CHIA Talk #11 Real Estate, Financial and Banking Law

Me Maxime B. Rhéaume, associate lawyer at Miller Thomson, recipient of "The Best Lawyers in Canada – Banking and Financial Law, 2022" award, advises us on how to avoid mistakes, shorten delays and reduce professional fees in your real estate financing files! Maxime Rheaume's 40 years of practice and 32 years of teaching law concentrated in 50 minutes of outspokenness! Maxime practices in the area of ​​private financing, whether financing contracts secured by movable or immovable property. Its clientele is mainly made up of financial institutions that grant loans linked to the financing of land acquisition, the construction of buildings and their long-term refinancing. In addition to being a lawyer for 40 years, Maxime has also been a lecturer in the bachelor's and master's programs in law for 32 years. In this episode, Maxime explains how to choose the right specialist lawyer in order to properly prepare his financing file, whether in partnership, construction financing, long-term financing... What are the most common mistakes made by general contractors / real estate developers / promoters? real estate do that can complicate records? Is it the zoning, taxes, subdivision, incorporation document, co-ownership agreement...? What are the most frequently seen legal structures? What are the advantages and disadvantages of nominees, nominees and limited partnerships? Title insurance? Professional liability? How to support borrowers by setting up a bond?

This episode aired April 13, 2022 and is rebroadcasted on Youtube, here is its english transcription:

Chia: Hello I am Chia your host for the show "Straight talk with Chia", our mission is to
educate on real estate investment, I have the pleasure to have with me today another
guest the best lawyers in canada 2022 masters Maxime Rheaume
Chia : Hello Maxime, what a pleasure to have you with us.
Maxime : Shared pleasure
Chia: Are we on first-name terms?
Maxime : Yes, absolutely
Chia: It's working ok perfect. So today I'm really excited, I thank you very much for
accepting my invitation because I think we share the same passion for education, for
training, right?
Maxime : And real estate
Chia: And real estate quite a bit. In fact I think there are a lot of people so among your
clients, your peers, you consider one of the best lawyers in your field and then actually for
me, you know, when I invited you to that show, I remember the first sentence, what I said
was that I would like you to wear the professor's hat.
Maxime : Oh yes of course
Chia: Because you have been teaching for more than fifteen years in Montreal and Lyon
Maxime: In fact, I teach law as an accessory to my practice, but for more than 15
years, since 1990, so it goes back thirty years and it is a combination of circumstances
that led me to teach at the university. Thirty years ago, the mandate that I was given
was to promote corporate law and the understanding of corporate law or corporate
transactions among notaries who thirty years ago, This is a different generation, and
this is what led me to take on the teaching of corporate law for what was at the time the
Chamber of Notaries. Over the years, first of all, I got a taste for teaching because it
took me out of my routine and also because it forces us to read and understand
concepts that we sometimes take for granted or that we never understood, so teaching
allows us to improve ourselves and teaching also has the challenge of finding the right
words to explain concepts to students and finding the right way to explain so that it is
understood, it is in itself a challenge and it deserves it, there is a lot of work in teaching
and then, the years passed and there were opportunities for me to teach at the
baccalaureate the law of partnerships, that is to say everything that is in the civil code,
in particular limited partnerships, partnerships in rights, SENC, non collectives and the
law of joint stock companies, law of partnerships, it is in fact the two vectors for
investors, that is to say the money that is necessary to make commercial operations it
comes either because it is a company with a registered form, an incorporated form, joint
stock company or it is partners but in both cases it is money, it is
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The first courses were on the borrower's money, where it comes from, how it is
managed, how it is used, how it is used, and how it is used, The first courses were about
the borrower's money, where it comes from, how it is managed, how it is organized, and
after that, how to take care of and protect the lender's money because the lender takes a
risk but calculates his risk. So that's what led me to have a teaching component, and
over the years I really got the taste for it, and thirty years later I'm still teaching at the law
school.
Chia: Oh that's wonderful and I thank you, I'm sure there are many people who benefit
from your teaching and your generosity in sharing and passing on the knowledge
Maxime: It's still something I teach in my current practice but we always find the time to
do things, it's just organization, well I also find it beneficial because it keeps me up to
date there are great advantages to teaching, first of all there is the knowledge that we
acquire and that we maintain
Chia: Yes, it's perfect, and in fact today I'm going to position myself as a student, you
know, there's no surprise there, I'm not a lawyer and I'm not a banker, so the areas that
you master and I don't, I'm going to ask my questions as a consumer who might have as
curiosity and you will guide me in this interview, thank you. And actually it's really funny
because while we're talking about teaching, I don't know if you've noticed since you've
been teaching here and in Europe as well, I don't know if you've noticed a difference in
the students' speeches, I'm from Asia specifically I am proudly made in Taiwan so all
through my youth, I'm proudly made in Taiwan so throughout my youth, through
university, through my master's degree what I've seen frequently is that I've often been
the only student who raises their hand because I'm full of questions and I don't mind
asking questions because I can understand, so here people are more used to asking
questions?
Maxime: Here it's easier, it's more natural to ask questions, for about ten years I've
been teaching in a program at the University of Lyon in business law and there is a
recognition of the professor or the teacher that is not the same here, that is to say, the
relationship is more friendly in Montreal than the experience I have in Lyon, but as far as
the questions are concerned, I invite 07:21 as soon as the courses start I tell the
students that your questions are the subject of the teaching, with your questions, first of
all of course they are answered but the question is the starting point of elements that
deserve to be transmitted for the understanding of things. So of course there is theory
but the understanding of the legal environment and the why of things, it's good to know
that we do such and such a counter in such and such a way but there is a reason behind
that, there is a utility and then there are the elements that must be considered either we
are a borrower or we are a lender. So there's all this context and often the question well
that brings a lot of information that we would not have the opportunity to transmit
otherwise
Chia: Yes, that's right, and with all this information, there's so much information, I had
to select some of it, so I thought I'd restructure today's interview more like a fano. So
first of all it's like in the real estate brokerage where I've been practicing for three years
now

