cure rights

In bankruptcy, the right to fix a default so that a creditor cannot pursue its remedies. For example, a debtor may file for bankruptcy moments before foreclosure, stop the foreclosure, and then propose a plan to cure the default and past due sums. Usually the plan involves small monthly payments over the course of several years. Of course, it is not enough to cure the default, the debtor must also stay current on future obligations, but bankruptcy will sometimes allow for a renegotiation of those obligations.

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Consequently, a ground lease must include certain cure rights and other key terms in favor of the leasehold mortgagee to protect it from such a catastrophic loss.

If, in order to exercise such cure rights, the leasehold mortgagee must foreclose on its leasehold mortgage or enforce its rights in a tenant bankruptcy proceeding, or appoint a receiver to obtain possession of the tenant's premises under the ground lease, the leasehold mortgagee should be afforded an unlimited grace period as long as the rent and other monetary obligations due under the ground lease are paid on a current basis.

Financing a ground lease: 8 essential terms

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