Real Estate Talking Point: Lending on leases

How can mortgagees/lenders protect themselves against forfeiture?

"If a landlord does exercise its right to forfeit a charged lease, the stakes are high as the lease may come to an end and a lender may find that it has lost its security for the loan."

When taking security over a real estate asset, it pays to know what kind of asset you’re taking on. Unique to acquiring a UK leasehold interest is the potential for that lease to contain a landlord’s right to forfeit. Certainly any forfeiture rights should be raised as part of a red flag review, but what commercial steps can be taken before the deal is done to try to minimise a lender’s exposure, and how does a lender apply for relief from forfeiture in practice?

Kathryn Murphy discusses the relief from forfeiture process, and explores the other protections that may be available both pre-and-post forfeiture in the context of commercial leases.

Find out more in the full report.