Events of default in real estate finance

Many of the events of default for a typical bilateral or syndicated loan facility will also apply to real estate acquisition and development finance transactions. Real estate finance documentation will include additional events of default relating to the following categories:

• • property-related defaults, such as failure to obtain or maintain planning approvals, compulsory acquisition or appropriation of the security property, default under key property documents (sales or leases), non-compliance with environmental laws;
• • construction defaults in a construction project, such as builder default or insolvency, failure to achieve completion, abandonment, damage or destruction;
• • cash flow defaults relating to administration of project cash flows, cost overruns, payment of contractors and operation of project bank accounts;
• • control events, such as change of ownership or control; and
• • cross defaults under project documents.

This guidance note describes these property or development project-specific events of default and the key considerations when drafting them.

See Events of default in real estate finance.