A negative pledge is really not a pledge at all. A negative pledge is a promise by a borrower to not allow any liens to be placed upon some or all of the borrower’s assets. Negative pledge language is often found in standard bank loan agreements as one of many covenants (promises) made by the borrower. As with other covenants in the loan agreement, violation of a negative pledge is usually an event of default. A negative pledge can also be a stand alone document. Frequently stand alone documents are for negative pledges of real estate assets and are in a form that allows recording in the real estate records of the county in which the subject real estate is located. (more…)