FCC Proudreed Properties 2005 HSBC SG CORPORATE ...

In most cases, the information contained in the Certificates of Title does not establish whether the Permits
are definitive. As a result, they could in theory be challenged by an interested third-party (such as a
neighbouring property owner), although an action challenging a permit after the building is completed is
rare in practice.
Absence/incompleteness of compliance certificate
After works are completed on a property in accordance with the relevant Permit to the satisfaction of the
local authority, a compliance certificate (certificat de conformité) is delivered.
According to the Certificates of Title, the Notary has not been provided with the compliance certificates
or evidence of the existence of the relevant compliance certificate, with respect to nine Secured Properties
of the Proudreed France Borrowers and 11 Secured Properties of the Paris Property Borrowers. The
Certificates of Title indicate that the compliance certificates issued with respect to 17 Secured Properties
in the portfolio of the Paris Property Borrowers and nine Secured Properties in the portfolio of the
Proudreed France Borrowers do not cover all the works mentioned in the Certificates of Title as having
been carried out on the relevant Secured Properties, or are not clear as to whether all compliance
certificates (or evidence of their existence) regarding the works carried out in the Secured Properties have
been provided.
A compliance certificate is not compulsory, but in the absence of a compliance certificate, the Borrower
has the burden of proving that the works complied with the relevant Permit in the event of a dispute.
Consequences of absence/incompleteness of Permits and compliance certificates
As a result of the missing or incomplete information concerning the Permits and compliance certificates
in relation to the Secured Properties referred to above, it is not possible to determine whether the
buildings on those Secured Properties were built pursuant to, and in compliance with, valid building
Permits. If no building Permit was issued at the time the relevant buildings were built, or if the building
works were notcarried out in accordance with the terms of the Permit, the relevant local authority and/or
an interested third party (such as a neighbouring property owner) could (among other things) require the
building to be demolished.
In relation to seven of the eight Secured Properties where Permits are missing or incomplete, the
Certificates of Title indicate that the relevant building works were undertaken more than 10 years prior
to the Closing Date (which is in most cases the statutory limitation period for commencing legal action).
Furthermore, compliance certificates have been obtained for all Permits issued with respect to works
completed during the 10 years prior to the Closing Date except with respect to seven Secured Properties
in the Property Portfolio of the Proudreed France Borrowers and four Secured Properties in the Property
Portfolio of the Paris Properties Borrowers. Even if the period for taking legal action has expired,
however, the relevant local authority could refuse to deliver a new building permit in the future (for
example, for the purpose of extending the building or re-building if the building is destroyed or damaged)
unless the original Permit is produced and/or any non-compliance is remedied to the satisfaction of the
local authority, or the issue is otherwise addressed to the satisfaction of the local authority.
The fact that the Notary has not been provided with certain Permits, or evidence of the existence of the
relevant Permits, does not mean that the Permits have not been obtained. Nor does the absence a
compliance certificate mean that the relevant building works have not been carried out in accordance with
the relevant Permit. The Borrowers have represented that, based on the due diligence carried out at the
time of acquisition, they believe that the absence of or incompleteness of the Permits in relation to the
Secured Properties referred to above has no other cause than the original Permits having been lost or the
inability to obtain copies from the relevant authorities. Furthermore, the Borrowers have represented that
they are not aware of any matter which would suggest that the works carried out on those Secured
Properties in relation to which the compliance certificates are incomplete were not performed in
accordance with the corresponding Permits.
Partial unauthorised use
According to the Certificate of Title with respect to the Secured Property located at Alfortville, no
building permit authorising the change of authorised use (affectation) has been issued in respect of that
Secured Property. The current legal authorised use is light industrial activity although one third of its
surface area is currently leased as office space. According to the Certificate of Title, a double tax for
creation of offices may be due by the Borrower owning this Secured Property on the grounds that the
change of use has not been subject to prior authorisation. Furthermore, according to the Certificate of
Title, the local authority could require that the premises revert to light industrial activity.
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