years and a half what I realize is that there are
There are so many specialized brokers in different niches, so as far as law is concerned,
it's the same thing, there are many, many, many different types of lawyers, so for
example, there are lawyers specialized in construction, in partnership, in construction
financing, in long-term financing, everything that I just named is associated with real
estate and construction, so there are also different types of files that we have to set up
and that we have to handle, so how can we do it? because obviously I know that you
often work on the very important files but there is also the, you know, we're talking about
the old one so there are the teachers, there are the teachers, So in our generation I see
a lot of new promoters who are starting to acquire more experience and who are doing
projects that are more and more important. So how do we push these people to prepare
their file well, how do they choose a lawyer or several lawyers in order to succeed?
Maxime: There are several aspects to the question, I would say the following thing is
that no matter the nature of the project, the project is first the idea of an entrepreneur
because without entrepreneurial ideas no one does anything so there is an entrepreneur
who has an idea and then works to realize it and this entrepreneur obviously will need
third party funds to finance his idea, generally they take, even if he has the means, he
will take all his money to finance his project, He will borrow and his approach will be to
find a lender with whom he will get along well and the entrepreneur will make a business
agreement on the basic principles with a lender, the interest rate, the term, the type of
guarantee, who will guarantee, at what level and once he has made this whole, His file
for the entrepreneur is quite organized because the entrepreneur, like in chess, thinks
two moves ahead and once he has his verbal or written agreement with the lender the
rest is mechanics but it is in the mechanics that the legal aspect comes in because it is
in this aspect that the detail comes in. When you go from an agreement between a
lender and a borrower on the principle of the thing and you get to the legal part, I
generally represent the lender more often than the borrower, I generally represent the
lender more often than the borrower, although it happens to me on occasion, but no
matter what hat we have in a financing, what is important for a borrower to grasp is
whether there are first of all components that are rather intangible in the sense that a
lender is also an entrepreneur because his job is to lend money to good borrowers, but
once he has found his good borrower, well, his sale is also done, so he thinks about his
new file, the back office has to manage the loan that both have agreed to make. The
quality of the relationship between a lender and his borrower is a personal one, but after
that the borrower has to live with the institution's machine, that's another matter, each
institution has its own way of doing things, each institution has different margins of
maneuver, there are accommodations that are allowed for one, others it's more difficult,
So there is this element that a borrower can inform himself beforehand and the second
part which is a little intangible but which is also essential for an entrepreneur or for a
borrower is that of course if the lender chooses the legal advisor who is going to put in
place the securities but often the lender has a small list that he has
his borrower and then he says here are 2, 3 names that I will accept as our consultants
I would suggest that when it comes to legal advice, that borrowers take the trouble to
call people, to call legal counsel, whether they know them or not, because the
chemistry that comes out of people is an intangible but important element in the
smooth running of a case

