TALLAHASSEE, Fla. — Florida State University’s $5 million-plus winning bid to buy the Sigma Alpha Epsilon fraternity house near campus has been put on hold after the property owner filed for bankruptcy just minutes before the foreclosure sale was set to be finalized.
Court records show 415 West College Avenue LLC, the company that owns the SAE house, filed for bankruptcy shortly before the sale would have transferred the property to FSU. The filing triggered an automatic stay, stopping the foreclosure process and pausing any transactions involving the property.
“When someone files a petition in bankruptcy, it automatically stops a foreclosure sale. So now all of the action moves over to the bankruptcy docket,” said Christopher Hampson, an Associate Professor of Law at the University of Florida.
The case is shifting from Leon County Circuit Court, which had been handling the foreclosure, to federal bankruptcy court. In bankruptcy court, a judge oversees the case, including the debts and the property, and determines what happens next — whether the sale can move forward, whether the parties reach an agreement, or whether the case takes another direction.
“When someone files a bankruptcy, the federal bankruptcy court issues an order saying all collection activities must stop. We are now handling this debt and all the assets that belong to this debtor,” said Kathryn Hathaway, a bankruptcy attorney with Hathaway Sprague Law.
Hathaway said the bankruptcy filing does not decide who will ultimately own the property, but it does give the owner time to work through the bankruptcy process.
“It stops the sale completely. They may decide they have to sell it later on if they can’t work out a deal with their creditors, but it stops the sale for now and gives them a chance to figure out another solution,” Hathaway said.
Hampson said the pause does not necessarily mean FSU has lost its opportunity to acquire the property.
“It doesn’t mean that Florida State is out of luck. They may still get it. It’s just that now they have to be in bankruptcy court rather than the circuit court,” he said.
Hampson also said the bankruptcy filing means students living in the fraternity house are not expected to be forced out while the case proceeds.
“415 West College Avenue LLC remains in possession of the property, and we can’t have any foreclosures or any evictions. So, everyone stays put for now,” Hampson said.
Requests for comment were sent to Florida State University, the SAE chapter, the FSU Interfraternity Council and property owner Daniel Gilbertson, but no responses were received by our deadline.
The next key date in the case is Aug. 24, when creditors are scheduled to meet as the bankruptcy process moves forward.