COVID-19 Complicates New York State UCC Foreclosures

The COVID-19 pandemic has resulted in significant financial distress for borrowers under commercial loan arrangements.  Many borrowers have missed payments or otherwise defaulted on their loans, triggering the potential exercise of rights and remedies by secured creditors.

Non-judicial foreclosure, i.e., a Uniform Commercial Code (UCC) foreclosure sale, is the basic method under Article 9 of the UCC for a secured creditor to realize on personal property collateral securing its loans. A UCC foreclosure sale involves the secured creditor disposing of the collateral in a public sale (i.e., an auction), without judicial process.  A key requirement of Article 9-610 in this context is that every aspect of the disposition, including the method, manner, time, place, and other terms, must be commercially reasonable.