Limited Recourse Loan Agreement Template for England and Wales

A Limited Recourse Loan Agreement is a specialized financing document that restricts your lender's ability to recover debt beyond specified assets or income streams. Unlike traditional loans where lenders can pursue all your assets, this agreement provides crucial protection by limiting recovery to predetermined collateral or cash flows.

When do you need this document?

You need this agreement when entering project finance arrangements where the project's assets and revenues serve as the primary security. It's essential for structured finance transactions involving special purpose vehicles, asset-backed securities, or when you're developing infrastructure projects. Real estate developers commonly use these agreements when financing specific developments, ensuring personal assets remain protected. Investment funds and corporate borrowers also utilize limited recourse structures to isolate financial risks within particular business segments or subsidiaries.

Key legal considerations

The limited recourse provisions must clearly define which assets are available for recovery and explicitly exclude others from the lender's reach. You must ensure the security arrangements comply with perfection requirements under English law to maintain enforceability. Default provisions should specify acceleration triggers while respecting the limited recourse nature of the arrangement. Consider including step-in rights for lenders in project finance scenarios and carefully draft intercreditor provisions if multiple lenders are involved. The agreement should address assignment restrictions to maintain the limited recourse structure and include comprehensive definitions to avoid ambiguity in enforcement situations.

Legal requirements in England and Wales

Your agreement must comply with the Financial Services and Markets Act 2000 if any party engages in regulated activities or if the arrangement constitutes regulated lending. Consumer borrowers benefit from Consumer Credit Act 1974 protections, requiring specific disclosure requirements and cooling-off periods. Security interests must be properly created and registered under the Law of Property Act 1925 for real property or the Companies Act 2006 for charges over company assets. Corporate borrowers must ensure board authority and capacity under the Companies Act 2006, with proper corporate approvals documented. The agreement should include appropriate jurisdiction and governing law clauses specifying English courts and English law to ensure predictable enforcement.