Real Estate Finance: Acting for a lender—property specific conditions precedent
Real Estate Finance: Acting for a lender—property specific conditions precedent

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Real Estate Finance: Acting for a lender—property specific conditions precedent
  • What are conditions precedent?
  • What are the usual property specific CPs?

What are conditions precedent?

In finance transactions, conditions precedent (CPs) are the conditions which the borrower must satisfy:

  1. (usually) before the borrower is entitled to serve a utilisation (drawdown) request, and

  2. before the lender is obliged to make the funds available to the borrower

The CPs are contained in the facility agreement. The facility agreement usually provides that each CP must be 'in a form and substance satisfactory to the lender'.

The purpose of he usual property specific CPs in a real estate investment finance transaction is to satisfy the lender that:

  1. the lender will obtain a first legal charge over the property, and

  2. the property will be acceptable security for the loan

What are the usual property specific CPs?

A satisfactory certificate of title or report on title

The lender will require property due diligence to be undertaken to check that the borrower will obtain a good and marketable title to the property and that it will constitute good security for the lender.

At the outset of the transaction, the lender (on the advice of its solicitors) should decide:

  1. who should carry out the due diligence (ie the lender’s solicitors or the borrower’s solicitors), and

  2. where the due diligence will be carried out by the borrower’s solicitors, whether the lender requires a certificate of title or whether the lender will