Titan Europe 2007-1 (NHP) Limited - Irish Stock Exchange

Enforcement of Security in England Upon Foreign Insolvency. The English courts are required, subject to
limited exceptions, to recognise and give effect to the opening, conduct and closure of “main” insolvency
proceedings taking place in accordance with the EC Insolvency Regulation in another Member State, as well as
judgments handed down in direct connection with such proceedings. Subject to important exceptions, including
those specified below, (i) the law of the Member State in which insolvency proceedings are opened pursuant to
the EC Insolvency Regulation is to be applied to those proceedings and is to determine their effect; and (ii) a
“liquidator” (as that term is used in the EC Insolvency Regulation) appointed in main proceedings conducted in
another Member State is empowered to remove any assets of the debtor company located in England and Wales.
It is the apparent intention of the EC Insolvency Regulation that the application of these rules be
circumscribed with respect to security interests, including fixed and floating charge security interests, over
assets or rights located in England and Wales. In particular, the EC Insolvency Regulation provides that the
opening of insolvency proceedings shall not affect the “rights in rem” of creditors or third parties in respect of
tangible or intangible, or moveable or immoveable, assets (both specific assets and collections of indefinite
assets as a whole which change from time to time) belonging to the debtor which are situated within the territory
of another Member State at the time of the opening of the proceedings.
Environmental Laws. Certain existing environmental legislation imposes liability for clean-up costs on the
owner or occupier of land where the person who caused or knowingly permitted the pollution cannot be found.
The term “owner” would include anyone with a proprietary interest in a property and as such could include a
mortgagee. Even if more than one person may have been responsible for the contamination, each person
covered by the relevant environmental laws may be held responsible for all the clean-up costs incurred.
If any environmental liability were to exist in respect of a property or an obligor, a lender should not incur
responsibility for such liability prior to enforcement of the related loan and security deed, unless it could be
established that the lender had entered into possession of the affected property or could be said to be in control
of the property. A lender who so enters into possession or controls a property is referred to as a “mortgagee in
possession”. After enforcement, the lender, if deemed to be a mortgagee in possession, or a receiver appointed
on behalf of the lender, could become responsible for environmental liabilities in respect of a property.
However, HM Government has expressly refused to state that where a borrower has become insolvent, actions
taken by a lender simply designed to preserve the property and to protect the general public should not be
regarded as making the lender a “mortgagee in possession” and therefore potentially liable.
If an environmental liability arises in relation to any property and is not remedied, or is not capable of being
remedied, this may result in an inability to sell such property or in a reduction in the price obtained for such
property, resulting in a sale at a loss. In addition, third parties may sue a current or previous owner, occupier or
operator of a site for damages and costs resulting from substances emanating from that site, and the presence of
substances on a property could result in personal-injury or similar claims by private plaintiffs.
Compulsory Purchase. Any property in the United Kingdom may at any time be compulsorily acquired by,
inter alia, a local or public authority or a governmental department, generally in connection with proposed
redevelopment or infrastructure projects.
However, if a compulsory purchase order is made in respect of a property (or part thereof), compensation
would be payable on the basis of the market value of all of the related obligor’s and the tenants’ and/or
landlord’s proprietary interests in that property at the time of the purchase. The risk to the lender is that the
amount received from the proceeds of purchase of the freehold or leasehold estate may be less than the
corresponding principal of the loan together with accrued interest to which the lender is entitled.
A further consideration is that there is often a delay between the compulsory purchase of a property and the
payment of compensation, which will largely depend upon the ability of the property owner and the entity
acquiring the property to agree on the open market value of the property.
Frustration. In exceptional circumstances, a tenancy could be frustrated under English law, with the result
that the parties need not perform any obligation arising under the relevant agreement after the frustration has
taken place. Frustration may occur where superseding events render the continuance or performance of the
agreement illegal, impossible or radically different for a party thereto, so that it would be inequitable for such an
agreement or agreements to continue.
189