LendSwift provided a 12-month development loan for the purchase of two neighbouring sites, just outside Glasgow, requiring planning permission to build a mixture of 22 houses and flats in May 2019. The initial gross advance was £360,000 with a further £1,200,000 to be provided for the works. Amendments were made to the proposed scheme, delaying the two planning applications being reviewed by the Committee until March 2020. The first Covid lockdown then delayed the Committee meeting further. LendSwift granted a three-month extension to the loan on the basis that the borrower serviced the interest monthly. At the adjourned Committee Meeting in July 2020 both applications were refused.
The borrower instructed a planning consultant to prepare and submit an appeal against the decision, which was examined in detail by the LendSwift management team. Based on the strength of the appeal, a further extension was granted whilst the borrower organised a refinance for the loan. Evidence of the refinance was seen by LendSwift and unfortunately the refinance for the loan fell through. The borrower then arranged the sale of their SPV company, which owned both the sites, to a hedge fund. The LendSwift team kept in regular contact with the Hedge Fund and the borrower’s solicitors, who were acting on the sale.
When this sale did not proceed, the borrower was informed that unless the loan was redeemed by the end of January 2021, default interest would be charged, and formal repossession would begin with the issuing of a calling up the loan. In January, the planning appeal was granted for the smaller site but rejected for the larger site. Based on the planning decision, LendSwift obtained advice from planning consultants and local commercial agents on the value and saleability of the sites.
When the borrower failed to redeem the loan, LendSwift’s solicitor issued a formal Calling Up Notice in February. LendSwift had provided a separate bridging loan to the borrower, secured on another property in Scotland. Although this loan was via a separate SPV company, a Cross Company Guarantee between the two companies has been secured, which is standard business practice. LendSwift also had the usual Standard Security (Legal Charge), Bond & Floating Charge (Debenture) and Personal Guarantee to protect them in the case of defaults.
The borrower asked to redeem the loan on the second property at the end of the term; March 2021. The LendSwift management team decided not to release the various securities held over that property until the first loan was redeemed. The day after the loan on the second property was due to be redeemed, in March, our solicitors issued a Calling Up Notice in relation to that loan.
At the expiry of the two-month notice period for the Calling Up Notice for the original two sites, LendSwift’s solicitors issued a court application for a Possession Order. Such an Order was necessary for the sites to be repossessed and eventually sold.
Faced with the repossession of the two sites along with the other property, the borrower arranged the refinance of these properties along with two other properties in his portfolio to fully repay his loan. All of LendSwift investors’ capital and accrued interest was repaid together with an agreed sum of default interest and all legal fees. This meant LendSwift maintained their record in repaying investors’ capital in full on all loans to date.
The successful recovery of the overdue loans can be attributed to taking the appropriate forms of securities over the properties including, and most importantly in this case, a Cross Company Guarantee. LendSwift also took early expert advice from the relevant professionals including planning consultants, commercial agents, and specialist property litigation solicitors. This enabled an efficient recovery strategy to be formulated and executed.
The LendSwift team are always aware of the importance of learning from such experiences and improving our loan policies and procedures. Accordingly, LendSwift no longer lend on land without planning permission and have also implemented a policy of issuing a Calling Up Notice as soon as the loan is over term. This ensures that no time is lost in obtaining a Possession Order if it becomes necessary. It also maintains pressure on the borrower, whilst at the same time allowing the LendSwift to work with them to facilitate repayment of the loan as quickly as possible.
LendSwift are committed to constantly improving our policies and procedures to protect investors’ capital and maximise their returns.