Bad Boy Guarantees Strictly ConstruedFall 2013 – Articles CRE Finance World
Real estate finance transactions typically involve non-recourse mortgage loans to single asset special purpose entities (SPEs). In these situations, the lender’s recourse is limited to the mortgage property, rents, deposit accounts and other assets affixed to or derived from the operation of the property upon non-payment of the loan. Recent court decisions addressing the scope and extent of the liability limitations indicate that parties signing bad boy guarantees need to be very clear and detailed in the documents supporting the agreement so as not to be caught off guard by the exposure they will undertake.
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