Personal Guarantee – Guarantee reduced settlement agreement

A development company had its loan facilities reduced by its bank making it unable to complete various residential developments. The bank appointed a receiver and sold the assets, leaving a substantial shortfall.

The bank called up the director’s personal guarantee of £125,000 and commenced legal proceedings. We were asked to help and immediately reviewed the banking relationship. Our review highlighted a number of potential concerns allowing us to negotiate a settlement limited to the potential equity in two buy-to-let properties owned by the director. Following completion of the sale any equity, after costs, would be paid to the bank as final settlement. The agreement included a provision whereby the settlement was concluded even if there was no remaining equity in the properties – client saving £105k or 84% of the original debt.