There are a 'litany of clauses' lenders can invoke on developers – 'now you're going to find out how good those relationships are,' claims lawyer

In a recent webinar on life after Covid-19 hosted by Development Finance Today, a lawyer from major London law firm Forsters LLP said that, during these unparalleled times, developers will realise just how good their relationships with lenders really are.


The point was made with regard to a question on what clauses a lender could legally invoke on their developer clients.

“There are a litany of clauses,” said Simon Collins, partner in the banking and finance team at Forsters LLP.

Some of these include non-payment, insolvency, cessation of business, abandonment of site, material adverse change (MAC) or material adverse event (MAE) clauses, complying with all insurance obligations, and whether the site is secured and regularly inspected.

“You could fall foul of some of the less obvious things,” Simon warned.

“The way that those agreements are written, they are robustly in favour of lenders, as you would expect.

“When we negotiate these documents, we get to a point where a lender says to a borrower, ‘It’s fine, we appreciate what it says in the ‘black letter’, but it’s about relationships.’”

“And now you’re going to find out how good those relationships are, and whether you picked a good lender, or a different type of lender.

“We’ve been seeing that if you picked a good lender, it’s working well for good developers and good lenders and they are collaborating and working well together.”

The webinar, ‘Life after Covid-19: Mobilising back to a new normal’, discussed the impact that the pandemic will have on supply chains, both in the UK and internationally, and whether it will change the way contractors source their materials and labour in the future.

The final part of the webinar can be viewed in full, below.

Part one and part two of the webinar series can be viewed online.

Attendees considered what lenders’ processes will be like once developers can open their sites and are faced with revised predicted completion dates, and what clauses, legally, a finance provider could invoke on the client.

Arc & Co’s managing director of structured finance, Edward Horn-Smith, and director of structured finance, Matthew Yassin, was joined by Simon Collins, partner in the banking and finance team at Forsters LLP; Niccolò Barattieri, CEO at Northacre; Dan Smith, CEO at Fortwell Capital; and Michael Sharpe-Neal, divisional director in the valuation team at Savills.

Beth Fisher, editor at DFT, chaired the discussion.

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