Enforcement options in respect of real estate finance transactions
Produced in partnership with K&L Gates
Enforcement options in respect of real estate finance transactions

The following Banking & Finance guidance note Produced in partnership with K&L Gates provides comprehensive and up to date legal information covering:

  • Enforcement options in respect of real estate finance transactions
  • Restructure or enforce?
  • Issues to consider before enforcement
  • Share charge/pledge enforcement
  • Quasi-enforcement through the voting rights
  • Enforcement pursuant to the debenture

BREXIT: The UK is leaving the EU on Exit Day (as defined in the European Union (Withdrawal) Act 2018). This has an impact on the information in this Practice Note about ‘centre of main interests’. For guidance on this issue, see Practice Note: Brexit—documentary implications for facility agreements—Issues affecting loan documentation—representations and undertakings.

A lender will typically have a number of enforcement options available to it in a particular real estate finance (REF) transaction. The lender will need to evaluate and assess:

  1. the economic realities of the transaction at the time it goes into distress

  2. the security package

  3. the legal framework pertaining to the loan, and

  4. the jurisdiction of the borrower and the property

in order to determine which enforcement route is the most viable to maximise recoveries.

Restructure or enforce?

In most distressed REF transactions, a lender will try to exhaust restructuring options before enforcement. A lender will have broad powers to do whatever it deems necessary or desirable in connection with the administration or restructuring of a REF loan. For example, it may grant standstills, extend the term of the loan and make other amendments to the loan agreement.

See also Practice Note: Restructuring an acquisition finance deal. Many considerations in that Practice Note about restructuring will apply equally to a REF deal.

However, if the borrower’s financial position is particularly serious and/or the secured property is in jeopardy, the lender may have no alternative but to take enforcement action. A lender’s rights of enforcement in a REF deal will be specific to real estate, and that is the focus of this Practice Note.

Issues to consider before enforcement