Negotiating Lender Debt due to City demolition

[Vic Reddy]

Hi

We need some advice on this strange situation. A friend owns a good cash flowing low income Multi family property in TX. This MFH property is 50+ years old and the City wants to enforce recent building codes on this property. My friend tried to comply but the age of the property makes it impossible to get the property up to code other than demolishing and rebuilding the whole property. The owners do not have capital to rebuild this property

My question is - can the owners negotiate with the lender on the recourse loan balance as the property will be demolished? Owners had on time loan payments. Did anyone else go through similar experience? Any advice is appreciated