The conveyancing process is a crucial, yet frequently challenging element of secured lending transactions. From the initial instructions to completion of the transaction, this involves the preparation of the security documents, reviewing the title to the security property and reporting to the lender, carrying out the necessary pre-completion searches, and dealing with the registration formalities at the Land Registry and Companies House.
Delays can occur at any stage of this process. As such, it is essential that there is good communication between all parties involved, including the borrower, the lender, and their respective solicitors. This will help ensure that potential issues are identified, and a commercial solution is found at the earliest point.
Below are examples of the more common issues we encounter which delay the conveyancing process:-
- Inexperienced conveyancers acting for borrowers.
- Unrealistic expectations of the level of due diligence required by lenders’ solicitors and the timeframes involved.
- Borrowers’ solicitors providing incomplete responses to enquiries and/or failing to follow lenders’ requirements in relation to the provision of KYC and advice in relation to the security documents.
In order to ensure that transactions are streamlined, it pays dividends for both lenders and borrowers to work with solicitors who understand their requirements, and have the requisite experience and resources available to ensure that the matter is handled efficiently from the initial instruction through to redemption.
The relationship with lenders’ solicitors remains key post-completion as borrowers are reliant on land registry applications being processed within the prescribed time limits. Delays will inevitably have a knock-on impact on refinances and sales later down the line. The Land Registry has warned that it had to correct basic errors in as many of 20% of transactions last year. They are already struggling with a backlog of applications, and it is not unusual for more complex transactions, such as first registrations, transfers of part, and registration of leases to take more than two years to complete.
The challenges being faced are especially true in the specialist finance industry, which has seen unprecedented growth in recent years, with bridging lending increasing by almost 50% between the end of 2021 into 2022 – a period in which the base rate continuously rose.
Bridging loans are short-term financial options that allow a property investor to “bridge the gap” to purchase a property, release equity, or fund refurbishment works. Flexibility and speed are key components and required from all parties involved in this sector. As such, bridging lenders recognise the importance of having strong partnerships with their solicitors. Moreover, borrowers will remember those who moved quickly for them in a challenging financial environment.
This article was written jointly by Real Estate Finance Associate Nicola Alton at Seddons & Market Financial Solutions.
Should you have any questions about the above information, or need secured lending advice, please get in contact with Nicola Alton, [email protected] or 020 7725 8016.
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