ARTICLE · 26 APRIL 2011

"Bad Boy" Guaranties And Protecting Yourself

Blank Rome LLP

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In this article, the authors describe bad boy guaranties, which provide for personal liability against borrowers and principals of borrowers upon the occurrence of certain enumerated bad acts committed by the borrower or its principals.

United StatesFinance and Banking

Originally published in The Real Estate Finance Journal (Volume 26), Spring 2011.

In this article, the authors describe bad boy guaranties, which provide for personal liability against borrowers and principals of borrowers upon the occurrence of certain enumerated bad acts committed by the borrower or its principals.

A typical mortgage loan requires the borrower and/or its principals to execute a "bad boy guaranty" (a/k/a recourse carve out guaranty), which provides for personal liability against the borrower and principals of borrower upon the occurrence of certain enumerated bad acts committed by the borrower or its principals. Where the transaction involves mezzanine debt, it is essential that the mortgage lender and the borrower and/or guarantors take certain steps to ensure that the bad acts of a foreclosing mezzanine lender do not trigger this personal liability. If triggered by enumerated bad acts, bad boy guarantees require the borrower and/or guarantor to

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