Mitigating Risks of Lender Liability Claims When Reworking Troubled Commercial Real Estate Loans
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Real Property - Finance
- event Date
Tuesday, October 22, 2024
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
-
This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE webinar will discuss how the current distressed commercial real estate market may lead to an increase in the number of disputes between lenders and borrowers and guarantors or other third parties. The panel will provide guidance on how lenders can protect themselves from liability claims when enforcing remedies or engaging in loan workouts, modifications, or restructurings.
Ms. Foudy has over 25 years of experience representing clients in a wide range of complex commercial litigation, including class action securities fraud, accounting fraud, white-collar criminal matters, and general commercial disputes. She also has a particular focus in bankruptcy litigation and she has represented Chapter 11 debtors, creditors’ committees, indenture trustees, secured and unsecured creditors, private equity sponsors, independent directors, and distressed investors in all stages of bankruptcy. Throughout her career, Ms. Foudy has worked on many of the United States’ largest and most complex bankruptcy cases, including serving as lead trial counsel in several of the most prominent bankruptcy matters of the last decade. She has advised clients on all types of bankruptcy-related disputes, including suits by or against bankrupt companies, investigations into what led to bankruptcy filings, avoidance actions, and litigation of reorganization plans.
Ms. Houck is an experienced litigation attorney and a member of the firm’s Real Estate Capital Markets Practice Group, with a particular practice emphasis on commercial real estate workouts and foreclosures. With more than two decades of litigation experience in various legal areas, her knowledge lies in providing legal counsel and representation to a diverse clientele, including lenders, special servicers, financial institutions, receivers, private investors and other businesses. Ms. Houck's approach to legal matters is characterized by her ability to blend her business acumen with legal strategies, aiming for amicable resolutions that align with her clients' business objectives. Nonetheless, she is also well prepared to engage in litigation when necessary. Her extensive litigation background includes trying lawsuits, conducting arbitrations and making appearances in state and federal courts across the United States. Ms. Houck was formerly a principal at an international law firm where she led the Commercial Real Estate Workout Team.
Mr. Jacob is a litigator advising financial and real estate industry clients and high net worth individuals in complex disputes across the financial and real estate industries, and in fiduciary matters. In his financial industry practice, Mr. Jacob has asserted and defended claims for institutional clients, managers, executives and high net worth individuals involving commercial and investment banking, mortgage-backed securities, CDOs and other derivatives, mortgage servicing, professional liability, and fiduciary obligations. He is known for his ability to resolve complicated real estate litigation matters that often involve multiple parties. Mr. Jacob has extensive trial experience in federal courts (including bankruptcy courts), state courts, and in arbitration and mediation.
While lenders are careful in drafting loan documents that protect them from a borrower's default, oftentimes loan documents do not provide adequate lender protections when the lender decides to make a loan modification or accommodation. These workout situations can leave lenders vulnerable to liability claims from borrowers and third parties alleging, among other things, that the lender has exercised undue control over the borrower or that a new loan agreement has been reached.
There are many steps and considerations for lenders when developing a workout strategy for a troubled loan. Pre-negotiation or pre-workout agreements can mitigate a lender's risk of exposure to liability claims when entering into discussions with a borrower about a change in loan terms. These agreements establish the ground rules for negotiation discussions and should be executed prior to entering into any loan workout or modification discussions with a borrower.
Pre-negotiation agreements come in a variety of forms and should be tailored to meet the needs and concerns of the parties. Some key elements of a pre-negotiation agreement are that the loan documents remain in full force and effect, an acknowledgment that neither party is waiving any rights or remedies by entering into workout discussions, that all discussions are confidential and inadmissible in any subsequent legal proceeding, and that nothing admitted or disclosed will be binding on the parties unless the discussions result in a written agreement that is signed by all the parties.
Listen as our authoritative panel discusses key considerations for lenders when entering into loan workout or modification discussions with borrowers and provides strategies and tips for mitigating risks and potential exposure to liability claims.
- Overview of the current CRE market
- Steps lenders should take in preparation for loan workout/modification discussions with a borrower
- Lender strategies for mitigating risks of liability claims when modifying CRE loan terms
- Pre-negotiation agreements
- Purpose
- Key elements
- Additional elements to consider to strengthen the lender's position
- Parties to the pre-negotiation agreement
- Enforceability of pre-negotiation agreements based on cases construing these types of agreements
- Other issues and key takeaways
The panel will address these and other key considerations:
- What circumstances make lenders more vulnerable to lender liability claims brought by borrowers and third parties?
- What steps can lenders take to mitigate the risks of liability claims?
- What is a pre-negotiation agreement and when should these agreements be executed by the parties?
- What parties should be included in a pre-negotiation agreement?
- What are core elements that lenders should include in a pre-negotiation agreement and what are some additional terms to consider?
- What are key considerations for lenders regarding the enforceability of pre-negotiation agreements based on caselaw construing these types of agreements?
