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ARTICLE · 23 AUGUST 2011

Bad Boys Get Spanked: New York Courts Uphold Recourse Guaranties

Blank Rome LLP
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Two recent New York cases have provided additional clarity with regard to the enforceability of "recourse carve-out" (or "bad boy") guaranties in commercial mortgage transactions.

United StatesStrategy
Michael Feinman
Michael Feinman
Joseph McFalls
Joseph McFalls

Introduction

Two recent New York cases have provided additional clarity with regard to the enforceability of "recourse carve-out" (or "bad boy") guaranties in commercial mortgage transactions. The two cases-Bank of America, N.A. v. Lightstone Holdings, LLC, July 14, 2011, Case No. 601853 (Lightstone) and, UBS Commercial Mortgage Trust 2007-FL1 v. Garrison Special Opportunities Fund L.P., March 8, 2011, Case No. 652412 (Garrison)-were decided by the New York Supreme Court (which is a trial level court, despite the court's name) in New York County (Manhattan), and were decided by the same judge, Justice Melvin Schweitzer. In both cases, the lender was awarded summary judgment for the amount it sought to recover.

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