Q&As

The borrower made a statement which turned out not to be true—what remedies might be available to me as lender?

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Produced in partnership with Ian Higgins of 3 Verulam Buildings (3VB)
Published on LexisPSL on 17/08/2016

The following Banking & Finance Q&A produced in partnership with Ian Higgins of 3 Verulam Buildings (3VB) provides comprehensive and up to date legal information covering:

  • The borrower made a statement which turned out not to be true—what remedies might be available to me as lender?
  • Express provision
  • No express provision—pre-contractual misstatement
  • No express provision—post-contractual misstatement

The borrower made a statement which turned out not to be true—what remedies might be available to me as lender?

The remedies available to a lender will depend principally on:

  1. when the misstatement was made (ie before or after the contract was entered into, and before and after drawdown; and

  2. what specific provision is made for such a misstatement in the loan documentation

Express provision

The loan documentation may specify the statements which the borrower is taken to have made on contract, and is often deemed to restate those statements on important dates such as the dates of drawdowns. If the statement is no longer true, depending on the terms of the contract, it may be possible to treat the untruth as an Event of Default. Again depending on the terms of the contract, this may have the effect of, for example:

  1. cancelling any further commitment to make drawdowns

  2. accelerating the existing debt

  3. triggering cross-default provisions

  4. causing security to become enforceable; and

  5. causing penalty interest to be chargeable

If so, the lender will want to ensure that any Default Notice is fully compliant with the notice requirements in the documentation, to avoid later challenges.

No express

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