The importance of specialist solicitors
By Laura Carr, head of underwriting at Hope Capital
At a recent roundtable event one of the interesting issues discussed was solicitor services in the specialist market.
The process of obtaining a short-term bridging loan is not the same as the process surrounding traditional mortgage finance, so the legal requirements are different too and having a solicitor that understands the process is absolutely vital.
Borrowers need to be confident that their solicitor understands what both the lender and the lender’s solicitors require – for example, the level of due diligence and the searches needed – in order for the finance to be put in place.
For example, the lender’s solicitors will require a costs undertaking from the borrower’s solicitor before starting any work, so the borrower should arrange to transfer funds quickly to their solicitor to avoid delay.
The borrower also needs to know if the lender needs a full suite of property searches or will accept no search indemnity insurance. If it is the full suite, the borrower’s solicitor needs to be on the ball.
They will need to undertake the searches as soon as possible, because it can take weeks for some of the results to come back, and in bridging, time is of the essence.
In order to make the process as quick and as smooth as possible, the borrower’s solicitor needs to try and provide all the documents from the outset to avoid a drip-drip approach.
A good solicitor will know that if they provide a complete suite of information (eg title documents, EPC certificates, gas/electrical certificates and copies of tenancy agreements) from the outset, the likelihood of further enquires down the line is minimised, and therefore there is less of a risk that the process will be held up.
It is also really important that the borrower’s solicitor does actually read what the lender’s solicitors require, rather than just assuming the documents they have will suffice. For example, what are the lender’s insurance requirements? Do they need to be named on the documents? What is the sum assured?
And what about credit reports – do they have their own system or does the borrower need to provide this? Providing incorrect or partial information can cause unnecessary delays which could easily be avoided. The borrower will also need to ensure that their solicitor has a contingency plan if the case lead is away.
At the roundtable it was agreed that solicitors shouldn’t accept cases they weren’t set up to deal with – especially when it came to two- or three-day turnaround times in bridging finance – or for which they lacked the necessary sector knowledge. However, industry associations could help minimise the risk of borrowers taking on solicitors not equipped for specialist lending cases by putting together a list of recommended solicitors.
Brokers are in the best position to be able to provide initial recommendations and a standard list would be hugely beneficial, as was unanimously agreed by the panel.
Bridging finance does not have to be complicated, or stressful, but it is different, so ensuring you have the right people for the job is really important.