Type of Asset Leasehold premises

Freehold Premises

Type of Security Charge by deed expressed to be by way of legal mortgage (must be by deed 52 LPA 1925) 87 LPA 1925 mortgage does not transfer ownership of the property (unlike mortgages over non-real estate assets) however the mortgage gives the lender rights equivalent to a lease of one day less than the duration of the borrower's lease Is it worth the lender taking security over leasehold premises?

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Consider how long is left before expiration of the lease (longer the lease the more valuable)

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How much is being paid for the lease and what is the market value?

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If borrower is paying below market value for the lease it is a valuable item for security because the lender will be obtaining it for less than market value (and would therefore be able to make a profit selling the lease on)

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If borrower is paying market rate or above, is not worth taking security over as bank would not make a profit when selling it on because the bank will not be able to sell it on at a premium

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Limitations on assignment/charging - will need to know whether the lease contains restrictions on assignment/charging (if so will need to obtain LL's consent) Charge by deed expressed to be by way of legal mortgage (must be by deed 52 LPA 1925) 87 LPA 1925 mortgage does not transfer ownership of the property (unlike mortgages over non-real estate assets) however the mortgage gives the lender rights equivalent to a lease of one day less than the duration of the borrower's lease If there is a pre-existing mortgage on the premises then new lender should negotiate a subordination/inter-creditor agreement with the existing mortgagee

Perfection 1) Check whether consent is required under the lease 2) 860(7)(a) Registration at Companies House is compulsory - Form MG01 a. 870(1)(a) must register within 21 days of creation 3) 27 LRA 2002 Registration at land registry within 30 working days as a notice on the charges register 48 LRA 2002 Date of registration determines priority

1) Check whether consent is required under the lease 2) 860(7)(a) Registration at Companies House is compulsory - Form MG01 a. 870(1)(a) must register within 21 days of creation 3) 27 LRA 2002 Registration at land registry within 30 working days as a notice on the charges register 48 LRA 2002 Date of registration determines priority

Supply Contracts

Assignment

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Assignment involves the transfer of a property interest from the borrower to the lender. That property interest is typically the borrower's rights against a 3rd party under a contract e.g. the right to receive an income stream from a contract

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Assignment is equivalent to a mortgage (i.e. transfers legal title) over intangible assets (contracts, goodwill etc)

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Assignment does not require borrower's consent 136 LPA 1925

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Always check whether there is a prohibition in the 1) Assignment must transfer the whole contract on assignment of the value of the contract (i.e. must assign everything it's owed under Legal Assignment (for lucrative and small number of the contract) contracts) 2) Rights to be ascertained must be If Borrower assigns contract to lender and lender then fails to wholly ascertainable and must not give notice to 3rd party and borrower later assigns the relate to part only of the debt contract to another assignee, that later assignee will gain 3) Must be in writing and signed by priority over the original lender if the subsequent assignee assignor (borrower) notifies the 3rd party 4) Actual notice of the assignment must be received by the 3rd party for rd rd 3 party has notice of the assignment because the 3 party the assignment to take effect must be alerted to the fact that he must, in future, make Register at Companies House because of payments to the lender rather than the borrower. The book debts problems with legal assignment are that 1) The borrower may not want the 3rd parties to be Register at Companies House because of altered to the fact that he is refinancing book debts 2) Where there are many contracts there will be an administrative burden of alerting all the 3rd parties Advantages of legal assignment 1) The lender has priority over equitable assignment 2) The lender can sue the 3rd party directly rather than having to join the borrower in an action Equitable Assignment (for lots of contracts but low value or for future contracts)

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