Structuring Real Estate Loan Covenants, Events of Default Provisions, and Representations and Warranties

Description

Strategically crafted loan covenants and default provisions can give flexibility to the borrower and adequate protections and remedies for the lender. Carefully structured loan provisions can minimize disputes between the parties and reduce the risk of suit.

Default clauses must be carefully constructed to distinguish between a default and an event of default. Grace periods and the ability to cure defaults are particularly important to borrowers. Finally, the MAC clause, a common provision in real estate loan documents, is critical to both borrowers and lenders.

The covenants are often among the most negotiated provisions in a loan transaction. Financial covenants in real estate investment finance deals are more tightly monitored and defined in the current market than prior to the financial crisis.

Although property aspects of representations and warranties will vary among transactions, there are standard representations found in most facility agreements. There are also standard limitations that borrowers seek to negotiate regarding the scope of representations.

Listen as our authoritative panel of real estate finance attorneys offers effective approaches for borrowers’ and lenders’ counsel for structuring loan covenants, event-of-default provisions, and representations and warranties.