The borrower's right to redeem: do lenders have to cooperate?
Updated: 23 hours ago
When a borrower commits multiple events of default under a secured loan arrangement, the lender’s duty to cooperate with the borrower in relation to loan repayment and the redemption of security is (usually) not the first principle that comes to mind.
However, English law recognises the borrower’s right to repay the loan and recover the security provided for it, known as the “equity of redemption”.
In Shukla v St James Bank & Trust Company Ltd, the Court recently held that, provided the arrangement was a genuine secured loan (rather than a repo transaction), a lender’s failure to cooperate with that right was a breach of contract with accompanying liability for damages.
This right is particularly important where the value of the security significantly exceeds the loan amount (as was the case in Shukla) because it helps prevent what otherwise would be a clearly unjust outcome.
If you are a lender or a borrower looking to get greater clarity in relation to your rights or obligations under a loan agreement, Via Legalis can help.
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