Delaware Real Estate Law Update: Commercial Loan Insurance Requirements Now Enforceable
August 24, 2010
Publication| Real Estate Services
On July 27, 2010, Governor Markell signed into law House Bill 371, which corrected a long standing problem for lenders making commercial loans in Delaware. Prior to this new legislation, commercial loans, like residential loans, were subject to very narrow limitations on what the lender could legally request from borrowers as evidence of insurance for the real estate collateral. Lenders were restricted, in the initial instance (at or prior to closing), to being able to ask only for binders or certificates and could not mandate the delivery of the actual insurance policies. The amendment allows the parties in commercial loan situations to agree to require insurance policies to be given to lenders as evidence of insurance of the collateral. The restrictive requirements for evidence of insurance now only apply to one-to-four family residential properties and not to office, commercial or industrial properties or to multi-unit residential properties such as apartment buildings having more than four units. This change in the law was effective immediately when signed by the Governor.