By Michael Fetter

28 May 2019

With the release of the Royal Commission Report in February this year and recent crack-downs on lending by the major banks, we are seeing more and more loans coming from private lenders and mezzanine financiers.

Lenders need to be aware of their responsibilities and the risks that they face when agreeing to lend large amounts of money to borrowers. We are seeing an increasing number of borrowers, notably under these economic conditions and uncertainty within the property market, not able to repay loan amounts and most of the time, the chances of recovering any interest is extremely low as is the provision of adequate security by borrowers.

Not only are Lenders facing a high chance of no interest being able to be repaid (especially at default rates that appear attractive at drawdown) but they will have to face court action for the purpose of recovering any amount back from borrowers. In the same light, borrowers are also encouraged to review carefully the lending requirements such as security interests being registered over borrowers for security for loan amounts.

Consideration should be given in relation to:

  • How these loans affect your future lending capacity?
  • How does it affect the functioning of your business moving forward in needing finance for other things?
  • If a Borrower is a developer, by borrowing from a mezzanine or private lender, as security for payment, is the Lender taking control of shares or units in the Borrower?
  • Does the Lender have the ability to halt progress of a staged development?

It is imperative, that security for payment documents are prepared and reviewed carefully.

For more information on what your responsibilities and risks are as a Borrower or alternatively as a Lender, please contact a member of the Commercial Law Team.


The material contained in this publication is meant to be informational only and is not to be construed as legal advice. Tisher Liner FC Law will not be held liable or responsible for any claim, which is made as a result of any person relying upon the information contained in this publication.

Related Articles

View All
Property & Development / Mortgages, Loans & Finance / Real Estate Agents

What is the Homebuyer Fund?

The Fund allow individuals the opportunity to own their own home that previously has always been out of reach The Fund...
Read More
Commercial Law / Mortgages, Loans & Finance / Mezzanine Finance

Private lending: the red flags

Today, it may appear amicable and you do not foresee anything going wrong after the money is advanced Surely, it’s...
Read More
Commercial Law / Commercial Contracts & Agreements / Corporate Advisory and M&A

Negotiating Indemnities: Some Practical Tips

An appropriate indemnity can provide a valuable mechanism for risk allocation between parties to commercial dealings...
Read More
Technology and Start Ups / Adverse Possession / Commercial Law

TLFC – Award Finalist for Law Firm of the Year (Medium Category)

Tisher Liner FC are proud to be nominated as an award finalist in the 14th annual Victorian Legal Awards Medium Law...
Read More
Commercial Contracts & Agreements / Mortgages, Loans & Finance / Mezzanine Finance

The Mezzanine Way

Mezzanine finance assists real estate investors, developers, businesses and those looking to refinance to bridge the...
Read More
Mortgages, Loans & Finance / Property & Development / Developments

Changes to the Foreign Resident Capital Gains Withholding Regime – effective 1 July 2017

On 9 May 2017 the Federal Government announced proposed changes to the Foreign Resident Capital Gains Withholding...
Read More
Mortgages, Loans & Finance

The Pitfalls of Loans

When avoiding the pitfalls of loans, advice and the careful preparation of documents are imperative for various...
Read More
Mortgages, Loans & Finance

New requirements to ensure lenders to take “reasonable steps” to verify identity

The amendments follow the lead of Queensland, New South Wales, South Australia and Western Australia, which have all...
Read More
Employment Law / Mortgages, Loans & Finance / Real Estate Agents

Purchasing real estate by an SMSF and the implications from an Estate Planning perspective.

In addition to income tax benefits, there are also capital gains tax benefits in using an SMSF to purchase real estate...
Read More
Mortgages, Loans & Finance

Are you a lender of funds? Get your systems in place now to avoid an issue.

On 24 September 2014 new laws took effect to require mortgagees, the lender, to take reasonable steps to verify the...
Read More
Leasing & Lease Disputes / Mortgages, Loans & Finance

Why is mortgagee’s consent to a lease so important?

A title search will provide evidence as to whether there is a mortgage over the property If there is not a mortgage, it...
Read More