Testing the Limits of Recourse Carve-Out Guaranties

November 24, 2009
Non-recourse loans with certain recourse obligations guaranteed by affiliates of the borrower have been a fixture of commercial real estate lending since the late 1990s. Recourse carve-out guaranties often provide that if the borrower commits certain bad acts, the guarantor may be held personally liable for lender’s losses or the entire loan. This update examines the outcomes of several recent cases that have tested the validity and scope of recourse carve-out guaranties, and whether a borrower or guarantor can be held liable for acts outside of the scope of the carve-outs set out in a guaranty.