Enforcing security over real property

Enforcement is an important matter to consider. If a borrower cannot meet its obligations under a loan agreement, lenders will need to consider the options available to them in enforcing their security. For eg, project lenders would want to be able to access the project assets so that on enforcement, they can for eg, sell the project as a going concern.

It is important to recognise that for many project lenders, taking enforcement action often is seen as a last resort. A project lender would often first consider the following options:

• • refinancing, for eg, having the borrower pay off the existing loan, then enter into a new loan that has more favourable repayment conditions and/or less onerous interest rates for the borrower;
• • restructuring, for eg, making changes to the borrower’s operations so its business run more effectively and profitably so that repayment of the debt becomes more likely; and
• • the project lender or another party providing additional financing in return for further security being granted by the borrower.

Further to these points, in this guidance note, legal practitioners will find guidance regarding two main issues that a project lender should consider before enforcement, being the possibility of a consensual sale, and the validity of security. Importantly, with regards to enforcing security over real property, this guidance note explores the concept of default in mortgage enforcement, and provides an overview of the typical mortgage enforcement process.

See Enforcing security over real property.