Chia: It's a question of feat
Maxime: It's a question of feat and that can't be seen on paper, a call, a meeting, a
virtual meeting can make the difference and you can feel it immediately if it works or not,
but if it doesn't work at least you're informed. Then, once the file is in the legal process,
there are two main concerns for a lender: first, who is the borrower with whom the lender
is doing business? Of course it's an entity, it's often a corporate entity, it's a corporation
that is the borrower but lenders in Canada have the obligation to ensure, to verify with
whom they are dealing and that's called the verification of, often what is called the
ultimate holders because behind all these entities, there is a gentleman, there is a
madam, At the end of the year, we get to those who own the interests and this is the
element where we sometimes have a certain number of surprises because the lender,
when he agrees to make a loan, we have presented him with an organization chart, we
have presented him with a set of stakeholders in the parties involved in the financing,
whether they are borrowers or guarantors, and we have a picture of who the ultimate
holders are. When you arrive at certain projects that are more important, it will happen
situations where the same group does not necessarily have either the funds in totality or
does not wish to be the only partner, there are often files where the borrower is a
combination of a partnership that involves a certain number of stakeholders who have a
common interest, that is to say to make the transaction and thereafter well it is 16:06 all
these people. It happens from time to time that there's a reorganization in a group, it's
not said, it's not there, and at some point for the lender at the end of the line before he
makes his disbursement, he needs legal confirmation that the corporate picture is indeed
that one and when we come up with a surprise, When we discover that there have been
transfers of shares, that the lender didn't know about, we can't think that it's important to
tell him, it's like putting the brakes on the car and in a legal file all that implies delays and
corollaries with fees and costs and the borrower obviously has a sensitivity, the question
of rap...It's not about value for money, because that's not how it works, but it's about the
relationship between time and cost, because for a contractor, it's not just that it's going to
cost more:11 it can have an impact on the availability of rates, right now lead time is a
factor because rates are volatile but when I'm borrowing for ten years a basis point it can
be it can be very important.
Chia: It's huge
Maxime: Exactly, so there are all these elements that, then the lender will manage that
and that's and that's important especially since the lender deals with his representative,
his lender but behind there is the back office then there is the credit, The credit of a
financial institution is the friends of people, the job of the credit is to ensure that the
rules are met, that the ratios are respected, that the securities are obtained and that all
the boxes are checked and we can't call credit and say well it's going to be next week.
Chia: It's more rigid.
Maxime: It's much more rigid and we have no control over that, we can't put any
pressure on it, so the more the file is put together in advance, the more we know we
won't have any surprises, the more we have checked our documents, so at least we
limit the surprises. So
the lender will check the compliance of these entities and then after that he will check the
quality of his assets because the lender it is sure that he takes risks but it is

