How does a lender enforce a defaulted commercial loan in New York, step by step?

This page explains New York law from the lender's side. KOR Law LLP represents lenders as well as borrowers and guarantors, and the firm's debtor and creditor practice describes creditor enforcement, judgment collection and asset recovery among its work. Knowing the borrower-side defenses is part of enforcing well, so this page links to them throughout.

What is the sequence, step by step?

1. Assemble the loan file. Signed note and loan agreement, mortgage, security and pledge agreements, every guaranty and amendment, UCC financing statements, payment history and all correspondence.
2. Confirm the default and send the required notices. Follow the loan documents' notice and cure provisions exactly. For a "home loan" as RPAPL 1304 defines it, the 90-day pre-foreclosure notice is a condition precedent; a loan made to a business for business purposes falls outside that definition (RPAPL 1304(6)(a)).
3. Decide on acceleration. Once a lender accelerates, the six-year limitations period runs on the entire amount due from that date (Van Dyke v U.S. Bank, 2025, applying CPLR 213(4)), and voluntarily discontinuing an action on a mortgage note does not reset it (CPLR 3217(e)).
4. Choose the first action. Foreclosure, a suit on the note, or a guaranty suit. Whichever comes first, a second action to recover any part of the mortgage debt requires leave of the first court (RPAPL 1301(3)).
5. Protect the collateral. Seek a receiver of rents under the mortgage's receiver clause (Real Property Law 254(10); RPAPL 1325) and, for personal property, exercise Article 9 rights (UCC 9-609, 9-610).
6. Get to judgment. A judgment of foreclosure and sale, a money judgment on the note or guaranty, or both in the right order.
7. Collect. After a sale, move for any deficiency within 90 days of the deed (RPAPL 1371(2)); enforce money judgments under CPLR Article 52; and pursue voidable transfers where assets moved (Debtor and Creditor Law 273, 274).

Which remedy fits which collateral?

What does the foreclosure track involve?

A New York mortgage foreclosure is a lawsuit in Supreme Court. The lender names every person whose interest is claimed to be subordinate, including owners, tenants for years and junior lienholders (RPAPL 1311), files a notice of pendency with the county clerk (CPLR 6511(a)), obtains a judgment of foreclosure and sale, and has a referee sell the property at public auction. The full sequence, from summons to auction, is in what happens after you are served with a foreclosure summons in New York. The auction rules for each borough are in where and when foreclosure auctions are held in New York City.

For income property, the rents can be secured from the start. If the mortgage has the standard receiver covenant, the lender is entitled to a receiver of the rents and profits without notice and without regard to the adequacy of the security (Real Property Law 254(10)); see whether a lender can take over a building's rents with a receiver.

After the sale, any deficiency requires a motion within 90 days after delivery of the referee's deed, against a liable party who was personally served or appeared, measured against the higher of market value or sale price (RPAPL 1371(1), (2)). Missing the window makes the sale proceeds full satisfaction (RPAPL 1371(3)).

What about guarantors and the note itself?

A lender can sue on an instrument for the payment of money only by serving a summons with a motion for summary judgment in lieu of complaint (CPLR 3213). For a guaranty, the lender's prima facie case is the guaranty, the underlying debt and the guarantor's failure to perform, after which the burden shifts to the guarantor to show a triable issue on a genuine defense (Navarro). Absolute and unconditional guaranties are enforced as written. The guarantor's side of that case is in what defenses a personal guarantor has when a New York lender sues. If a foreclosure is already pending on the same debt, get leave from that court first (RPAPL 1301(3)).

How does a lender use Article 9 collateral?

After default, a secured party may take possession without breach of the peace, collect from account debtors, and dispose of collateral by public or private sale, provided every aspect is commercially reasonable (UCC 9-607, 9-609, 9-610). It must send a signed notification of disposition to the debtor and any secondary obligor, and 10 days' advance notice is timely in a non-consumer deal (UCC 9-611, 9-612). If the lender cannot prove compliance once a debtor or guarantor puts it in issue, its deficiency is limited by UCC 9-626. Equity pledges are covered in what a UCC foreclosure sale of an ownership interest is in New York.

