Firm Files Legal Suit to Stop Hotel Foreclosure

October 16th, 2009 | Tags: Foreclosure

A firm is trying to help an hotel to stop the foreclosure process

A/P Hotel LLC, has been nursing plans to repair, refurbish and open again a hotel in Las Vegas located on Paradise Road. The firm has filed a legal suit against Lehman Brothers Holdings Inc. for blocking the foreclosure sale on the estate. The suit was filed in the District Court of Clark County.

At the centre of the storm is Atrium Suites Las Vegas hotel adjacent to Hard Rock casino hotel. This hotel that did not have gaming facilities was hitherto known as the Crowne Plaza.

The suit states that A/P had made plans to purchase this room having 202 rooms and convert it into Paradise Boutique Hotel. For this in 2007 it obtained a loan commitment of $66 million from Lehman Brothers. At closing $39.8 million had been given while the rest were kept in escrow. It was meant to be disbursed as the work proceeded. The work was to be completed by 31st May 2009.

In the legal suit the firm alleged that the funding was stopped after Lehman collapsed and subsequent bankruptcy on 15th September 2008. A/P hotel had taken $55.2 million out of the promised $66 million but had to stop work when Lehman could not disburse the remaining amount.

On 19th September the firm dispatched a letter to the lender wanting to be assured that it would continue to finance the project. The lawsuit read, “Plaintiff specifically notified Lehman Brothers Holdings that if it failed to fund, plaintiff would not be able to continue the renovation work on the project and would experience significant losses and damages.”

Lehman, according to the suit, did not answer to the letter and failed within the stipulated period of 10 days to continue disbursing funds. $1.3 million had been requested. Following this the firm discontinued repayments towards the debt and this made Lehman file foreclosure proceedings. With Lehman refusing to finance the project the latter has come to a halt.

In it bankruptcy papers Lehman as stated that it has the right to foreclose on the project from 12th October but it permitted A/P to challenge the foreclosure with this particular lawsuit in Nevada. A/P argued that following the breach of contract by Lehman it too was not any longer bound by its conditions.

A/P is trying to stop the foreclosure by saying that since the contract has been breached Lehman does not have the right to foreclose.

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