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MMLU / Denise Developer found a near-perfect piece of property zoned commercial in the…

Problem

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question

Denise Developer found a near-perfect piece of property zoned commercial in the downtown area of Pleasantville. She hired an architect to design a high tech office building with an objective of attracting upscale tech-industry tenants. She approached Microhard and secured a lease agreement for over half of the available square footage. The lease was not recorded, but the agreement allowed Denise to attract other wealthy tenants. She also disclosed the Microhard lease on her application for a $1,500,000 construction loan from Maximum Mortgage Company. Denise executed a mortgage and related promissory note in favor of Maximum. Maximum recorded the mortgage immediately. The office building was completed and Denise had more tenant demand than available space, so the building opened full. One year later, Denise ran into financial trouble and defaulted on the mortgage. Maximum took possession and immediately notified all the tenants that their leases were cancelled, that they were evicted, and that they must vacate immediately unless they were willing to sign a new lease at double the previous rent. The recording statute in the jurisdiction specified "every conveyance, encumbrance, or lease not recorded is void as against any subsequent party recording first." The tenants retained you to compel Maximum to honor the leases at the lower rents. Which of the following statements of advice is the most accurate?

choices

  1. All the tenants will prevail (unless otherwise in default on their leases), because Maximum loaned money to Denise with actual knowledge that she intended to enter into binding leases with the tenants.
  2. Microhard is entitled to continue their lease because Maximum had constructive notice of their prior lease.
  3. Microhard is entitled to continue their lease because Maximum had actual notice of their prior lease.
  4. All the tenants should renegotiate their leases with Maximum.

subject

professional_law

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Source and history

task_id
585f0dd8-0491-5864-b8be-b3415421cebd
task_key
all--test--585f0dd8-0491-5864-b8be-b3415421cebd
task_revision_id
1
config / split
all / test

Official source

initial import