Trends in real estate finance

“Current trends in UK real estate finance” is an article that has been published in this month’s subscription journal, Butterworths Journal of International Banking and Financial law (Paul Doctors, May 2007 page 288).  If you are interested in the area it is worth hunting down: noting the record levels of property lending in 2006,  it notes the shadow cast by property yields falling below interest rates and the expectation of a general slowdown. 

There is a possibility that borrowers will be more reluctant to invest if rates continue to rise leaving the field open for cash-rich institutions.  Despite this, it is still thought to be an area worth investing in.  The location of deals is starting to move towards the continent. The expansion of Commercial Mortgage-Backed Securities conduit programmes has continued.  Deals are becoming more complex; off-shore property funds such as JPUTs are being used; and the introduction of REITS (Real Estate Investment Trusts) has further stimulated the sector.

Hedge funds guide

The second edition of the Guide to Sound Practices for European Hedge Fund Managers has been published today (22 May 2007), by the Alternative Investment Management Association.   The guide is a weighty 64 pages long and covers the legal structure of a hedge fund, administration and controls, the investment process and raising capital.  The FT has been covering this heavily remarking on the reluctance of UK and US hedge funds to accept German calls for a full voluntary code of conduct.   The Guide takes into account the recommendations and principles of the Report and Agreement, below.

Links:

The report of the Counterparty Risk Management Policy Group II July 2005

The Agreement Among the President’s Working Group and US Agency Principals in Principles and Guidelines Regarding Private Pools of Capital 22 Feb 2007

Bank confidentiality – a thin line?

The impact of the change to court procedure allowing third parties to view court documents still has to be felt in full. In October 2007, the rules changed: only to find themselves immediately frozen pending judicial review the following December. The effect of the review was to make the rules apply only to court documents filed after 2 October – originally the rule had been retrospective. So banks have had fair warning to be careful when drafting statements of case since that time and to plead only what is necessary to protect their interests. 

An article in this month’s Butterworth’s Journal of Banking and Financial Law (04.07, 216) by Joanna Ludlam points out the problem for banks: how can they reconcile their legal duty of confidentiality with the public nature of a statement of case? The author suggests that it is only a matter of time before a claim for breach of confidence is brought although some steps can be taken to minimise the bank’s exposure.

Effect of Consumer Credit Directive on bank advertising

The Council of the European Union is due to consider the draft Consumer Credit Directive on 21 May 2007. The Directive aims to give information to consumers across the EU in a format that allows them to make meaningful comparisons and so to open up the market in cross-border credit.  In particular, consumers will be given access to key facts and figures in advertisements, they will receive information on credit offers within a new comparable EU-wide Credit Information Form and they will benefit from a single, comparable, EU-wide Annual Percentage Rate of charge. The Directive will set out two rights for consumers:

• (1) Consumers will have a right to a cooling-off period after they conclude a credit contract and will be able to withdraw from the credit without having to give any reason and without any charge and
• (2) Consumers will have the right to repay credit early at any time and the compensation that creditors are entitled to claim in this event will be harmonised in order to lower market entry barriers.

The proposed directive has been substantially modified by the European Parliament and Commission since it was originally published in 2002.

Corporate Manslaughter Bill

The fate of the Corporate Manslaughter Bill has been in the balance in the last few weeks.  Yesterday (16 May 2007), the government discussed how to meet the Lords half-way by agreeing a compromise: the argument had arisen that the Bill ought to extend to include deaths in prison, police cells and psychiatric hospitals.  The government had not intended the Crown to be liable under the Bill; Labour have long promised to introduce the Bill to make it easier to prosecute large companies responsible for a fatal accident.  Time is now working against them as the Bill will fail unless passed before the summer recess.  

And …

The FT reports today, 22 May, that the Bill may not make it through the Lords’ vote today.  It’s thought that last week’s concesson will not be enough to persuade them to get it on the statute book this session.

And … amendment!

