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3
What is the key trigger for the director's to repay the mortgage?
These are key triggers whereby the directors would be required to repay their mortgage obligation to the lender (in risk order).
- A missed payment by the directors which has not been paid when the lender has notified them of the missed payment
- A missed payment (with no notification required)
- any breach of the mortgage terms by the company (no matter what the breach was)
- No trigger required. The mortgage lender can call in the guaranteed mortgage obligation (from section 1 above) 'on demand' i.e. whenever it wants
What is the legal definition of 'On Demand'?
"must be repaid on the demand of the lender"

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4
How long does the Directors Guarantee last for?
The directors guarantee starts from the date it is executed on completion however when does it end?
- until the debt is repaid
- until cancelled by the director
- until the lender decides to cancel it
- No right of termination. The personal guarantee lasts forever, even when the director is no longer an owner, director, shareholder or officer of the company.
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5
How long is the notice/grace period?
Most directors guarantees are drafted such that lenders are not required to write to the Director to inform them of their intention to call upon the guarantee. Most of the lenders are also not required to give the director any "grace period" I.e. any time before payment needs to be made.
When the company and the director cannot make payment for the mortgage payment then the mortgage lender can petition for the director's bankruptcy after 21 days.
Would the mortgage lender really call upon the guarantee?
When a company stops paying its mortgage repayments, whatever the reason be it because their tenant moved out or it has run into cash flow problems, the mortgage lender will want to protect its asset. The options for the lender are:
- Request payment of the missed payment
- Call upon the whole debt under the mortgage terms (whatever is in section 1 above)
- Sell on the debt to another lender.
Whilst there is more leniency given for residential mortgages, when the debt is with a company the banks take more immediate action.
How do you reduce the risk of a directors guarantees?
It is a requirement of the mortgage that every director providing a personal guarantee obtains independent legal advice. During this meeting the solicitor explains the terms of the mortgage lender and how these personally affect the company director. After the meeting the solicitor provides a letter confirming the legal advice and the guarantee document is signed. The lender may also want the mortgage deed signed in the presence of the solicitor. At SAM Conveyancing we have a solicitor on hand to help with independent legal advice - get in contact and see how we can help 0207 112 5388.