Many of the loan documents that I have reviewed lately (especially in connection with CMBS loans), no longer follow the typical "Business Days" rule, which provides that any due dates in loan documents that fall on a non-business day carry to the NEXT business day. Instead, the documents require payments to be made, or allow lenders take any action (which we would typically expect to occur on the Monday after a weekend, or the day after a bank holiday), on the date PRIOR to the non-business due date.
So, if your payment is due on the 1st of the month, but the first is a national holiday, and thus, a non-business day, your payment would be due the Friday prior, not the next business day, like most of us are used to. Your payment would be late, and potentially cause a default under your loan documents if it wasn’t made on the 28th or 29th, notwithstanding that the 1st is your actual due date.
In a lockbox or auto-withdrawal scenario, you also have to be careful that you leave enough cushion if Tenants don’t have to pay until the NEXT business day, but your bank pulls your payments on the PRIOR business day.
Lawyers should always try to negotiate this provision back to the typical Business Days rule as it can cause a lot of confusion and difficulty for clients, but in the event that a lender is not budging, property owners and landlords should keep an eye out for the months that this may become an issue.
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