Nonrecourse Loans (Commercial Real Estate)

Summary

This practice note provides an overview of nonrecourse commercial real estate loans, which limit a borrower's individual liability for repaying loan obligations. This practice note compares fully nonrecourse loans against loan transactions that include features that protect a lender against a borrower's bad acts taken in connection with the loan or real estate, including nonrecourse carve-outs set forth in the principal loan documents and related nonrecourse carve-out guaranties. This practice note also describes recent developments in nonrecourse carve-out guaranties and discusses such guaranties and other mitigation of lenders' risks in the context of specific transactions, such as acquisition loans, construction loans, and loans that are originated and sold into the commercial mortgage-backed-securities market.