to the approval and confirmation of the Williamson County Chancery Court. Per my Sale Order, I’ll handle getting the sale approved.
The sale will occur on Thursday, November 4, 2021 at 11:00 o’clock a.m., at the property address.
Please let me know if you would like additional information on this property. I am the attorney for the creditor, and, as a result, I will be limited in what information and guidance that I can provide, but I am available to answer questions about the judicial foreclosure sale and the court approval process. Nothing in this post, of course, is designed to give you legal or factual advice about these sales.
As with all distressed real estate sales, buyer beware, and hire a lawyer.
As indicated in the Sheriff’s Sale Notice, the property is scheduled for auction at 11:00AM, on August 3, 2021. The Sale Notice contains the terms of sale, including opening bid and the bidding process.
I post here in order provide a quick link to the Notice of Sale, which I’m planning to forward to potential bidders. This should present a great opportunity to a bidder.
In this strong real estate market, there are limited opportunities to find good deals on Middle Tennessee real property. The investors have long figured out foreclosure sales, then they figured out tax sales, and, now, Sheriff’s Sales are the next frontier. Sheriff’s Sales used to be rare–given that the process is fairly complex and confusing (even to lawyers)–but these are becoming more common, given the rise in property values and the unyielding demand for residential real estate.
As Zillow continues to grow into a trusted resource, though, I worry that a typical homebuyer may be lulled into seeing only the upsides of the potential deals listed on Zillow, without fully exploring the risks that distressed asset sales present.
I’m not suggesting that a buyer shouldn’t consider participating in a sheriff’s sale (seriously, please come on August 3), but I am encouraging every caller to educate themselves on the process and to consult with a real estate lawyer in advance.
The sale was cancelled when the corporate owner filed a California Chapter 11 bankruptcy, but Zillow nevertheless has me listed as the sales agent and, ever since, I get at least one phone call a day asking about the property.
After getting three calls about it yesterday, I looked up the status of the Bankruptcy Case, and I see that the bankruptcy trustee has a sale contract on the property!
Per the Motion for Approval of Saleof Real Property [Docket 217], the bankruptcy trustee is proposing a sale of the property for $600,000 (more than $175,000 below the Zillow value). A copy of the full Motion can be viewed below.
Under 11 U.S.C. Sec. 363, a bankruptcy trustee can sell non-exempt property of the bankruptcy estate. Here, after payment of all the liens associated with this property, the trustee has determined that this sale will generate proceeds for the benefit of creditors.
If you are reading this and you are one of the hundreds of people who have called me over the past 6 months, don’t despair. Pursuant to Paragraphs 9, 12(g), 14, and 15-17 of the Motion, the trustee will continue to entertain higher offers.
But, please note, any such offers must be presented to the Trustee before the hearing on this Motion on June 14.
A successful sale will fully pay my lender client, but I’m also hopeful that a sale will cause Zillow to remove this property as an active listing and that I’ll stop getting so many phone calls.
While it’s been fun to talk to callers from all over the country about this house and the hot Nashville real estate market, it’s also been a huge waste of my time.
Of course, like any good marketer, I’m making lemons into lemonade…I’m telling all the callers about my upcoming and planned Nashville and Brentwood foreclosures for 2021.
The real estate market has been so hot in Nashville over the past 6-7 years that, any time an old building in an in-demand area burns down, I’ve wondered if the culprit was a crafty real estate developer looking to build a high-rise condo. (Kidding, of course.)
But, as matter of law, a disaster can provide a landlord a way out of a long-term lease (whether they’re happy to be out or not), where the premises are fully destroyed.
I thought of this today, when reading the Nashville Post article Old Spaghetti Factory loses lease after 40-year run. Per local news, after total destruction of the building on Second Avenue, the landlord “will be terminating the lease agreement, although the restaurant reportedly has 16 years remaining on that lease.” The article notes that the restaurant is offering to spend more than $1 million of its own money to help rehab the space.
