The many implications of the Grenfell Tower fire

All charged stock will be valued on a regular basis, typically every three or five years. But, in addition to this, nearly all lenders reserve the right to seek additional valuations, particularly if they have cause to believe that there may have been a significant loss of value.

So if you have tower blocks in charge, what should you do?

First, make sure you know when the next regular valuation of any tower blocks is to take place.

Second, think about the possible consequences of any tower blocks being assigned a nil value.

This could happen sooner than you think and (for the reasons mentioned above) outside the usual valuation cycle. Could this cause you to be in breach of any asset cover requirement?

Third, if there could be a potential breach on the horizon, think about how that could be mitigated.

Is there substitute security that could be provided? Does the relevant loan agreement provide for the use of cash as alternative security?

Bear in mind that charging substitute stock could take some time and there are likely to be detailed provisions in loan agreements about how release and/or substitution of security could work.

Lenders are likely to be sympathetic to any potential problem, so long as they are alerted to possible issues at the first possible opportunity and kept updated as matters develop.

It could for example be possible to negotiate some kind of temporary waiver or standstill.

Lenders may also look kindly on any request to relax some of the more detailed requirements around security release and/or substitution.

Solutions of this type should hopefully offer a timing window to allow the many and varied issues around the valuation of tower blocks to be worked through.