the local authority will enforce the condition, which could potentially include demanding that the building is taken down. In some circumstances, lenders can be persuaded to agree to planning pre-con- ditions being satisfied within a given timeframe, with the failure to do so being treated as a default event. It is notable that despite this leeway, conditions that go to the heart of a development, such as approval of fire safety materials, are unlikely to be acceptable in this way. On the other hand, conditions such as installing a cycle store are less concerning. It is useful in these situations for the planning consultant employed by the developer to provide detailed information about any submissions made to satisfy relevant conditions, how long it is likely to take to satisfy them and the likelihood that the conditions will be satisfied at all. "Of foremost importance to lenders is ownership. Anyone looking to raise money against a property will need to prove that they own the property."
that they have control. This can happen where one spouse has been added as a director and owner, but in fact it is the other spouse that has direction and authority. Where a property consists of several leasehold flats and the freeholder is a connected party (including common directors/shareholders) the lender will also usually ask for a legal charge over the freehold (often referred to as a comfort charge). Where the freehold is already charged to another lender this first lender’s consent will be needed and documented within a deed of priority. This process should be undertaken as early as possible to avoid delays. Lastly, the lender will want to be convinced that the loan can be serviced. Renting out the property on commercial leases and/or assured shorthold tenancies is the most common way in which this occurs. In these cases, the lender will ask to see that letting agreements are in place, together with all the necessary statutory requirements such as gas certificates, electrical condition reports, energy performance certificates, fire risk assessments, asbestos reports and so on. In short, at a time when finance is becoming harder to obtain, developers must be able to show that they are savvy and knowledgeable if they want to secure terms for building projects. This means having properly drafted documentation and ensuring that loan terms are adhered with. Please contact Ray Oshry if you would like any further information about the issues covered in this article.
Security & Servicing loans
A lender will, of course, take a legal charge over a property that is offered as security.
Where the borrower is a company, the lender will almost always also require personal guarantees from the directors/ shareholders of the borrowing company and possibly a debenture (a floating charge over all the assets of the borrower). It is useful to note that even where an individual does not appear as having an interest they may still need to provide a guarantee for example, if it can be shown
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