Commercial mortgage debt is typically non-recourse, subject to carve-outs that impose personal liability on a guarantor for defined conduct.

Loss carve-outs. Liability limited to the losses caused by the conduct — misapplication of rents, insurance or condemnation proceeds; waste; failure to pay taxes or insurance; environmental liability; and fraud or material misrepresentation.

Springing recourse. Full liability for the entire debt on defined events — a voluntary bankruptcy filing by the borrower, collusion in an involuntary filing, a prohibited transfer or encumbrance, and breach of the single purpose entity covenants. These are enforced as written, and courts have upheld full recourse for a bankruptcy filing made in good faith to protect the property.

Negotiating. Narrow the springing triggers to intentional conduct; carve out filings compelled by third parties; limit transfer triggers to voluntary transfers by the borrower; and cap environmental liability where a report exists.

Guarantor covenants. Net worth and liquidity requirements tested annually, with a default if breached.

Practical warning. Owners frequently treat these guaranties as unlikely to matter. The events that trigger them are precisely the events that occur when a property is in distress, which is when the guarantor can least afford them.