You're Exonerated: Exploring the "Sham Guaranty Defense to Eliminate Liability Under a Guaranty

Lenders commonly require principals of a company to personally guarantee a real estate loan. While the business may be protected by California’s antidefiency statute, guarantors are not. Lenders also carefully draft guaranties to expressly waive or otherwise exclude defenses. In many cases, the only defense a guarantor may have to secure the protections of the California antideficiency statute is the “sham guaranty” defense.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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