Best Practices in Commercial Real Estate Lending

Daniel J. Beck, J.D., LL.M.

Even though commercial real estate ("CRE") lending is less regulated than consumer mortgage lending, CRE lending can be much more complex and face significant legal challenges. Lenders need to have a strong understanding of the regulatory requirements and other legal risks associated with CRE lending. To promote strong CRE lending practices for its members, the Arkansas Bankers Association is hosting a Best Practices in CRE Lending Workshop on Monday, March 6, 2017, at the Holiday Inn Presidential hotel, 600 I-30, Little Rock, Arkansas, which will cover many of the legal risks associated with CRE lending. The Workshop will be presented by myself and other attorneys of Quattlebaum, Grooms & Tull PLLC.

Commercial Credit Applications
While the phrase "commercial credit application" seems foreign, financial institutions may be using written commercial credit applications in the near future to comply with the Equal Credit Opportunity Act ("ECOA") and new data collection rules. Even if financial institutions do not develop written commercial credit applications, their lenders need to know how the ECOA applies in commercial lending situations, what disclosures are currently required, and what information lenders will need to collect from commercial borrowers in the near future. The Workshop will cover these issues, as well as other regulatory requirements in the early stages of a CRE lending transaction, including when it is appropriate to use an evaluation versus an appraisal and how lenders can avoid the High Volatility Commercial Real Estate (or HVCRE) lending capital requirements.

CRE Loan Documents and Other Due Diligence
Lenders should a solid understanding of the loan documents that they will be signing and the due diligence that is necessary to secure their financial institution's money and collateral. The Workshop will provide a thorough checklist of the items lenders should require from their borrowers and why they are important. The Workshop will also discuss best practices for filing Uniform Commercial Code financing statements, obtaining proper corporate authority from a business entity, what title insurance actually insures and what endorsements are important, and the importance of surveys and survey certificates.

Environmental Liability and Bankruptcy
Finally, there is always the risk that borrowers will have an environmental incident or fail to repay the loan. The Workshop will discuss why and when environmental site assessments are needed and the risks CRE lenders and their borrowers face if an environmental incident occurs. The Workshop will also cover what CRE lenders should know if a default occurs and the property is foreclosed upon and placed in receivership or if the borrower files bankruptcy.

Please join the Arkansas Bankers Association and members of Quattlebaum, Grooms & Tull PLLC for this half day Best Practices in CRE Lending Workshop. Even if you've been practicing CRE lending for years, a better understanding of the legal pitfalls associated with CRE lending will allow you to identify legal risks in the future and provide you greater strength when negotiating with borrowers to ensure your financial institution is protected from legal risks.

Daniel J. Beck is a transactional attorney who primarily practices in the areas of banking law and real estate. Mr. Beck regularly assists banks with raising capital, regulatory guidance, corporate governance, and loan documentation. Because of his broad experience with financial institutions, Mr. Beck is able to provide valuable and efficient legal service to his clients.

Mr. Beck has been recognized as a Mid-South Rising Star in the area of Banking by Super Lawyers.