Seems unfair, right? It may be, but it’s probably allowed under the Lease.
Most commercial leases have a “Casualty” section, which dictates what happens when rental premises are totally destroyed, whether by fire, earthquake, or some other huge event.
Those provisions generally require the Landlord to restore the premises to substantially the condition that existed prior to the disaster. If the Landlord does that, then the Tenant is most likely stuck in the Lease. (Yes, even if losing the use its rented space during the repair period kills the Tenant’s business.)
Having said that, the provisions also generally give the Landlord an “out,” if the destruction is so total that the premises can’t easily be restored. In making this determination, a number of factors are considered, including if the cost to restore the building exceeds the ultimate value (and/or insurance money), if the Landlord’s lenders scoop up all the insurance money, the lease is near the end of the term, or if would take too long to restore (180 days from the event is a common measure).
In most cases, the landlord is motivated to repair or rebuild quickly, hoping to get the tenant back in the space–and back paying rent–as soon as possible.
There is no indication in the story whether the landlord here is relying on a similar provision or what types of other issues exist.
It may be that the cost to restore this historic building is so high that the landlord can’t (or isn’t financially ready to) quickly go into rebuilding mode. If the lease uses a typical 180 day requirement, the owner may know that there’s no way to do it in that time with all the special challenges presented by this terrorist event and during a global pandemic.
A skeptic would wonder if this owner wants to renovate a building to a newer, better use (like condos, offices, etc.) or may want to get rid of a long term–possibly below market–lease.
Leases are just like any other contracts. The plain text of their terms control. But, casualty provisions are a rarely negotiated point. When I prepare leases for commercial real estate, it’s often a few paragraphs at the end that I review quickly and move on.
But, when they do apply, it’s a big deal. Just like COVID got every Nashville commercial real estate attorney talking about force majeure, maybe this situation will get us negotiating casualty paragraphs.
In the end, though, yes, this is probably allowed under the lease.
The Tennessee Legislature is, again, considering debtor-friendly changes to the homestead exemption statute.
The one most likely to pass is House Bill 1185, which seeks to increase Tennessee’s homestead exemption from the existing $5,000 to $35,000 for single homeowners and from $7,500 to $52,500 for jointly owned property.
Before you complain too much about that proposal, consider Senate Bill 566, which provides an unlimited exemption for a judgment debtor’s residential real property (and, after the debtor’s death, it passes to the heirs).
Back in 2019, I talked about the importance of exemptions for debtors, since exemptions can preserve and protect a basic necessity level of assets for debtors (picture the clothes on their back, a few thousand dollars in the bank, a car, tools).
As I wrote in 2019, though, “if this new law passes, the downfallen debtor can keep 100% of the equity in his $750,000 house entirely out of the reach of creditors.” I then said:
Wait a second. Is this law designed to protect downtrodden debtors seeking a fresh start in life (who very probably do not have high value real property at all) or, maybe, is it designed to protect high income individuals whose businesses fail?
Because that’s all this proposed law does. It grants fairly absolute protection to the high value real property owned by judgment debtors in Tennessee, and all the garnishments, levies, liens, and bankruptcies will never touch a penny of that equity.
I feel the same way about these new proposals. If we’re talking about protecting the working poor and preserving the necessities of life from garnishment, let’s start somewhere other than $750k of equity in a mansion. Let’s talk about debt relief measures, eviction support, access to justice, etc.
But, these new laws aren’t about basic necessities of life for poor people. Most poor people don’t live in lien-free mansions. Instead, these new measures are being lobbied for by the construction industry.
These are bad proposals. Unless you’re a debtors with big, lien-free McMansion. Then, sure, it’s a great new law.
My first job as a lawyer was on Second Avenue in Nashville.
This was in 1999, and my future boss had me come to the office to interview on a Saturday morning (partly to avoid the suspicion of the lawyer I would be replacing).
At the time, I didn’t know much about downtown Nashville, since most of my trips to Nashville were either to Opryland as a kid or driving on I-40 on the way to law school in Knoxville.
