Security in real estate finance transactions

This Overview is a guide to the Banking & Finance content within the Security in real estate finance transactions subtopic, with links to the appropriate materials.

Real estate finance is a type of secured lending. Some of the reasons for taking security in a real estate finance transaction reflect the main advantages of taking security in any commercial finance transaction (see Practice Note: Difference between security and quasi-security).

Security in real estate finance transactions is particularly important because the borrower is usually a special purpose vehicle (SPV) (also known as a 'special purpose company' or SPC) which is set up specifically for the proposed transaction (ie to purchase or purchase and develop a property). This means that the borrower will have no history of operations and its only assets will be those related to the property and, if applicable, its development.

As a result of the SPV structure, the credit risk associated with the borrower is usually of less importance to lenders in real estate finance transactions than in a straightforward corporate loan transaction. A comprehensive security package is one way for the borrower

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