Review the material-adverse-change language with counsel, maintain current operating information and evaluate credible alternatives. These steps support negotiation but do not prevent a lender from changing or declining its proposal.
Why each defense works
Tightened MAC at term sheet: the MAC negotiation is the single highest-leverage structural negotiation at term-sheet stage. Standard lender draft is broad enough to function as a free option; tight borrower-friendly draft enumerates specific events (casualty, condemnation, anchor-tenant loss), excludes general market conditions, requires both materiality and adversity, requires permanence, and adds notice and cure rights. A tight MAC is hard for the lender to invoke even when market conditions move.
Documented operating performance: through diligence, send the lender monthly operating updates that prove the property is operating in line with underwriting. A documented record of in-line performance makes it harder for the lender to claim a MAC and easier for the borrower to dispute one if invoked.
Keep credible alternative lenders informed where appropriate and confirm what they would need to issue terms. A replacement proposal or closing date cannot be assumed.
Having credible alternatives can improve a borrower’s negotiating position. It does not guarantee that a lender will retain its original terms.
Negotiating posture if MAC is invoked: do not capitulate immediately. Engage borrower counsel and demand the lender document the specific event and demonstrate materiality and adversity. Most MAC invocations are negotiating positions, not absolute walk-aways; pushing back often results in the lender either dropping the MAC or proposing a modest accommodation.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1
- Financial Stability Report · Board of Governors of the Federal Reserve System · 2025-11
- Semiannual Risk Perspective · Office of the Comptroller of the Currency · 2025-12