Tips for In-House Counsel
August 13, 2009
California Lenders Should Think Twice Before Exercising Remedies Under a Material Adverse Change Clause
By Michael J. Zerman of Zuber & Taillieu
The material adverse change (“MAC”) clause has become a common provision in real estate loan documents. This clause typically provides, in broad terms, that a material adverse change in the financial condition of the borrower, the secured property, or any guarantor will constitute an event of default, upon which the lender may accelerate the borrower’s obligations under the loan documents and exercise the lender’s other remedies, including foreclosure. Given current economic conditions, lenders may be tempted to read the MAC clause literally, as a “catch-all” default provision for loans that are insufficiently collateralized, even though the borrower has not made any…
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About the Author
Michael J. Zerman is a Partner of Zuber & Taillieu, focusing on real estate law.
