Real Estate Finance Case Law: Personal Guarantees

Charles Bezzant, partner, and Aselle Djumabaeva-Wood, associate at Hemlins, consider recent trends in relation to real estate finance case law and what might be on the horizon.

What have been the key cases in this area over the past 12 months?

There have been quite a few cases in relation to the recovery under personal guarantees given in relation to the borrowing from banks and private lenders but only a couple of those cases are in the context of real estate finance.

What themes are developing in this area?

This type of case is not uncommon after a recession, and the cases have inevitably taken some time to reach the courts. During difficult economic times, in relation to loans when full recoveries from borrowers have not been possible because of the fall in value of the properties, lenders have been faced with seeking to make good shortfalls in recovery from personal guarantees. This time around, the courts appear to have largely found in favour of the lenders. In fact, lenders have often been looking to seek summary judgment to enforce the guarantees.

The most interesting cases in this area have come about when summary judgment has been granted by a court, and guarantors have sought to challenge it by presenting evidence that there might have been a misrepresentation on the lender’s part to induce the guarantor to enter into the guarantee, and/or that the guarantor only entered into the guarantee as a result of duress.

For example:

Bank of Ireland (UK) plc v Jones and another [2014] NIQBD 93

A default judgment given in favour of the bank was set aside because the guarantors contended that they gave personal guarantees on the basis of their understanding that their liability under those guarantees was limited. It was held that t