Mezz Lender's Requirement That Bidders at U.C.C. Foreclosure Auction Be "Qualified Transferees" Not Commercially Unreasonable

Posted: February 4, 2026 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories UCC Sale, Preliminary Injunction

Mezz Lender's Requirement That Bidders at U.C.C. Foreclosure Auction Be "Qualified Transferees" Not Commercially Unreasonable

On January 27, 2026, Justice Andrea Masley of the New York County Commercial Division issued a decision in WWP Mezz, LLC v. WWP Mezz Investment Co. LLC, Index No, 650135/2026, denying a mezz borrower's motion for a preliminary injunction enjoining a U.C.C. foreclosure sale of the mezz borrower's ownership interest in the fee owner of Worldwide Plaza.

One of the arguments the borrower made was that the requirements to be a "Qualified Bidder" were too onerous, since those requirements--which came from the definition of "Qualified Transferee" in the intercreditor agreement entered into between the mortgage and mezz lenders--were agreed upon when the underlying property was worth much more than it was at the time of the foreclosure. But Justice Masley rejected this argument, explaining:

Plaintiff’s strongest argument is from its expert Alan Tantleff who challenges the sale as commercially unreasonable because a “Qualified Bidder” must meet a monetary threshold that was set forth in the 2017 Intercreditor Agreement when the Loan was first issued, but this threshold is outdated given the “broad[] shift in the office investment market” rendering the excessive financial requirement arbitrary, irrelevant, and thus commercially unreasonable. (NYSCEF 78, Tantleff aff ¶¶ 13, 19.) Tantleff fears that this now excessive financial requirement applicable to institutional bidders in 2017, will exclude current bidders who may be high net worth individuals and private equity, along with institutional investors. (Id. ¶¶ 20-23.) In addition, he opines that since the foreclosure sale would extinguish any mezzanine creditors, the Intercreditor Agreement would be superfluous and thus its requirements are unnecessary. (Id. ¶ 6 [d].)

First, the court rejects plaintiff’s invitation to rewrite the Intercreditor Agreement’s definition of “Qualified Bidder” because the parties could have anticipated a downturn in the market when they negotiated the Agreement. (See id. ¶ 19.) A fundamental rule of contract interpretation provides that “clear, complete writings should generally be enforced according to their terms” particularly “where, as here, the instrument was negotiated between sophisticated, counseled businesspeople negotiating at arm's length.” Wallace v 600 Partners Co., 86 NY2d 543, 548 [1995] [internal quotation marks and citations omitted].) This rule “has even greater force in the context of real property transactions, where commercial certainty is a paramount concern.” (Id. [internal quotation marks and citations omitted].) Moreover, “it is a deeply rooted principle of New York contract law that parties may ... contract as they wish in the absence of some violation of law or transgression of a strong public policy.” (2138747 Ontario, Inc. v Samsung C&T Corp., 31 NY3d 372, 377 [2018] [internal quotation marks and citations omitted].) Plaintiff has not established a likelihood of success that the allegedly commercially unreasonable sale violates law or public policy in this regard. Indeed, plaintiff does not dispute that including such an eligibility requirement is standard practice in UCC sales. (NYSCEF 87, Brett Rosenberg6 aff ¶ 13.)

Rather, plaintiff argues that the eligibility requirement is outdated because of a significant change in market conditions. However, the parties to the Intercreditor Agreement – defendant’s predecessor and the mortgage lender, but not plaintiff who is not even provided a copy – did not negotiate for a change in the marker. (Id. ¶ 17.) Likewise, there is no requirement that the parties to the Intercreditor Agreement modify the Qualified Bidder financial requirement because of market changes and Rosenberg avers that she has never seen such a modification. (Id.)

Second, plaintiff fails to establish likelihood of success that the terms of the sale and notice are unusual and thus commercially unreasonable. Rather, the terms of sale, in particular, appear to be consistent with other UCC sales. (NYSCEF 87, Rosenberg ¶ 8.) Plaintiff’s example of a typical notice that does not contain a qualified bidder requirement for a UCC sale of eleven Texas apartment buildings is not comparable here as plaintiff fails to establish that that sale has a similar debt structure. (NYSCEF 72, Meister aff ¶¶ 12-13.) However, Rosenberg offered a sample notice and terms of sale with a similar debt structure and qualified bidder requirement, and she confirmed that its terms are standard and customary by comparing the terms to nine similar transactions. (NYSCEF 87, Rosenberg aff ¶ 8; NYSCEF 88, Sample Terms of Sale; NYSCEF 89, Sample Notice of Sale.).

Requiring that any bidder at a U.C.C. foreclosure meet certain eligibility criteria based on experience and assets under management is common when there is an intercreditor agreement between the foreclosing mezz lender and the mortgage lender. Here, the borrower didn't challenge the mezz lender's right to include this requirement, but argued that the requirement was outdated based on market development. But as explained above, the court rejected this argument and held that the mezz lender had no obligation to attempt to modify the intercreditor agreement (and presumably, it would have been unable to do so even if it tried). Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning U.C.C. foreclosures.