Pam Rothenberg in GlobeSt.: CRE Loan Carve Outs Contain Unseen Risks

This article was published in the September 16, 2026 edition of GlobeSt.

For decades, nonrecourse financing reflected a clear allocation of risk. If the loan went into default, the lender could look to the property and its cash flow, but generally not to the borrower's other assets or the personal balance sheets of its principals. That allocation has become increasingly blurred. As lenders continue to tighten their underwriting standards and loan document provisions in today's more cautious credit environment, borrowers and guarantors need to pay closer attention to how routine defaults are treated in the recourse provisions.

Modern "nonrecourse" loan documents often contain an expanding web of recourse carveouts. Some still address the conduct these provisions were originally designed to deter, including fraud, intentional misrepresentation, misappropriation and bankruptcy filing abuses. Others reach far beyond bad acts and into the daily mechanics of operating a property.

The result is a fundamental shift. Somewhere between the term sheet and the closing table, recourse carveouts can transform ordinary operational risk into personal liability.

Click here to read the full article in GlobeSt.