risks that he calculates and it is risks that he protects and how they protect them? Well
it's by taking guarantees and on what he takes guarantees well real estate financing is
first on 18:53 when I talk about building it often starts with interest because real estate
financing is the life of a project, that is interest either vacant or the buildings demolished,
The key element of this is the quality of the title of the land and often, and this brings me
to the question of title reports or title insurance because when a file arrives, the
deadlines are often short and there are two options available: either you take out title
insurance, which is an insurance with a premium, It's easy to evaluate, the rates are
known and so fast and from a lender's point of view it's a, not a guarantee, it's an
acceptable insurance compared to the other alternative which was more traditional which is
the title report which was always done in the years, if we go back ten years or so, we
were not very hot with the title insurance especially in Quebec which was not a way to
proceed, now it's much more on a larger scale. The title report, in my opinion, is still an
investment for a borrower that is valid over the long term because in a..., we talk about
financing by phase, but each time you go from land to construction, from construction to
the long term, you start over and you don't necessarily start over with the same lender,
sometimes an magazine, sometimes you have different service offers, opportunities, you
never know how it's going to end. So all these financings are to be redone, are to be
taken again and if each time you take title insurance obviously there are blows, it is fast
but there are blows. If you are in the acquisition phase of your land and you know that
the long term and in the mine in three years or in four years well you know that you are
going to need these title reports, if you take the time from the beginning to have them
done well they can be used from one to the other.
Chia: From one phase to another.
Maxime: Well yes, we just need to update them, but the key is that in order for them to
be useful for the long term, the person who issued the report, the person who issued
the title report at the time of the acquisition of the land, must be sufficiently insured in
terms of his or her own personal liability so that it can be used for a long-term loan,
which can be used to buy a building, a million dollars worth of land, but at the end of the
day, the building is going to be a guarantee.
Chia: Yes, absolutely.
Maxime: And so that we can use it at the end, well, there is a question of liability
insurance which can be important.
Chia: Yeah absolutely I see that in my files too. So now, in fact, to summarize, since
there is phase by phase from the acquisition of the land to the construction to the long
term conversion or resale, all these phases have just concluded on the importance of
calling the legal counsel, to meet him to check the feat with this person because we are
talking about an accompaniment over a few years so it is really necessary that this
mutual confidence exists to be able to really make all the transactions well at each stage
and that brings me to my next question, in fact there in the time we have only spoken
since often in the side

The borrower can be several individuals because there are several corporations etc.
etc. It can be several individuals because there are several corporations etc. etc. It is
the partnership and it can happen that an individual forgot to mention that "Ah I made a
transfer of shares" and that can cause delays and problems, complications in the next
financing file and then apart from these two terrors, I call, in your files what are the
other errors that you notice that a borrower who has not thought about for example a
question of zoning, taxes, subdivisions, incorporation documents or even to the
condominium agreement, what are the errors most often seen?
Maxime: The errors that create delays and hassles will be linked to the question of
titles, so it's all well and good to have title insurance, it's all well and good to have title
reports, but the fact remains that in some cases there may be title problems that are
often revealed either in old reports or in certificates of location with the report of their
puppets that will denote an encroachment, Well, to denote an encroachment, either it
has been suffered or created, but it is factual information that we need to know, so the
borrower or the promoter who does not have the factual information, well, there is
verification that must be done and that creates difficulties. The other thing that creates
difficulties in terms of delay and in terms of heaviness is when there are several
interveners, several groups, several companies, each of them is also represented by its
own legal advisors and there for the bank or for the institution or for the lender when the
time comes to finish its disbursement it takes a legal opinion of such advisor for such
group, of such advisor for such other group and it's the stowage of all this
documentation that makes that certain files are heavy, Sometimes we will also see files
where there are partnerships and as they are partnerships of course the partners trust
each other but there are still limits so when the time comes to sign it takes the signature
of group A after that it learns the signature of group B, it is necessary to put them
together, it is necessary to make them trust then there are many things upstream which
can be done.
Chia: Okay.
Maxime: I would say to you that the documentation, the question of taxes, the question
of taxes, it is sure that it can be an irritant in particular at the level of the construction
loans because the construction loan supposes that there are progressive disbursements
and the progressive disbursements are done when the lender is advised that there are
no taxes to be paid and that there is not a legal mortgage before him. When you start
with the base lot which is 26:50 one thing but when you get to the construction phase
and there may be several lots or there has been a dismemberment of property with
condos then you are obliged to verify 50, 60 or whatever the number of lots and now the
verification of the lots there is a cost for the cabs, there is a cost for... so that makes
invoices that are irritating for the developer but that is disbursements that.
Chia: Yes absolutely, wow, that's a lot of checking indeed. So let's talk about...
Maxime: But just, if I may, you were talking about young promoters who go up and then
start to... It's the history of the world, it's the generations that follow one another and in
the management of a real estate file there is also a pyramid that must be made so that
each one does what he is good at, not what he is good at, but his level of expertise, so
to have teams that can bring this type of file to completion because the documentation
and the multiplication of the parties involved means that the volume of communication
that we get can sometimes

