Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Hedging definition

What does Hedging mean? In legal practice, hedging describes arrangements used by a business or investor to reduce or neutralise an identified financial exposure by taking an offsetting position that delivers the opposite payoff to the underlying risk. Its purpose is loss prevention or risk minimisation, not speculation. Hedges are commonly implemented through derivatives (for example, interest rate swaps to hedge floating‑rate loans, foreign exchange forwards for currency receivables, or commodity hedges), or via natural hedges that match assets and liabilities. Key legal features include: clear identification of the exposure; proportionality (avoiding over‑ or under‑hedging); basis risk; robust documentation (often under an ISDA Master...

Real estate finance hedging: LMA REF Facility and ISDA alignment, intercreditor ranking and control, swaps and caps, covenant modelling, RFR floors and mismatches, security, and regulatory compliance

Published by a LexisNexis Banking & Finance expert

Practice notes

In real estate finance deals that incorporate Hedging, a range of documentation points must be carefully addressed so the facility papers and the hedging terms are properly consistent and aligned. In addition, intercreditor matters arise, including the ranking of the hedging Counterparty within the security package, who holds decision‑making powers under the facility agreement, and the practical consequences this has for the hedging counterparty in practice.

Why is hedging used in real estate finance? Real estate finance structures and hedging

Within a real estate finance arrangement, the borrower is commonly a Special purpose vehicle (SPV) formed for the purpose of owning a property or a portfolio of properties. Typically, it has no income stream other than the rental income received from the property. For more information, see Practice Note: Introduction to real estate finance-the lending structure—Structure of a typical real estate finance investment transaction.

From the borrower’s (investment modelling) and the lender’s (credit control) perspectives, the financing arrangement is fundamentally based on an expectation that the net rental income produced by the property will adequately cover ongoing interest payments payable under the loan facility (and amortising principal instalments, if any). Any external influences that may affect the certainty of the...

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

Ruth Marken

CMS

Ruth is a Partner in the Finance Group at CMS. She previously worked at Slaughter & May in London and Paris.Ruth advises on the full range of financing transactions, with expertise in acting for corporate and fund clients in the real estate and TMT sectors. She has a particular focus on complex structured transactions including derivatives.Ruth has been described in The Legal 500 directory as "outstanding".Some of Ruth's key transactions include advising a music publishing business on the securitisation of its receivables generated by music catalogues, a transaction which required a deep understanding of the music publishing business and its cashflows; advising an international television production group on its acquisition and production facilities; and advising a leading global manufacturer of IT products on taking security over international intellectual property....

Chris Clark

CMS

Chris is a partner within, and head of, the Capital Markets and Derivatives team at CMS UK and has a broad range of experience in advising leading investment banks, corporates and other financial institutions on a wide range of OTC derivatives, debt capital markets transactions, structured products linked to a range of asset classes and structured finance transactions. Chris specialises in derivative securities and advises on, amongst other things, the drafting and structuring of proprietary indices including advising on regulatory considerations in respect thereof (including, without limitation, the EU Benchmarks Regulation) and the drafting of structured products or transactions referencing such indices/strategies. Chris also regularly assists clients in the negotiation of a wide range of master agreements (ISDA, GMRA, GMSLA) and bespoke structured transactions entered into in connection with such agreements. In addition, Chris advises both issuers and dealers on the issue and...

Yasmin Hook

CMS

Yasmin is an associate in the Corporate and Leveraged Finance team within the CMS Finance Practice Group. Yasmin specialises in corporate finance including, TMT finance, acquisition and real estate finance, corporate and platform lending. Yasmin regularly assists a broad range of clients from major UK and international banks, international specialist lenders, leading corporates, SME’s, founders and private clients with their ongoing finance activities (both Borrower and Lender side). Yasmin also has a corporate background including experience acting for UHNWI’s, board members, shareholders and alternative finance providers....

Web page updated on 21/05/2026

Popular documents

Using the Judicial College Guidelines to assess general damages in personal injury claims

When evaluating a general damages claim, the practitioner ought initially to refer to the Judicial College Guidelines (JCG)...

Tomlin orders in England and Wales: CPR guidance on drafting, confidentiality, approval, variation, enforcement, limitation, CCA issues, court-specific requirements, sample wording and precedents

This Practice Note This Practice Note reviews mechanisms used in settling litigation. A Tomlin order consists of a consent order paired with a schedule. It operates to stay proceedings on terms that have been agreed. The provisions contained in the schedule may remain confidential. This Practice Note describes the scope of confidentiality attaching to the schedule and sets out how it differs from a standard consent order. Sample wording for a Tomlin order is included, alongside links to precedents, as well as guidance on court approval. It also addresses varying, setting aside and enforcing a Tomlin order, including the considerations the court will take into account when handling applications for each. Further guidance is provided on interpreting and applying the relevant provisions of the CPR; however, some courts and divisions impose very specific requirements for both drafting and approval, and for approaching the schedule and confidentiality issues. Accordingly, you must consider the particular rules and court guide provisions in the forum where your claim is proceeding when drawing up the Tomlin order...

Precedent: Deed of Surrender of Lease with Optional Premium, Settlement and Release, Landlord, Mortgagee and Guarantor Consents, Reimbursement and HM Land Registry Provisions (England and Wales)

Date [ date ] Parties [ name of Landlord ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Landlord) [ name of Tenant ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Tenant) [ [ name of Guarantor ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Guarantor) ] [ [ name of Mortgagee ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Mortgagee) ] Definitions Within this Deed, the terms below shall be interpreted as follows: [ Annual Rent • the annual sum reserved under the Lease; ] [ Insurance Rent • the Tenant’s share of the Landlord’s costs of insuring the Property (as set out in the Lease); ] Lease • the lease of the Property dated [ date ], entered into between (1) [ the Landlord OR [ name ...

Precedent Statutory Declaration: Standard Wording under the Statutory Declarations Act 1835

I, [ name ], of [ address ], solemnly and sincerely state that: [ Matters to be verified, set out in numbered paragraphs ] I make this solemn statement in good conscience, believing it to be true, and pursuant to the provisions of the Statutory Declarations Act 1835. DECLARED at [ details ] this [ day ] day of [ month and year ] Before me ................................................................................ [ signature of the person before whom the declaration is made ] A [ commissioner for oaths OR [ solicitor OR [ insert other qualification ] ] authorised to administer oaths ]...