Consulco Capital has established the London Credit Fund, licensed and regulated by the Cyprus Securities and Exchange Commission. The London Credit Fund provides the opportunity to well-informed and professional investors to profit from the benefits of the 6 billion London short-term lending market. More specifically, the Fund and its subsidiaries will invest in short- and medium-term London property secured loans which are underwritten, structured and prefunded by London Credit Ltd. The target return for its Euro Investors, exceeds 4% p.a. and it’s payable quarterly. The London Credit Fund’s underlying loans are secured against London Real Estate, one of the most prime investment assets in the world that provides solid security and comfort to all Fund’s investors.
Despite the fact that London Credit Ltd has achieved an impeccable track record of 100% collection rate of more than 100 million pounds worth of loans for a continuous period of nine years, there is always a possibility the borrower fails to repay a debt including interest or principal on a loan or he breaches any other terms of the facility agreement. For these reasons, Secured Loan agreements describe in detailed terms the events of default which must occur before a lender can enforce any of the securities in place to cover the obligations of the borrower as well as the procedures of enforcing those securities.
The secured loans (bridging or otherwise) are advanced by London Credit Ltd (Lender) and these loans will form the basis of the London Credit Fund Investment. The loans are always secured by legal charges on real property, residential or commercial. The loan to value (LTV) does not exceed 75% whereas the average LTV is 50.8%. The security properties are valued by a RICS professional valuer from a reputable firm who is covered by indemnity insurance to cover losses borne by the lender due to the valuer’s negligence. The legal completion of the legal charges and legal due diligence on the borrower and property is carried out by reputable solicitors who have indemnity insurance to cover any losses caused to the lender caused by the solicitor’s negligence.
The residential security properties are all investment properties which are not occupied by the borrower or family members and as such the borrower’s prime residence is never acceptable as security. This means that in the event of default by the borrower, enforcement of the security (usually sale by an appointed receiver) becomes relatively easy; legally and ethically. Legally easy as there is no need for lengthy court proceedings to obtain vacant possession before a sale and ethically easy as there will be no need to evict the property occupants from their home. As the security investment properties are occupied by paying tenants under a lease/tenancy agreement the property will be sold subject to the lease/tenancy agreement and so that the buyer of the property will be receiving the rental income generated by the property as his investment.
The same principle is applied to commercial properties as the lender will avoid accepting as security such properties which are occupied by the borrower. However, occupation by a company (even if the company belongs to the borrower) under a lease paying market rent will be acceptable as the property (in case of default) may be sold subject to the lease and as such without the need to obtain vacant possession through the courts or otherwise. The buyer of the property will receive the rental income from the occupying company as provided in the occupational lease.
The power of sale and appointment of receiver
In the event of default by the borrower the usual method of enforcement of the security is the exercise of the power of sale granted to the lender by the legal charge deed, which is registered against the title of the property at HMLR from the outset.
The legal charge also grants power to the lender to appoint a receiver. Legally, the receiver is the agent of the property owner and he will have all the powers by stepping into the owner’s shoes such as power of sale, repair and insurance, to commence litigation, grant, vary or surrender leases or tenancy agreements. The appointment of the receiver is the common method which is followed by the lender company. Following the appointment of the receiver by the deed of appointment between the receiver and the lender, the receiver will take control of the property by insuring the property and taking the rental income pending the sale. The receiver has the power of sale given by the Law of Property Act 1925 and by the detailed provisions in the legal charge deed. The sale can either be effected by auction or privately and the receiver must take care to obtain the best possible price in the circumstances. Sale by auction is the preferred route as it is a clear way of achieving the best possible sale price. There will usually be a reserve price below which the property cannot be sold. This reserve price is to protect the lender, so it does not sell below the amount due to the lender from the borrower, provided of course that the amount due to the lender does not exceed the market price of the property.
If sold privately, the receiver will allow for a reasonable marketing time through an estate agent and in line with valuations indicating the market value of the property. The receiver will normally be a qualified professional in a reputable institution who is covered by indemnity insurance to cover losses to the lender resulting from the receiver’s negligence.
As there is no need for the receiver to obtain vacant possession of the property before sale, in a normal case, the sale procedure is expected to take 3-6 months from the appointment of the receiver. This timeframe compares favorably with the time required to sell a security property in other non-UK jurisdiction which in some cases may take a few years.
The costs incurred in appointing a receiver, such as legal costs for the appointment, the receivers renumeration, the auctioneer’s fees if sold by auction, the estate agent fee if sold privately, legal fees for sale of the property can all be legally deducted out of the proceeds of the sale and assuming the proceeds of the sale are greater than the amount due to the lender and receivers’ costs, the lenders position is not affected by such costs.
Andreas Chr. Christoforou, Legal Advisor
Kyriaki Georgiou, Junior Legal Advisor