Drafting and Negotiating Real Estate Loan Documents: Key Issues and Strategies for Borrowers and Lenders

Description

Documentation of real estate loan transactions has grown increasingly complex over the years. Commercial loans now generally include a note, mortgage and security agreement, loan agreement, assignment of leases, environmental indemnity, financing statements, cash management agreement and guaranty, and require negotiation of a myriad of issues relating to the borrower and its operation of the property.

The lender seeks protection of its collateral and as much control, information, rights, and remedies as possible. It may also require certain features that allow for securitization or syndication of the loan. Consequently, the lender's loan documents generally cover a broad set of issues and impose various obligations and restrictions on the borrower.

In reviewing and negotiating the documents, the borrower wants to ensure that they properly reflect the business deal and do not impose obligations that are inconsistent with the way the borrower leases and operates the property. The borrower wants to limit the extent to which personal liability is imposed on the borrower or its principals (including for environmental matters). Prepayment and due on sale provisions can also be critical points of contention.

Listen as our authoritative panel discusses the key concerns of borrowers and lenders in negotiating commercial mortgage documents and the extent to which certain provisions can be negotiated in a given transaction.