You can follow the detailed and stirring debate in the Lords yesterday, 22 May 2007 as reported in Hansard on the Commons’ proposal to deal with extending the offence to cover deaths in custody in subsequent legislation.  The Lords Reason for insisting on their amendments and for disagreeing to the Commons’ amendment in lieu to the Corporate Manslaughter and Corporate Homicide Bill has just been published: the Lords have refused to accept the Common’s compromise wording saying “it is appropriate that a relevant duty of care should be owed to anyone held in custody”.

Bank charges case

There has been a huge amount of press coverage, naturally, of LTSB’s success in defending a bank charges claim in Birmingham County Court.  The hearing was on 13 April 2007 but the judgment was only handed down yesterday, 15 May.  Kevin Berwick had claimed repayment of fees and interest of nearly £2,000 on his account but the claim was dismissed on the grounds the charges were a legitimate charge for the banking service and were not a penalty.  Which has an article on this, as does MoneyExtra,  This Is Money (who provide the link to the judgment), the Guardian, the Independent, the Telegraph and the BBC .  I am sure there are plenty of others.

The FT on 21 May has more to say in the context of Tom Brennan’s case against NatWest that will be taken up in court again today.  He’s arguing a case in tort, that the Bank was in breach of a statutory duty not to treat customers unfairly. 

And …

On 22 May, the FT again: following Mr Brennan’s argument in the City of London county court.

No misrepresentation by lending bank

The Royal Bank of Scotland plc has successfully defended an action brought by Rabobank over loans made to the Yorkshire Food Group, in which more than £101m damages were claimed for alleged fraudulent misrepresentation by National Westminster Bank. In a complex judgment that runs to 129 pages, the court carefully considered the detailed factual evidence and concluded no tort was committed by the Bank. 

Link to the case on BAILII: National Westminster Bank plc v Rabobank Nederland [2007] All ER (D) 186 (May

SOCA wrong that only bank can apply to use frozen account

Bank accounts were frozen on the bank making an authorised disclosure to the Serious Organised Crime Agency.   On a request by a third party (who had an interest in the smooth operation of the account) to SOCA asking them to revisit the decision to freeze the accounts, SOCA refused, saying the application needed to be made by the bank.   The court held that s 335 of the Proceeds of Crime Act did not require the request to be made by a bank, and that SOCA must give the bank consent to release funds from the account when there was no longer any good reason for withholding consent.  The claimant was an offshore finance company who were applying for judicial review of SOCA’s decision.  The accounts in question were held by the bank for one of its customers who dealt with funds held on trust for the claimant.

R (on the application of UMBS ONLINE LTD) (Appellant) v SERIOUS ORGANISED CRIME AGENCY (Respondent) & REVENUE & CUSTOMS (Interested Party) (2007) CA (Civ Div) (Ward LJ Sedley LJ Hooper LJ 2 May 2007

EC’s policy on retail financial services

The EC have published a Green Paper giving their policy objectives in retail financial services in the single market.  Not surprisingly, these are to:

• reduce prices, increase choice and empower consumers.

The policy follows on from the White Paper on Financial Services 2005-2010 and on its sector enquiry into retail banking.  Feedback from interested parties is sought by 16 July 2007 and there will be a public hearing in September.  The results will go in the EC’s Single Market Review  due in autumn 2007.

An article by Jonathan Craft at Penningtons sets out concisely the reasons why the Law Commission sought to reform the system for registering company charges.  It’s called “Missing the moment”  – scroll to second article.  He is right to mourn the opportunity for reform that has been missed in the Companies Act 2006.  Of course there are arguments both ways for reform, but there was mostly only benefit in the proposal to instantly have a note of your registration instead of having a messy, 21-day twilight period.  The waters got muddied by trying to reform English security law on a grand scale instead of just sticking to the registration procedure.  Understandably, the legal establishment took fright at the implications of a wholesale reform and the baby was thrown out with the bathwater.