Special Purpose Properties
The Headaches are Just Beginning
One of the real nightmares that lenders face is taking over the operation of "special purpose properties." I'm talking about properties such as hotels (with restaurants, bars, and liquor license issues), nursing homes, hospitals, and other types of very specific franchise operations.
Many times the licenses required to operate and run these facilities are personal in nature (i.e., they cannot be transferred effectively to lenders) or, if they can, the lenders must take some additional action to operate under the licenses. In many cases, the very nature of the financial institution of the lender opens issues as to whether or not the lender can, in the regulatory context, operate the facility. Many times a lender will need to create a master lease of the entire property to an entity that can act as operator.
Lenders should be very cautious in exercising rights to these "special purpose" property types. The uninitiated lender can very quickly get into unchartered waters and find the process very frustrating and difficult, as well as economically disastrous.
