The following Banking & Finance practice note provides comprehensive and up to date legal information covering:
This Practice Note examines the key parties in real estate finance involving the development of property.
It does not deal with the lender or other finance parties (see Practice Note: The finance parties).
The borrower will typically be purchasing the property to be developed or may already be the owner of the property. In the construction contracts, the borrower will usually be referred to as the employer, client or developer.
In real estate finance, it is common for the borrower to be a special purpose vehicle (SPV) (also known as a special purpose company or SPC). This means that the borrower company is set up or purchased 'off the shelf' specifically for the proposed transaction (ie purchasing, owning, developing and operating the property).
In any SPV financing, the borrower's only activities (and therefore assets and liabilities) will be those related to the transaction. The facility agreement will typically include provisions which give the lender comfort on these points, eg:
representations that the borrower has not conducted any business activities prior to entering into the facility agreement other than those relating to the proposed transaction
representations that the borrower does not own any assets other than the property to be developed and any assets which are ancillary to the property such as bank accounts to receive rental payments
covenants from the borrower not to change the
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