On July 17, 2009, a lower court in Upstate New York granted an injunction mandating that a lender continue to fund a project and granted other relief that sent shivers down the spines of financial institutions. On appeal, a recent decision by the Appellate Division reversing certain of the lower court’s rulings has given a glimmer of hope to lenders. Nonetheless, both the lower court decision and the appellate court opinion remain a cautionary tale for lenders and their lawyers in the drafting and enforcement of loan documents and demonstrate the need for consistent vigilance when following a course of conduct with a borrower that the lender believes is in default.

Click here to view memo, Appellate Court Ruling in Destiny USA: Notes of Caution for Construction Lenders and A Glimmer of Hope