Chapter 3Loan Agreement

There are no standard terms and conditions for commercial structured real estate financing agreements, and each agreement is negotiated individually without any predefined standard form contracts. Moreover, the rules applicable to loan agreements differ from country to country, as more closely detailed in Part Two of the book.

The following rules and clauses are those which frequently appear in structured real estate loan agreements:

  • parties1 to the transaction (bank, borrower company, and guarantors, if applicable);
  • object and purpose of the loan;2
  • conditions precedent;
  • amount of the loan;
  • loan repayment schedule;
  • allocation of the loan;
  • interest rate;
  • interest rate risk hedging;
  • fees charged by the bank;
  • frequency and procedures of drawdown;
  • events of default (i.e. situations which will end the agreement or establish entitlement to terminate or withdraw);
  • collateral;
  • insurance;
  • representations and warranties by the borrower;
  • contractual covenants;
  • duties to provide information;
  • costs, taxes, and ancillary charges;
  • clauses relating to assignment/transfer/syndication;3
  • choice of law and jurisdiction.

The contents of the aforementioned contractual clauses will differ depending upon the relevant legislation in force in the country in which the agreement is concluded. In common law countries, all matters are regulated under the loan agreement as it is the only source of rules governing the relationship between the parties (bank and borrower). In civil ...

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