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Personal Liability

Personal Liability
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In the context of real estate investing and financing, personal liability refers to whether an individual investor or sponsor is personally responsible for debts and obligations beyond the investment itself. For example, in a recourse loan, a borrower (often a sponsor or guarantor) assumes personal liability – meaning if the loan defaults and the property’s value isn’t enough to cover the debt, the lender can pursue the individual’s other assets to satisfy the balance. By contrast, non-recourse loans limit the lender to taking the collateral property only, with no further claim on the borrower’s personal assets. Similarly, in partnership structures, limited partners enjoy limited liability (they can lose their invested capital, but no more), whereas a general partner or sponsor might have personal liability for certain obligations or through guarantees. High-net-worth passive investors typically invest via LLCs or LPs specifically to avoid personal liability – their risk is confined to their equity contribution. Lightstone’s offerings are structured so that individual investors are limited partners in an entity and are not personally liable for property-level debts or legal claims; all financing is generally non-recourse to the investors. This structure aligns with best practices and the firm’s investor-first ethos – allowing investors to participate in large real estate deals without exposing their personal balance sheets beyond the investment. It’s important for HNW investors to review any carve-outs or guarantees in a deal, but fundamentally, a well- structured private real estate investment (such as those by Lightstone) will provide legal shields (like LLCs) and non-recourse financing to protect investors from personal liability.

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