This article discusses potential pitfalls lenders may encounter in the face of loan agreement language purporting to limit and/or restrict the lender’s right of assignment, and ways to address these issues. The focus of this article is New York law.
New York Law
The general rule in New York is that unless there is an express contractual restriction on assignment of a loan, then the lender has the right to assign. It is typical in loan documents (other than among multiple lenders in syndicated or tiered credits) that there is no limitation on lender assignment. In construction loans, particularly syndicated ones in which future advances are an important part of the business arrangement, however, it is not unusual for there to be limitations on assignments of the loans without borrower and/or co-lender consent. Although, in the run up to 2008, borrowers had the ability, due to competition among lenders, to negotiate more restrictive assignment language than they previously could have.
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