The majority of non-recourse loans (full info: https://cloptoncapital.com/non-recourse-commercial-loans/) have what are referred to as bad boy carve outs (carve outs) written into the loan documents. These items cover instances where certain acts performed by the borrower or borrowing entity result in the loan becoming full recourse to the carve out guarantor. Typical carve outs cover actions such as fraud, misrepresentation, waste, negligence, misappropriation, or any sort of sale, encumbrance or transfer without prior consent.
Bad boy carve outs are in place to ensure that the property is able to operate as laid out in the non-recourse loan documentation and operating agreements set in place at closing of the loan. Any purposeful deviation would most likely result in violation of a bad boy carve out and trigger full recourse to the guarantor.
Want to understand more about Bad Boy Carve Outs?
To understand more about these concepts and how it affects your loan, contact one of our commercial mortgage lenders at Clopton Capital by calling 866-647-1650 or using our Contact Us form.