BERMUDA Law and Practice Contributed by: E Scott Swainson, Katrina Dickson and Erik Gotfredsen, Wakefield Quin Limited
3.8 Lenders’ Liability Under Environmental Laws
exercise of the power of sale, to allow for addi - tional time and flexibility. Priority The priority of legal charges is determined by registration at the LTRO. Court judgments may take priority over mortgages if they are correctly registered in a way that creates constructive notice to the lender before the charge is exe - cuted/registered. Such judgments would, how - ever, be discoverable by searches at the LTRO. Dealings that lead to first registration enjoy prior - ity from the time of submission (assuming there are no registered liens). First registrations are back-dated to submission once the registration is finalised. Cautions Owners and claimants may register a caution against first registration (for example, if they claim an equitable interest under a resulting trust). 3.7 Subordinating Existing Debt to Newly Created Debt Priority of Charges Debt secured by a registered legal charge will rank in priority to any subsequently registered legal charge. Subordination by Agreement Lenders can agree a different priority as between them but this is rare. If there is ample equity, lenders may agree that their debts will rank pari passu. Most Bermuda banks will not allow the borrower to grant a second mortgage, as they fear the loss of control this would bring.
The lender’s position is the same as for a suc - cessor; see 2.7 Soil Pollution or Environmental Contamination . 3.9 Effects of a Borrower Becoming Insolvent Moratoriums do not apply to the enforcement of collateral security, as secured parties gener - ally operate outside of Bermuda’s bankruptcy regime. Insolvency proceedings may affect the ability of a secured lender to enforce its rights, as underly - ing transactions may be attacked. For example, any conveyance or other disposition of property (including the creation of a security interest) made by or against a Bermuda company within six months prior to the commencement of its winding-up will be invalid if it was made with the intent to fraudulently prefer one or more of such company’s creditors at a time when the company was unable to pay its debts as they became due. 3.10 Taxes on Loans As stated in 2.10 Taxes Applicable to a Trans- action , mortgage and loan documents attract stamp duty (being a document tax). This has been the case for many years; nominal filing or registration fees have also been payable his - torically. As far as is known, no new taxes or charges relating to such documents are currently being considered.
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