I had clerked one summer in Nashville at the Tennessee Attorney General’s office, but, back then, Second Avenue didn’t have much to attract folks in their mid-20s. In 1999, the vibe was Gatlinburg-esqe, with a Hooters, Mere Bulles, Graham Central Station (three stories of bars, each with a different theme), a palm reader, The Wild Horse, and other tourist-centric places that catered more to out-of-town grandparents.
I got the job, and I spent about 8 years on Second Avenue. A lot changed during that time.
Before Fan Fair moved downtown, the big show was Dancin’ in the District, which was set up in Riverfront Park. My office window was a perfect vantage for these shows; I saw Kanye West (with a then unknown John Legend on the piano), the Strokes, and many others, from about 500 feet away. It’s strange to think about all the big-time, national acts that performed at these free concerts to such relatively small audiences. Part of that, of course, was that, back then, hardly anybody wanted to go downtown.
In fact, in the early 2000s, that lack of “busy-ness” was part of what I loved about downtown Nashville. On a Friday night, we’d hit 6-7 Broadway honky tonks (generally via the back doors in the Ryman alley) looking for any bars with a crowd, which we rarely found. Needless to say, there were no “all points” pedestrian crossings downtown in 2005.
As a lawyer, there was always a bit of unease about being in a “Second Avenue” office, especially as that part of downtown started to take shape as an entertainment district. The tallest building on Second Avenue was 4 stories high, and no white collar firms would dare move in next to a karaoke bar.
Things really got bad in 2005 when Fan Fair became CMT Fest and moved downtown. During this all-day and all-night music festival, my very serious lawyer phone calls were always at risk of interruption by country music and–definitely worse–the pre-show sound checks at the “River Stage” in Riverfront Park (generally, 5 second snippets of Rod Stewart’s “Do Ya Think I’m Sexy,” played over and over and over in the days before the festival).
The CMT Fest move was a spark for downtown’s growth. Before that, people just didn’t go downtown at night. There was wasn’t much to do and not much interest in what there was. This single event showed 50,000 folks (and countless others watching on TV) how awesome the historic downtown venues were.
This process was accelerated in 2010, when the Nashville Flood hit, and the buildings on Second Avenue flooded and many were then sold and renovated for new uses. Nashville’s overall recovery from the Great Recession was far quicker than other cities, and the rebuilding (and, yes, the developer opportunities) resulting from the devastation of the flood caused a rapid growth in downtown property investment and in tourism.
And, out of nowhere, people saw downtown Nashville not just as a “night out” option, but as a vacation destination. Maybe it was the TV show, but, in 2014 or so, you couldn’t even get in the door (front or back) at the old honky tonks. And, where there’s a happy tourist, there will be no shortage of a honky tonks willing to sell them a $6.50 Coors Light. As a result, dozens of new bars took over any available spaces downtown. Tootsies even built a new Tootsies on top of the old Tootsies.
Soon, all the Second Avenue lunch places and the ground-level offices were turned into bars and gift shops, while the upstairs offices were converted into condos and, later, AirBnBs.
In fact, in 2015 or so, the new owners of my old office building converted it into a residential condo building with a tourist-centric snuff shop on the ground floor.
I moved to a different firm in 2008 on the “business” side of downtown, and, personally, got married and had kids and just stopped going downtown very much–if ever–at night. When I did go downtown, I was always amazed at the crowds. Just an oppressive amount of people that, frankly, made me wonder who all these people were and where they came from.
Locals began to avoid downtown, and local media had fun mocking the bachelorettes and references to the “It City.” It became a sort of estranged relationship, and that always made me sad to see.
The Nashville bombing on Christmas morning was a tragedy on all levels. A senseless, terrible act that risked many peoples’ lives and absolutely destroyed their homes and businesses. Some of the businesses destroyed–like Old Spaghetti Factory and The Melting Pot–had been there when I walked to that first job interview in 1999.
