Structuring Real Estate Mortgage Covenants, Event of Default Provisions, Representations and Warranties

Description

Strategically crafted loan documents 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 should carefully define "default", "event of default", and the borrower's ability to cure defaults. Grace periods and notice and cure provisions may be critically important to the borrower, while the lender may want to maintain its ability to take immediate enforcement action.

Affirmative and negative covenants are often among the most negotiated provisions in a loan transaction due to their integral relationship with individual properties and borrowers. Financial covenants and material adverse change (commonly referred to as MAC) clauses have evolved in the wake of the COVID pandemic but remain important tools for the lender to monitor property performance and trigger cash management.

Although property representations and warranties will vary among transactions, standard representations are in most loan agreements. There are also limitations (such as best knowledge) that borrowers seek to negotiate regarding the scope of representations and warranties.

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