Lending after Lockdown

Specialist lenders urged to consider action early on underperforming or default loans due to 'backlog' of possession claims

Specialist lenders need to consider action at the earliest opportunity for underperforming or default loans, as the expected backlog of possession claims could take time to subside, recommended Daniel Richardson, insolvency practitioner at CG&Co.

The statement was made during today’s (11th May) ‘Lending after Lockdown’ event, organised by Brightstone Law, in partnership with Westcor International and CG&Co.

Daniel highlighted that the closure of the courts due to Covid-19 restrictions, together with the lack of ability to enforce possessions as a result of the government’s eviction ban, have caused a backlog, resulting in significant delays to the legal process.

According to Jonathan Newman, senior partner at Brightstone Law, the total duration of the court process for possession claims they have dealt with — from issue to enforceability of order — has reached an average of 26 weeks, more than doubling the pre-Covid timeframe of 12 weeks.

He claimed that, regionally, the slowest courts are currently in London, the East and the North West, with average duration for court proceedings for these types of claims reaching approximately 30 weeks.

Meanwhile, West Midlands and Yorkshire courts are said to have the shortest average time between issue of claim and order of possession, with an average of 19 and 21 weeks respectively. However, this is still almost double the average time pre-Covid.

Despite the setbacks, the success rate of obtaining an order for possession after the first hearing has remained at 75% — the same as it was prior to the health crisis.

The pandemic has also affected the ways lenders approach the recovery of funds, with 32% now opting to appoint receivers to deal with defaulted loans, compared to 17% pre-Covid, according to Jonathan.

“Engagement in the negotiation with borrowers is paramount to mitigate the situation as soon as possible,” Daniel said.

For tenanted properties, he warned lenders to take into account the history of rent payments made by the tenant at the lending stage to ensure the investment income is good and sustainable.

“Whether a borrower has received financial assistance during the pandemic will [also] provide an insight into their affairs as a whole and their ongoing commitments that could have an impact in the future,” he added.

Leave a comment