Would The Real Guarantor Please Stand Up

Not all guarantees are created equal. There is considerable confusion amongst mortgage lenders when structuring a mortgage loan highlighted by a recurring tendency to insist on a guarantee from the beneficial owner of the real property subject to the mortgage. In other instances, where a partnership is a credit party, there is an equally confusing tendency for mortgage lenders to insist on a guarantee from the general partner(s) that signs the loan documents as general partner(s) for and on behalf of the partnership. These trends reflect a fundamental misunderstanding of the law of agency, guarantee and partnership, which frequently results in a muddled loan structure. Fortunately, cleaning up the loan structure is straightforward.