Which bad-boy carve-outs should sponsors push back on in a non-recourse CRE loan?

Standard list, accept; expanded list, negotiate

Standard carve-outs that almost no lender will move on substance: fraud, intentional misrepresentation, willful misconduct, intentional waste, criminal acts, and misappropriation of insurance or condemnation proceeds. These are non-negotiable in substance, but the language must be tight (e.g., misrepresentation should require materiality, criminal acts should require conviction, waste should require willfulness, not negligence).

Expanded carve-outs that have crept into many lender forms over the last decade and where sponsors should push back: voluntary bankruptcy of the borrower or any guarantor (push to limit to bad-faith filings); failure to maintain SPE separateness (push to require materiality and a cure period); transfer of any interest in the property without lender consent (push to carve out permitted transfers among existing principals and estate-planning transfers); environmental violations of any kind (push to limit to violations caused by the borrower's actions during the loan term); failure to pay real-estate taxes when due (push to apply only when escrow was adequately funded).

The hardest carve-out to negotiate is springing recourse on insolvency proceedings. Lender-friendly draft converts the loan to full recourse on any insolvency filing, voluntary or involuntary; borrower-friendly language requires the involuntary case to be either consented to by the borrower or not dismissed within 90 days. Push hard for the 90-day dismissal exception.