A conditions precedent list is the set of items a borrower must satisfy before an investor releases any funds: clean title, registered security, signed guarantees, insurance in force, and the corporate approvals behind them. Lawyers call them CPs. The list is the least visible part of a loan, and it does more than any other document to decide what protection is in place on the day the money moves.
The idea is old and the drafting is largely standard. The Loan Market Association's real-estate finance facility agreement, the template most European property loans are built from, structures the whole first drawdown around a conditions precedent schedule, and a borrower's guide to that document treats satisfying the CPs as the gate to funding. What follows is what typically sits on that schedule for a European property loan, and how to read it.
What sits on a conditions precedent list
A CP list groups into a few families, and most property loans carry a version of each.
Title and property. Evidence that the borrower owns, or is completing the purchase of, the asset the loan is secured against, with the land registry entry to prove it and no undisclosed prior charges sitting ahead of the investor.
Security. The mortgage or charge, executed and ready to register, plus any pledges over shares or accounts and any guarantees the structure calls for. On a first-rank facility this is the item that has to rank ahead of everyone else, so its registration is the hinge the whole file turns on.
The borrower's authority. The corporate resolutions, signatures, and powers that show the people signing can bind the company, and that the loan is properly approved inside it.
Insurance and the asset's condition. Cover in force on the property, with the investor noted where the structure requires it, plus valuations, and on a development, the building contract and the professional team behind it.
Compliance. The know-your-customer and anti-money-laundering checks on the borrower and its owners, cleared against the relevant standards before money moves.
What it protects, and where it fails
The CP list protects capital by making disbursement conditional: until the security is registered and the title is clean, the investors are not yet exposed, so the exposure cannot begin a day before the protection does.
When the list fails, the cause usually lies in how it was handled. A CP agreed late, once the borrower is committed and the clock is running, invites pressure to fund before every item is clear. A CP verified loosely, an assurance accepted in place of the registered document, leaves a gap that only shows up if something goes wrong. And a list where several conditions are waived or pushed to conditions subsequent, delivered after drawdown, quietly moves protections from before the money moves to after it. A short list fully satisfied is stronger than a long one half-waived.
Where it sits in the file
In Watson AM's nine-step diligence, CP verification is stage three, after the initial assessment and the legal review, and before the financial and collateral work, the security package, and notarial registration. The early placing is deliberate: what has to be true before closing is written down at the start, when both sides can still discuss it calmly, and never left to the last week, when a borrower has the least room to push back.
That ordering does much to let investors commit on a timeline a developer can plan around. With the framework built in advance and the conditions settled at the outset, the work at funding is a matter of checking items off against documents already known to be coming.
How this connects to Watson
Watson AM arranges financing against European real estate, with the security package set deal by deal, and the CP list is where that package becomes enforceable fact. On the twelve published case files, investors funded once the list was satisfied: the first-rank mortgage registered, the personal guarantee signed, the title and the borrower's authority confirmed. We publish the diligence pipeline, including where the CP list sits in it, so a borrower can see what they are agreeing to and an investor can see what their capital stands behind.
None of this is unique to Watson; it is how secured lending is meant to work. What a borrower notices is when the list is settled. Agreed at the start, it keeps the terms grounded in the transaction; left to the end, it lands just as the window is closing. Borrower and investor material is available on request.
Common questions
What is a conditions precedent list?
A conditions precedent (CP) list is the set of items a borrower must satisfy before an investor releases any funds on a loan: clean title, registered security, signed guarantees, insurance in force, and the corporate approvals behind them. Until every item is met, nothing is disbursed.
What is the difference between conditions precedent and conditions subsequent?
Conditions precedent must be satisfied before money moves. Conditions subsequent are things the borrower agrees to deliver after drawdown, within an agreed window. A well-run file keeps the important protections as conditions precedent, in place before the investor is exposed, rather than promised for later.
Who checks that the conditions precedent are met?
The investor and its legal advisers verify each item against the underlying documents: the land registry entry, the executed security deeds, the insurance certificate, the corporate resolutions. Verification means checking the document itself rather than accepting an assurance that it exists.
Can a loan complete with conditions still open?
It can, if the investor waives or defers a condition, but each waiver moves a protection from before drawdown to after it, or removes it. A CP list with many waived or deferred items is weaker than a shorter list that was fully satisfied before funds moved.
Watson AM, Basel. This article is general market commentary for professional and qualified investors and for real-estate developers. It isn't investment, legal, or tax advice, or an offer of any financial product.
Sources
- Loan Market Association, Real Estate Finance Facility Agreement (the market-standard European property-loan document that structures first drawdown around a conditions precedent schedule).
- Jones Day, "The Loan Market Association's Real Estate Finance Facility Agreement: A Borrower's Guide," 2012.
- Fieldfisher, "The LMA Real Estate Finance Facility Agreement," practice commentary.