As published in Toledo Business Journal- December 1, 2019
by John Mark Tichar
Real estate developers are a unique breed with complex deals and an overwhelming number of daily decisions required to drive a project forward. A risk managment strategy must reflect this complexity and should take into account non-traditional risks.
The Opportunity Zones Incentive is a community investment tool established by Congress to encourage long-term investments in low-income and rural areas. With a tax incentive for investors to reinvest unrealized capital gains into dedicated opportunity funds, investing in a project or business within an opportunity zone (OZ) can allow investors to reduce or defer federal taxes on capital gains if they stay in a project for 10 years.
Partner with the right attorney and accountant to help you navigate the representations you make to your investors and business partners. You may also want to review your professional and management liability policy forms.
Vice President,
Senior Client Executive
Market Leader
567.803.0103
mcasey@oswaldcompanies.com
Many commercial loan transactions include a "bad boy" guaranty which imposes personal liability against the borrower and principals when "bad acts" are committed. If triggered, this guaranty converts a nonrecourse loan into a full-recourse loan against the borrower or guarantor. While developers obviously want to steer clear of such behavior, lenders who find themselves with real estate owned property may be motivated to seek recourse. Another scenario may involve a simple misinterpretation of loan provisions, leaving an owner out of compliance which can result in litigation.
While intentional acts are not covered under any insurance policy, those owners who operate with the best of intentions and care can still find themselves in a precarious situation. Take the time to understand how your current policy may or may not provide defense cost protection.
At every phase of a project, owners make representations to investors, joint venture partners, lenders, contractors, and buyers and sellers of real estate. Sometimes inaccurate information is communicated, often the result of internal miscommunication or lack of documentation. Misrepresented information can damage not only a reputation but can also lead to significant financial loss.
Be sure to emphasize the importance of accurate communication to your staff. Consult with a real estate insurance specialist to understand the right policy term that may step in to cover your defense costs should a misrepresentation occur.
The insurance marketplace includes custom solutions designed to help protect real estate developers. Oswald's Real Estate Practice is powered by a team of 20 professionals positioned to maximize and protect our clients' net operating incomes. Operating in 45 states, we insure 210 million square feet of commercial space and 230,000 units. Contact us to learn how we can help your protection against non-traditional risks.
Note: This communication is for informational purposes only. Although every reasonable effort is made to present current and accurate information, Oswald makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information.
OC_1950
