During the last decade of lower interest rates and higher property values, commercial real estate borrowers had easy access to capital with high loan-to-value ratios. However, recent years saw increased competition for capital and lower loan-to-value ratios for commercial mortgage loans. The use of mezzanine loans are correspondingly making a resurgence to fill the gap between senior mortgage debt and borrower equity, and mezzanine lenders, among others, need to understand the laws that apply to exercising remedies on their collateral.

In this article, we will explore a recent case from the Southern District of New York that discusses certain requirements under the Uniform Commercial Code (UCC) related to the mechanism by which a secured party can dispose of its collateral upon an event of default by the borrower.