Publications

Deal-Making Among Co-Lenders: Is it Legal?

September/October 2009
Real Estate New York

Over the past several years, increasingly sophisticated and highly structured loans have come to dominate the real estate finance industry. The recent downturn in the real estate market and the decrease in property values will inevitably see a significant number of these loans go into default. As a result, lenders, either within the same tranche (or level of debt) of a capital loan structure or within different tranches within the same loan, may find themselves at odds with one another as to which course of action to pursue if the loan is underperforming. Because these structures are a relatively new creation, there is little existing law to offer guidance to lenders. There are, however, some cases and principles that can be applied in discussing whether a lender could be found liable to a co-lender when one lender communicates with, cajoles or persuades another co-lender regarding a recommended course of action.