Glossary

Strict Foreclosure

A remedy under UCC Article 9 in which a secured lender holding pledged collateral — most commonly, in CRE, the pledged equity interests of a mezzanine borrower — accepts that collateral in full or partial satisfaction of the debt without conducting a public or private foreclosure sale.

Strict foreclosure is a distinct UCC 9-620 remedy from a UCC foreclosure sale: rather than auctioning the pledged equity, the secured party simply proposes to keep the collateral outright in satisfaction of some or all of the obligation. Critically, strict foreclosure requires the debtor's affirmative consent (or, for a partial strict foreclosure, the debtor's failure to timely object after proper notice) — a secured party cannot force a strict foreclosure over an objecting debtor's opposition, which is why a mezzanine lender facing a cooperative borrower may prefer this faster, quieter path to control, while one facing a contentious borrower typically proceeds instead with a noticed UCC sale it can conduct unilaterally. Loan-to-own investors who have specifically acquired a mezzanine tranche to obtain equity control often favor strict foreclosure precisely because it avoids the cost, publicity, and execution risk of a public sale process.