I would say that this is probably the key element and what I teach to the master's
students is that when the client comes to you with a file, the first thing you do, the first
thing you do, you take a piece of paper and you declare your transaction. I had an old
mentor who used to speak English to me, he says "visualize transactions" it meant what
do you do? You don't start preparing contracts without knowing the order, who has to
sign them, in what sequence, is it necessary now, for now, later, to make a contract
architecture.
Chia: Yes, that's how I work too.
Maxime: Well, it's the only way not to make mistakes, yes, because we're able to say
we start here and then we finish there, and then what are the intermediate steps, and I
tell the students that you have to identify each piece of paper that passes through your
hands, because these pieces of paper are useful, and if they're not useful, discard them.
So planning is the key to a job that is, not that is well done because I think everybody
works well, it's not the case but when you're in my field, you're often evaluated for
criteria that have nothing to do with your competence because often the clients have
limited knowledge of what you've done or of your specialization notes but you're going to
be judged on the way you work, the way we answer, the way we respect the deadlines,
the way we control the file and I often say to the youngest ones with whom I work when
the client calls you, you are late because the client does not call you for 30:33, the client
is calling you because you didn't pass on a piece of information that they need so in an
ideal world we should never talk to clients but that's not how it happens.
Chia: I understand completely. Well, we were talking about the importance of planning
because this planning is basically to unify communication, to simplify communication
because there is a lot of coordination, the more stakeholders there are, the more
communication and coordination there is, so if from the beginning, as you said, we
prepare the architecture, the roadmap, where we are going, who are the key people,
who does what in a file, it will go much better than if we did not do this planning work
Maxime : Absolutely, because once the "mapping" is done, it's like music paper, it's
paint by numbers, you just have to execute.
Chia: Yes, the biggest mapping I've done in my career is very interesting because we
were mandated by the Montreal airports to negotiate the first non-stop flight that puts
Montreal on Asia so my mandate was to negotiate the first flight, We had two hundred
key people and influencers on the mapping and my goodness, that's how we delivered
the goods, our mandate, you know, it was a mission impossible for ten years so we
32:19 in 6 months.
Maxime: Congratulations.

Chia: So it's really, this work I'm glad to see that, you know, like there are other people who
work the same way.
Maxime: Well, listen, over the years I've realized that not doing it can be a surprise
because there's nothing more uncomfortable than realizing that there's an oversight, that
there's a stitch in the knitting. And of course now with the pandemic the meetings are
virtual and the signatures are electronic but in the "old days" when people came to sign
documents around a table, the rule was that nobody asked any questions because
everybody was happy to be around the table and the matter was evacuated, meetings
where you start to say that clause 10 is not the right clause, you don't go anywhere, it's a
problem.
Chia: So you're really banking on the preparation.
Maxime : Absolutely.
Chia: Super perfect, so in the end it's this, earlier we were talking about the feat
between the borrower and then his advisor and the feat between the advisor and the
lender because it can happen that an advisor represents just one party and then to
collaborate with another advisor of the other party. Now I'm wondering how do we know
who is close to whom? In the sense that because for a borrower he goes to look for a
loan and he has to as seen that each lender so each bank or each private bank or other
private lenders they don't have the same margins of maneuver they don't have the same
products or solutions and all that so it's how can we really find that advisor there?
Maxime: I would say, first of all, everyone has their constraints and everyone has their
objectives. Generally, of course, all lenders lend money, the margin is in the rates, it's in
the conditions, it's also when things go wrong, what is the history of this lender to
support someone who has temporary problems? Are we quick to realize where we're
going to tolerate, we want to be accommodating, we're going to allow time, we're going
to give 35:07, that's the reputation of each lender and only the reputation of each lender,
like the reputation of the legal advisors, like the brokers everyone has a roadmap that
tells us a little bit about what can happen in the future, how do we do that? It depends
on, well I would say this, is that the borrower has a basket of what they have to offer and
there's some lenders that are going to take and there's some lenders that are not going
to take, For example, if you need to put 20% equity in a project but the other lender is
asking for 10%, well, that's not the same thing and there are some for whom it makes a
difference, so I would say that it's a bit simplistic, but there's something for everyone,
there's something for everyone. I would say that, sometimes we talk about feat between
people, why it can be important is that when you deal with a lawyer, when the client
retains the services of a lawyer, it is very difficult for him not to listen to the advice of his
lawyer because he retains him, he pays him and if the lawyer says good we should take
this way if then that's where we should go because it's more prudent, it's very difficult for
a lender to say no it's not the right idea we won't do that. If your legal advisor is more
cautious than another one, the road will be longer, more arduous yes because we are
more sensitive to fears and risks yes so there is all that to evaluate yes there is at a
given moment, there are things that are white or black, it is important or it is not
important, there comes a time when it's a final judgment and we in my field or in the role
I have, I don't make decisions, it's not my role to make decisions but it's my role to say
here's what can happen and here are the chances of it happening

