The Benefits of Representations and Warranties Insurance

Los Angeles

Private REIT transactions are becoming more and more popular, as Allen Matkins attorneys Ben Fackler and Max Brunner have explained, but the transactions operate much differently than a standard real estate transaction. As a bit of risk assurance, representations and warranties insurance has also become more popular for these deals. While this insurance provides protection, it isn’t a one-size-fits-all solution and needs to be negotiated into the deal.

“Representations and warranties insurance is increasingly popular in transactions of this type, because it allows a third party to stand in to provide assurance for some risks and removes a key part of the seller’s exposure in these transactions,” Brunner, senior counsel at Allen Matkins, tells GlobeSt.com. “The buyer will typically purchase this representations and warranties insurance policy instead of the seller because knowledge of an issue will be an exclusion from coverage, and the seller will always have more complete knowledge. This insurance does not have standard terms and will require significant negotiation with counsel with experience with these types of policies.”