Even well-drafted loan documents papering expertly structured transactions are frequently the subject of modification during their term as market conditions and developer expectations evolve. While written amendments entered into between borrower and lender are sufficient to change the relevant deal terms as between those principal parties, lender’s counsel’s failure to analyze the potential impact of those modifications on a guarantor’s original obligations under the as-closed loan may lead to some unexpected problems if and when the lender seeks to enforce the guaranty. Increases or changes to the guarantor’s potential liabilities could serve to give the guarantor a defense to payment or annul its obligations altogether if made without the guarantor’s consent.

Modifications that serve to release collateral for the loan or reduce planned amortization require the consent of a guarantor in much the same way as an increase to the loan amount or extension of the maturity date since, in each case, the guarantor’s liabilities may be increased. This article explores effective methods for obtaining the requisite guarantor consents, including a number of instances where a guarantor’s forward-looking waiver and consent contained in the original guaranty instrument was found to be enforceable in the face of modifications that would have otherwise threatened the agreement’s enforceability.

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