Enforcement options in respect of real estate finance transactions
Produced in partnership with CMS
Enforcement options in respect of real estate finance transactions

The following Banking & Finance practice note Produced in partnership with CMS 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
  • Consensual sale
  • Validity of security
  • Stand-alone moratorium introduced by the Corporate Insolvency and Governance Act 2020 (CIGA 2020)
  • Share charge/pledge enforcement
  • Quasi-enforcement through exercising voting rights
  • Enforcement pursuant to the debenture
  • Appointment of a Receiver
  • More...

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 what it deems necessary or desirable in connection with the restructuring of a REF loan. For example, it may grant standstills, extend the term of the loan and agree to other amendments to the loan agreement. It may also look to block bank accounts and restrict payments from them (given most REF transactions will have structured account mechanics—see Practice Note: Real estate finance—bank account provisions in facility agreements).

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

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