A lower risk method to receive a fixed income.
A brief explanation of the legal framework behind Reap:
You will enter into a loan agreement with the Company under which you agree to provide a loan for a period of 5 years to assist with the financing of a property. In return the Company agrees to pay you interest on the loan amount at a rate of 7% p.a.
The property will be used to provide affordable housing to private tenants which will produce a rental income, from which your interest will be paid.
The loan will be secured by way of a legal charge and will be registered at HM Land Registry. Interest will be paid to you monthly in arrears, although you may choose to receive your payments once per year.
A Security Trust will be appointed to act as Security Trustee, the purpose of the Security Trustee is to hold a legal charge over the property on your behalf and any other lenders over the same property, thereby ensuring privacy and protection.
All lenders will enter into a loan agreement with the Company on exactly the same terms, albeit often for different sums of money.
A lender can demand repayment of its loan after 5 years and on 90 days notice.
A more detailed explanation of the legal framework:
We have worked hard to ensure that Reap stays as clear and transparent as possible, while still affording you, the lender, the protection needed.
The explanation below is quite technical, if there’s anything you don’t understand please contact us and we’ll be happy to help.
For the purposes of this agreement:
- Society = Equfund (IPS) Limited
- Investor = You, the lender
- Security = the property your loan is registered against
The Security Trust is used to hold security over the asset, on trust for itself and the Investors on the terms and subject to the conditions contained within the Security Trust Deed.
Each of the Investors appoint the Security Trustee to act as agent and trustee in connection with the Legal Charge over the Property and authorises the Security Trustee to perform the duties and to exercise the rights, powers and discretions that are specifically delegated to it under the Legal Charge.
The property is the tangible security granted by the Company to the Security Trustee.
Security Trusts are commonly used in finance transactions and are established by a document called a Security Trust Deed. The Security Trustee will have control rights over the property from the moment the Security Trust is established.
Why is a Security Trust Deed used?
- It is administratively convenient, particularly where there is more than one Investor to a property
- It permits transfers to new Investors if a lender chooses to do so, meaning there is no requirement to change the registration of the security
Any monies received or recovered pursuant to the Legal Charge will be used by the Security Trustee to pay enforcement costs and thereafter applied as follows:
- Pro rata to the Investors respective to their individual loans;
- Any surplus balance being paid back to the Society.
In the event of default, the entire amount of the Loan will be repayable on demand by the Investors.