Both had held on through all of the ups and downs on Second Avenue and three different recessions, and then this happened.
As I watched the news coverage all day on Christmas, I’d see my old office building, with broken windows and blown open doors. It made me profoundly sad, as a human being and as a resident of Nashville. These buildings on Second Avenue are part of our city’s history, having made it through thousand-year floods, fires, and wars.
And, maybe this is just typical New Year’s Eve sentimentality talking, but I’m also sad on a personal level that the Second Avenue that I first visited 20 years ago is gone and most likely will never come back.
The entire city of Nashville has changed so much in the past 7-10 years, and it sometimes feels like, if you don’t drive down a certain street for a few months, that, when you do, you’re going to see something old gone and something new being built, whether it’s downtown, Music Row, or even far away places like Madison. There hasn’t been an end in sight, and the Nashville Post must be running out of ways to report that the old “price per square foot” real estate sale records get broken on a monthly basis.
Maybe my broader sadness for Second Avenue is a feeling of loss over the city that I first moved to, over that office I was sitting in when that jerk opposing counsel yelled at me, or the places Lena and I went when we were dating. (Cue the Dan Fogelberg music now.) Maybe it’s a bit of maudlin loss for that version of me who walked cautiously past the Lazer Tag place while rehearsing for that job interview. Maybe it’s sadness that we live in such a divisive world where somebody felt compelled to bomb a building for political reasons.
I’m hopeful that these old buildings can be saved. At the same time, I’m also a realist, and I remember all the day-to-day structural and mechanical issues that arose in that 150+ year old building that I worked in. In my old conference room, the floor was so un-level that, if you lifted your feet off the ground, your chair would roll to the side.
If that’s the case, then, I hope this isn’t just another in a long line of disasters to hit Nashville and lead directly to investors’ property-prospecting and redevelopment. I hope our city leaders do what they can to protect the character. I’m hopeful that, instead, our state and federal governments will offer aid to the businesses and people affected.
I’m hopeful that, whatever happens on Second Avenue, that there aren’t a row of glass fronted condos and high rise offices there someday. I hope it’s never shiny or, worse, fancy.
I hope that Second Avenue comes back strong and serves as a vibrant rebuke to this despicable act. And, when it does, I hope that it preserves some of that unique charm that it’s had all these decades.
I hope it never becomes a place where big law firms want to move to.
In a post from last month, I mentioned that, when a commercial tenant defaults and leaves a leased property, the landlord is faced with a hard decision: File the lawsuit for unpaid rent now, or do you wait 6-9 months until a replacement tenant can be found?
One thing we know for sure: A landlord can’t just file a lawsuit for all the rent due for the remainder of the term. Instead, the landlord has a duty to mitigate its losses, which means–in this situation–to try to find a replacement tenant.
As of last Thursday, the next available civil hearing date for new and pending cases was December 9, 2020.
Since last Thursday, 357 new cases have been filed in Sessions Court.
Given the usual holiday court schedule, I’d bet that–as of this blog post— there are no more open civil dockets in 2020.
The Nashville Bar Association hosted a General Sessions Court Town Hall today to talk about these issues, but, given the unprecedented nature of this problem, nobody knows what’s next and how to solve it. Will there be afternoon dockets? Staggered morning dockets? Video appearances?
I’ve received a handful of calls from local lawyers, for advice on how to navigate all this. In some cases, the best move is to file the matter and just get a date locked down before things get worse (even if it’s in mid-January).
Another option, though, if you aren’t going to get into Court until January or February, is to file your commercial eviction lawsuits in Circuit Court (which has jurisdiction, per Tenn. Code Ann. § 29-18-108).
If you file an eviction action in Circuit, today, and get it served this week, you may be able to get a judgment by early December (or early January).
And, yes, I know I’ve criticized lawyers for filing Sessions-sized and eviction matters in Circuit Court (a move that generally presents no tangible strategic advantage, other than the lawyers get more billable hours).
But these unprecedented times call for novel ideas.