Property Finance

Chapter 10England and Walea¹

1. What are the principal securities lenders will require borrowers to provide?

• A legal mortgage over any real estate which the borrower currently owns legal title to.
• A fixed charge over all current and future assets of the borrower.
• To the extent not captured by the fixed charge, a floating charge over all current and future assets of the borrower.
• An assignment of rental income, insurance policies and any other material contracts.
• A share charge over the entire share capital of the borrower.

2. What statutory provisions apply to such securities?

Section 136 of the Law of Property Act 1925 (the “LPA 1925”) states that for a legal assignment to be effective it must:

• be in writing and signed by the assignor (or mortgagor);
• be absolute (that is, unconditional and, in the case of a debt, of the whole amount);
• not purport to be by way of charge only; and
• be notified in writing to the third party against whom the assignor could enforce the assigned rights (that is, the person who owes the obligation to the assignor).

If an assignment does not comply with section 136 of the LPA 1925, then it will take effect as an equitable assignment.

There is a statutory requirement under s. 870 of the Companies Act 2006 (the “CA 2006”) to register security given over assets at Companies House within 21 days beginning with the day after the day on which the charge is created.

Under s. 859A of the CA 2006, a company registered in England and Wales, Scotland, or ...