A.BACKGROUND

The term “bad boy” guaranty is used in certain circumstances to describe a guaranty to be provided – usually by an individual, not an entity – in connection with, most often, real estate financing.

The original intent of “bad boy” guarantys was to influence the post-closing behavior of a principal of the borrower, in order to discourage bad conduct that would harm the lender’s position and collateral. Traditionally, the triggers for recourse to the borrower and/or guarantor liability were events such as: