It is common for JTC Corporation ("JTC") to grant
leases for an initial lease term, with an option for a further
lease term upon the satisfaction of certain conditions. This client
update explains the issues that a financing bank may encounter when
taking security over such leases and the possible solutions that
may be adopted.
The Issues
A mortgage is commonly taken by a bank over the initial JTC
lease.
The mortgage only secures the initial JTC lease. Two issues to
consider upon the expiry of the initial JTC lease are:
(a) Security over the further JTC lease
Upon the expiry of the initial JTC lease, the mortgage will
correspondingly lapse as well, as it only secures the initial JTC
lease. The mortgage will not automatically secure the further JTC
lease upon its issuance. Further security documentation and steps
are required for the bank to have security over the further JTC
lease; and
