REALWorld Law

Real estate finance

Non-insolvency procedures

Are there any schemes or arrangements which can be implemented in relation to a debtor company or business which is in financial difficulties (other than insolvency proceedings)? How do they affect the rights of a lender with security?



If the debtor is having financial difficulties, a mortgagee, who is also the pledgee with respect to the rental income arising from the mortgaged property, can make its right of pledge public, as a result of which the tenants must pay the rent directly to the mortgagee/pledgee (and not to the pledgor).

The mortgage is also entitled to take over the management of the property if the mortgagor seriously defaults in the performance of its obligations towards to the mortgagee and the Dutch court grants the mortgagee authorization to do so. This can only be the case when this is agreed upon beforehand in the mortgage deed. In such an event, the mortgagee must be aware that it could be deemed to be the manager of the relevant property under Dutch environmental law, in which case the authorities could require the mortgagee to comply with the applicable environmental rules. Therefore, this should only be done when the implications of potential environmental liability have been considered.

The mortgagee is also entitled to take the property under its control if this is required for purposes of foreclosure.