Real estate finance—bank account provisions in facility agreements
Real estate finance—bank account provisions in facility agreements

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Real estate finance—bank account provisions in facility agreements
  • Where to start with drafting the bank account provisions in a real estate finance transaction
  • The purpose of the bank accounts in a real estate finance transaction
  • Common types of bank accounts in a real estate finance transaction
  • Designation of bank accounts in a real estate finance transaction
  • The account bank in a real estate finance transaction
  • Use of each type of bank account in a real estate finance transaction
  • Rent account
  • Deposit account
  • Disposals account
  • More...

In a typical real estate finance transaction, the lenders rely heavily on the rental income generated by the property for repayment of the loan.

As a result, real estate finance lenders will impose strict restrictions on how the property company uses its cash. This Practice Note examines how the lenders commonly impose these restrictions in real estate finance transactions.

Where to start with drafting the bank account provisions in a real estate finance transaction

The various bank accounts, which will be required, and the restrictions on the operation of each account for a particular transaction are usually agreed at term sheet stage before drafting the facility agreement. See the Loan Market Association (LMA) term sheet for real estate finance multiproperty investment transactions (available to members on the LMA website).

The LMA has clauses to cover these provisions in its:

  1. single currency term facility agreement for real estate finance multiproperty investment transactions (LMA Investment REF Facility Agreement), and

  2. single currency term facility agreement for real estate finance single property development transactions (LMA Development REF Facility Agreement),

together, the LMA REF Facility Agreements.

The bank account provisions are found in clause 17 (Bank accounts) in the LMA REF Facility Agreements.

The LMA Investment REF Facility Agreement is a good starting point for a transaction where the borrower will be purchasing a property or a group of properties from the funding provided by the

Popular documents