Now make a decision, it's a big deal or it's not a big deal, are we going to call back a 20
million loan because he's 35 days late on his taxes, the answer can be yes but the
answer can also be in practice you won't call back your loan because there is a 35 day
delay on the taxes.
Chia: Absolutely, where the title of counselor comes from, because a counselor is that
we are not the client, we don't make the decision for the client.
Maxime: I'll give you a small example that comes to me while talking about this, in
offices we give ourselves a lot of, we make a lot of effort to find good trainees because
trainees are the next generation and in these times trainees have resumes, absolutely
astronomical roadmaps, they have traveled and done volunteer work, they speak three
languages, They have a master's degree, in short, they are all exceptional on paper, but
when you get to the reality of life, some of them have more business judgments than
legal knowledge, and legal knowledge without judgment is worthless, the judgment of
what is good in some area is a key element in a business relationship, so when you
have your field, it's 39:06 but when you have good judgment, obviously it's very random
as an assessment but and then I or throughout my career, in 40 years of practice I've
already seen excellent jurisprudents who have no judgment so you go nowhere with that
because where you're in trial for years of time or they say well or if you don't want to be
in trial for years of time you're going to find a way to settle his 39:35 then you move on.
Chia: That's it, I like very much functioned by the group in blood so the judgment, that's it
why drag the energy to more finish.
Maxime: Well, that's not in a CV, it's not on paper, but you can see that with a phone
call or a meeting or an exchange.
Chia: It's by asking the right questions that we will get the right answers. So what are the
legal structures most often seen?
Maxime: Well, the legal structures are generally, I would say, of three types. The most
visible and most used by far is of course the joint stock company, a Quebec Inc. or a
Canada Inc. or whatever because it's the preferred vehicle, if only for the liability of the
shareholders. The second vehicle that we see very frequently are the limited partnership
vehicles, limited partnership the advantage obviously is a fiscal advantage, I am not a
tax specialist but I can nevertheless indicate to you that what my understanding is that
the limited partnership allows a protection of the limited partners as that of a shareholder
but the limited partnership is not a taxpayer therefore does not pay taxes as such, the
income and losses are directly between the limited partnership and the limited partner,
there is no intermediary and the third entity that we find not as an operator but as an
interest holder are the trusts, often family trusts, so family trusts are also an issue
because trusts are created by trust agreements that are not public and are not published
or publishable, so the information is also important because who is behind the trust, who
are the beneficiaries of the assets, it is also important for a lender to know that so there
is information to obtain and often the beneficiaries must be identified and the lender
must know who it is so I will tell you in order in the structures certainly by far, the

corporations, limited partnerships and as interest holders we will often see either
personal individuals or trusts.
Chia: Yeah and I also saw like several levels there, so that was by action...
Maxime: It's a tree, in fact it's a family tree, well a corporate tree or an organization chart
and by the way why it's important is that if you do, in many files the lender will attach the
organization chart 42:40 that's the picture that was presented to me and that's what I'm
going to lend with. If you're dealing with loans that are insured at CHL and CHL is also
going to say I'm going to insure this loan here but here's who my people are behind this
project there where to locate its first street in Montreal or it can be the second, it's who's
behind that? And if there are changes at the time of the loan where you realize that it's
not that the HLC has in these files but your lender is at risk of insurance 43:19
Chia: Yes that's right, you can't lend to a shell.
Maxime: You can't lend to a shell even more you can't lend to a shell that has strangers
or unknowns that are not known to the lender or to the CHL.
Chia: Absolutely so speaking of that individual or those individuals there, I would like
you to be able to tell us about the bond.
Maxime: Bonding is a situation that is found in almost all financing files for a very
simple reason: bonding is one of the ways, I'm talking about bonding, well there's
personal bonding or corporate bonding, but let's start with personal bonding, it's the
way for a lender to know that his contractor, if his house is at risk, or his cottage, or his
boat, is a certain insurance that will ensure that this project will end up being raised
from the ground and will be well managed, and ultimately
Obviously, there is a monetary component to this depending on the portfolio of values
of this individual. What I see very often when there are several guarantors, is the
confusion that the guarantors or the borrowers have between their personal
responsibility and that of the other guarantors. That is to say, if you have, I don't know,
4 sureties, well is each one responsible for just their share or is each one responsible?
Chia: That's a good question.
Maxime: So it depends how it's written but generally in this type of loan each
guarantor is responsible with the borrower, that is to say that there is solidarity and
there the guarantor can be limited to an amount or a percentage or unlimited it doesn't
matter but the concept is that the lender can address first either the guarantor or the
borrower, when there are several guarantors, the relationship of a guarantor with
another guarantor is not important, it's the relationship of the guarantor with the
borrower, that's where the solidarity is, so in a very general way, a lender can be
taken for granted that he doesn't take any risk, so when he obtains a guarantee, if
things go wrong, he can call the guarantor, he pays less, and you manage to go and
sue the borrower or to go and recover from him.

