In this recession like no other, enforcement over complete and incomplete residential and other property developments is a common scenario faced by both bank and Insolvency Practitioner alike. The dilemma initially appears quite stark; Should the bank advance further monies to complete out developments in order to maximise realisations or sell the site "as is" to another developer but at a significantly discounted price? The purpose of this article is to consider the issues which warrant consideration before devising an enforcement strategy in relation to incomplete developments.

Lender Security Package

In a typical case, the bank will have made available facilities to the borrower to assist with the acquisition of a site for residential development. The facilities are secured by way of a legal charge, possibly a step in agreement and a legal assignment over a form of JCT building contract between borrower (also commonly referred to as the developer or the employer) and contractor. Let us consider each in turn:  

 Step in Agreements

"Stepping-in" will commonly allow a bank to complete out a development project where either the employer or the contractor is unable to comply with its obligations under a development agreement. This is often due to one party being in financial distress. Broadly speaking, the upside for the lender in exercising its "step-in" rights is that it can maintain continuity and preserve collateral agreements with other members of the design team (e.g. architects). In theory, it allows the development to be completed out seamlessly and without having to renegotiate terms. However, the downside for the lender is often that in stepping in to the shoes of employer or contractor, it is often stepping-in to their obligations (existing and future) as well. Where there is a legacy of unpaid counterparties, this is often an unattractive proposition for the bank.

Legal Charge - Appointing a Receiver or an Administrator?

This is likely to be the enforcement option favoured by banks, however, in terms of which procedure to use, the following non-exhaustive list of factors might warrant consideration at the outset:

  • Does the legal charge properly arm the receiver with the range of powers necessary to control and complete the build out?
  • Will the appointment of a receiver and/or an administrator allow the JCT counterparty to terminate the underlying JCT agreement?
  • Will the appointment of a receiver and/or an administrator entitle purchasers of off-plan units to terminate sale contacts?
  • If the borrower is already, or is likely to be made, bankrupt or wound up, a receiver will lose his agency.
  • Is the contractor in possession of the site? If so, how best can the contractor be removed without the risk of physical damage or any other associated liability/loss?
  • Are there any underlying deficiencies in the security which might prejudice the appointment of a receiver?
  • Care must be taken in relation to any ongoing funding issues, especially where there are other charge holders.

Other Considerations

In relation to the build out of a residential development, other issues which feed into the enforcement strategy devised by lender and receiver/administrator are as follows:

  • Does NHBC registration need addressed as this can be cancelled in the event of builder insolvency?
  • Have deposits been taken from off plan purchasers? If so, who has benefitted or currently controls that money?
  • Are there any long stop dates relating to practical or actual completion?
  • Do environmental issues require consideration?
  • Is there access to site plans and/or architects drawings? Does the position "on the ground" accord with Land Registry plans, site specifications and planning permissions?


There are many variables which must be considered prior to embarking upon an enforcement process in relation to incomplete property developments. Outlined above are many, but not all, of the issues which are likely to arise. Nevertheless, a collaborative approach between lender, experienced IP and experienced lawyer is often the key to unlocking the correct enforcement strategy.