QVA insights
Non-Recourse Loans and Guarantees Explained
What to check in the actual loan documents when a real estate financing proposal uses the term non-recourse.
Read the obligation, not the label
Non-recourse generally describes a limit on a lender’s ability to recover from a borrower beyond specified collateral. The actual protection depends on the loan documents and applicable law. A financing proposal may also contain guarantees or exceptions that create personal liability in particular circumstances.
Questions worth asking
Which assets secure the debt? Who signs the note and any guarantee? Are there exceptions for fraud, misrepresentation, misuse of funds, environmental matters, or bankruptcy? Does the agreement change after a default? Ask qualified counsel to explain the provisions in the specific transaction.
Credit reporting still matters
A limitation on collection rights is a separate question from whether a loan appears on a person’s credit report or whether missed payments affect a score. Confirm reporting and payment responsibilities with the lender in writing before signing.