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Making Your Leases Work with Your Loan Documents

By Pablo L. Petrozzi
October 25, 2012

As a general matter, you should be mindful of loan document compliance. You do not want to find yourself in a situation where you believe you are adding value to your project but have unwittingly put yourself at risk of being in default under your loan documents.

Among the various reasons for complying with your loan documents, the most compelling is the fact that the typical non-recourse carve-out for unpermitted “transfers” may include leases that are not approved in accordance with your loan documents. A violation of this restriction on unpermitted transfers could trigger recourse liability for losses, or full recourse. And the recent trend of courts to uphold the enforcement of full-recourse guaranties further punctuates this concern.

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