The 7th Circuit issued an opinion recently concerning the rights of a limited liability company (“LLC”) that is a “single asset entity”, i.e. all it does is own one piece of real estate, and the rights of a lender to such an LLC when that loan is secured by a mortgage attaching to the real estate. The opinion can be found here.
Given the large number of entities existing that were established just to own a piece of real estate (often done for purpose of asset and liability protection), combined with the depressed real estate market and the debts owed against that real estate due to the borrowing that occurred when real estate values were higher, it will be important in the coming years for businesses and their counsel to understand what can, and cannot, be accomplished through a plan of reorganization, and what a secured creditor’s rights are related to the real estate owned by the LLC.