Chia: But I'm particularly interested in understanding the proportion of risk shared by the
different people who give the guarantee because it reminds me of partnerships because
it's like there's no limit.
Maxime: I'll give you an example that's easy to understand. We had a file where we had
three guarantors, each one joint and several with the borrower, which means that we
can ask one or three to pay. In fact, when you are a lender and number 1 is moderately
rich, number 2 is moderately rich and number 3 is very rich, the lender is after number 3
who has the means to pay and it is the problem of number 3 to recover from guarantor
one, guarantor two and the borrower. The lender, the management of the 47:10 he can
choose to just chase one and then he will chase the others and often that's what bothers
the guarantor who is more fortunate because she knows the risk that she is the one who
is going to have the trouble. So I saw in a case at one point where the guarantor who
was more financially comfortable with this concern did not want to be the only one to
have the problem and the way to solve it is simply to tell the lenders that if you ever ask
for guarantors, If you ask for bonds from all the sureties at the same time, first of all it's
not more trouble, but you have to be in progress anyway, and then the judge will divide
the amount paid between the different sureties, but the important thing is that when you
sign a bond, generally, very, very generally, otherwise it's 48:09 I think well, one is
responsible in the same place as the borrower, which adds in effect a debtor or lender
and instead of going to sue a borrower to embark on all this, we will ask the surety to
sign a bond of a million, we are owed 4 million, the loan is in default, pais the million. So
the bond is of course in just about every file but another aspect that is added to that in
loans, especially construction loans is that in a real estate development, one of the risks
of anyone who is involved in the building is the environmental issue so of course the
lenders have the environmental reports and well etc.. One of the risks of anyone who is
involved in real estate development is the environmental issue, so of course the lenders
have the environmental reports and well, etc., they have an assessment of the
environmental situation, but nevertheless, they may have surprises where they may
have an environmental problem that has been misdiagnosed, so there is an
environmental problem and therefore there is a risk because if there is an environmental
problem, the risk is not just for the owner, but for the lender, and so often the guarantors
are asked, first of all, "You're going to be a guarantor", ordinary surety if they don't pay
you pay but also we will tell them but if there is an environmental risk and that there is
work or installations which must be made to remedy the environmental problems well
you will pay for that. So this is an additional commitment. Sometimes in construction,
you have a project to build a 13-storey tower and then for all sorts of reasons when it
starts to go wrong it goes wrong everywhere and you stop at the seventh floor and there
are still four floors to build or five floors to build, there are additional funds that will have
to be put in to complete the construction because a lender's security is a building that is
complete and then that you can rent or that you can sell, A lender is not interested in
following the construction, it happens but it is not what is sought so a person is led to be
a guarantor of the loan but also to take on commitments that are directly linked to factors
that are external to the loan, that is to say the environmental problems and the problems
of completion of the work and that obviously it is put in the balance sheet of the
individual it is risks.
Chia: Yeah that's something so where does the importance of planning well, scheduling
things and writing well come from. So in summary today, I think the

Communication is key because when we communicate clearly we understand very well,
when we understand well we can succeed in any project. Once again, thank you Maxime.
Maxime : With pleasure, see you next time.
Chia: Yes, see you next time, have a nice day.