The Seventh Circuit case of River East Plaza V. Variable Annuity Life Insurance Co., No. 06- 3856, 2007 WL 2377383 (7th Cir. Aug 23, 2007) has upheld the enforcement of a prepayment premium in a fixed rate commercial real estate loan. The court reversed the decision of the district court which had held that such provision was an unenforeable penalty. The court of appeals reasoned that the borrower was given an alternative means of performing the contract. The court also noted that there were no Illinois decisions holding that the prepayment clause was an impermissible liquidated damages provision.
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Prepayment premium on commercial real estate loan upheld
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