How is a money judgment collected?

A judgment creditor uses the CPLR Article 52 devices: restraining notices on bank accounts (CPLR 5222), information subpoenas (CPLR 5224), property and income executions (CPLR 5230, 5231), turnover proceedings against people holding the debtor's property (CPLR 5225), and, where useful, a receiver (CPLR 5228). The court system's CourtHelp guide reminds judgment holders that a judgment "does not mean that you get a check at the end of the case," and collection takes its own steps. The full toolkit is described from the debtor's side in what happens after a money judgment is entered against you in New York.

What changes the answer?

• The collateral mix. Real property, personal property and pledged equity each follow different rules (RPAPL Article 13; UCC Article 9).
• Whether the loan is a "home loan." Home loans carry the 90-day notice and the settlement conference (RPAPL 1304; CPLR 3408).
• Which actions are pending. A second action on mortgage debt needs leave (RPAPL 1301(3)).
• The limitations clock. Acceleration starts six years on the whole balance (Van Dyke; CPLR 213); see how long a lender has to sue on a note or guaranty.
• The loan's pricing. Rates and fees on loans under $2.5 million can draw a usury defense (General Obligations Law 5-501).
• Guarantor waivers. Absolute and unconditional language narrows defenses (Navarro).

For example: a lender with three kinds of collateral

Common mistakes lenders make

• Suing on the guaranty without leave during a foreclosure. It hands the guarantor a defense (RPAPL 1301(3)).
• Missing the 90-day deficiency window. The sale then satisfies the debt in full (RPAPL 1371(3)).
• Not serving guarantors personally in the foreclosure. A deficiency runs only against a liable party who was personally served or appeared (RPAPL 1371(1)).
• Rushing an Article 9 sale. A process that is not commercially reasonable can limit the deficiency (UCC 9-610(b), 9-626).
• Discontinuing and refiling to reset the clock. For mortgage instruments, a voluntary discontinuance does not reset it (CPLR 3217(e)).
• Ignoring asset transfers. The voidable transfer periods are short (Debtor and Creditor Law 278); see whether a creditor can undo a property transfer.

What to do this week (for lenders)

1. Pull the complete signed loan file and confirm who signed each document and in what capacity.
2. Check the default notice against the documents' notice and cure provisions.
3. Decide whether and how to accelerate, and record the date.
4. Search for subordinate liens, tenants and other interests that must be joined in a foreclosure.
5. Map every guarantor and every item of personal property collateral.
6. Set the order of actions with counsel before filing anything.

Frequently asked questions

Can a lender skip foreclosure and just sue on the note?

It can choose to sue on the note first. If it later wants to foreclose after a money judgment, it must first issue an execution to the sheriff and have it returned wholly or partly unsatisfied (RPAPL 1301(1)); see whether a lender can sue on the note and foreclose at the same time.

Is a confession of judgment a shortcut?

Only within CPLR 3218's limits: it must be filed in the county of the debtor's residence at signing or filing, within three years of signing; see whether a confession of judgment is enforceable in New York.

Does a lender need a court order to sell pledged equity?

No. Article 9 lets a secured party dispose of collateral after default without a lawsuit, if the process is commercially reasonable and properly noticed (UCC 9-610, 9-611).

How long does a judgment last once the lender has it?

It is presumed paid after 20 years (CPLR 211(b)), and it is a lien on the debtor's real property in a county for ten years from filing of the judgment-roll (CPLR 5203(a)).

What if the borrower offers a forbearance?

A forbearance can trade time for acknowledgments, waivers and reaffirmed guaranties; the borrower-side view is in what you give up when you sign a forbearance agreement.

Can a lender collect the deficiency from rents the receiver still holds?

Yes. After the sale, money left with a receiver of rents, after its fees and expenses, goes to the plaintiff up to the shortfall, whether or not a deficiency judgment is sought (RPAPL 1371(4)).