What are carve out guarantees?

A carve-out guarantee, also referred to as a carve-out guaranty, gives a commercial lender the authority go after a borrower’s personal assets if the lender forecloses on the property.

What is a carry guarantee?

In construction lending, a Carry Guaranty is a standard and typical requirement whereby a Guarantor will guaranty the payment by Borrower of all costs incurred in connection with the operation, maintenance and management of the Property (or some subset of the same) for the term of the Loan (or, if the Property is …

What is a non recourse carve out guaranty?

Non-Recourse Carveout Guaranty means that certain Agreement of Guaranty and Suretyship, of even date herewith, given by the Guarantor to the Lender, as the same may be amended, replaced or supplemented from time to time with the prior written consent of the Lender.

What is a construction completion guaranty?

Under a completion guaranty, sometimes referred to as a “cost overrun guaranty,” the guarantor typically guarantees any excess of the cost of completing construction over the portion of the construction loan allocated to funding construction costs.

What is a warm body guarantor?

Warm Body: A creditworthy individual, as opposed to a borrower-related entity that might sign a guaranty but has no real assets.

What is recourse vs nonrecourse debt?

There are two types of debts: recourse and nonrecourse. A recourse debt holds the borrower personally liable. All other debt is considered nonrecourse. In general, recourse debt (loans) allows lenders to collect what is owed for the debt even after they’ve taken collateral (home, credit cards).

Can a guarantor cancel a contract?

If the Deed of guarantee contains a termination provision (allowing the guarantor to withdraw on say two months’ notice)- the provision can allow the termination during the fixed term. If any term of the tenancy changes (e.g. rent increase) the guarantee will automatically come to an end.

What is an interest Guaranty?

If the interest reserve is depleted or deemed insufficient to complete the project, the lender may require the borrower to deposit additional funds to replenish the reserve. A carry guaranty is intended to cover operating costs of the property after completion of construction, during lease up.

What is a cost overrun guarantee?

In cases when project costs exceed the budget – a situation known as “cost overrun” – the sponsor (or another company from the borrower’s group with a good financial standing, acting as a guarantor) is required to provide additional equity pursuant to a cost overrun guarantee, which is a standard security in real …

What is performance bond insurance?

A Performance Bond Guarantees that a bonded contractor will perform the obligations under the contract according to the contract terms and conditions. Project owners will typically require performance bonds for either 50% of the contract value or 100% of the contract value.

What is a cash trap?

Cash Trap: When things are bad, but perhaps not bad enough to call for a Cash Sweep, Lenders may use a Cash Trap. Excess Cash Flow is held in an account while the parties wait and see whether things improve.

What is a cash trap covenant?

A cash trap event occurs where the borrower fails to satisfy certain financial covenants levels and means that any surplus cash (following completion of the rent/debt service account waterfall) which would otherwise have been transferred to the borrower’s unblocked general account will instead be trapped in a blocked …