Sample Release Clauses For Blanket Loans

[Bryan Hancock]

I was wondering if someone knew of a good spot to review sample legal language for some sample release clauses for blanket loans. We're about to contract with a seller who will finance a small development project for us and this information could be helpful in our discussions.

Any help or advice is appreciated. Here is what I have thought of that we want:

-Non-recourse to borrower. Carve-outs for bad boy provisions okay, but I doubt this will even come up

-No points and market-based rate

-80%+ LTC

-Blanket loan with release clauses (I'll start doing some research on language for these today)

-Release clauses should allow us to build on any of the lots and not prevent "checker boarding" (the lots are all adjacent so I can't imagine this is an issue less some of the flag lots)

-Release clauses should keep seller's security interest in tact and allow our group to take pro rata distributions as projects sell. In other words we'd get paid as the projects sell and not fully repay the debt first

-Bullet as far out as is possible if required

[Bill Gulley]

Bryan, you really need to get with an attorney, the particial release is an agreement incorporated in the note and the release is done by a Deed of Release for each parcel released filed after the Deed of Trust.

The note itself should be identified as to the type of debt created in the top margin. Such as: Limited Recourse Promissory Note (which is what i think you are wanting). The other title is simply Non-Recourse Promissory Note.

With carve outs, it's not a true non-recourse if recourse is granted under certain conditions. You could say that...for and in consideration of the collateral granted by the maker(s) hereof, the lender agrees to advance funds without personal liability of the maker(s) for the debt hereby created. However, your company has the liability to pay as agreed, so if you do the project in a seperate LLC, you're not personally liable unless you do those bad boy things under which case you can't write yourself out of acting without liability for intentional acts.

You may wish to incorporate a hold hamless agreement withing the note whereby the lender, for and inconsideration of the interest rate stated, the lender agrees to hold hamless and indemnify the maker(s) from and against any loss, damge, expense or finding arising from or out of this debt created notwithstanding the terms and agreements made in that certain deed of trust for the assignment of collateral granted,made of even date, or those promises made under the debt created for the payment of any and all amounts due.

Now, everyone knows that this is not legal advice and is simply the generalized language I have used before in similar instances as an example, I'n not an attorney, so go see yours. There may be verbage required in Texas.

I know that you'd love to have a hold harmless agreement incorporated, but the lender needs to take great care in the use of a HH agreement, in all fairness. If you draft this note and it is seen as preditory or unfair, you could get hammered and the whole thing could be at risk. SO it's very important not to just agree for the sake of getting someone to agree, because they will, you need balance in any HH Agreement and in the structure of the entire deal.

This is really not a DIY matter, I know you're a very clever and smart guy, but to protect yourself to ensure you end up with what you want, especially if things blow up, you really need to see an attorney...what's 500 bucks in the scope of things (?) when you probably have 6 figures going here....that's cheap....draft one and get it blessed with legal water. Good luck