The Road to Success – A Solicitor’s Guide
Author: Gisella Alberici, Partner for and on behalf of Ratio Law LLP
“The concept of a “Roadmap” is an interesting one and of particular relevance when applied to the borrowing process.
A good lender will want to ensure the loan stays on schedule and hits the deadline just as much as the borrower, with a clear and considered roadmap key to success.
Before we get into the process it’s important to understand the parties involved. In a standard property finance transaction this will see five – the lender (especially the underwriter); the broker; the borrower; and the solicitors of both the lender and the borrower.
Whilst all parties have the one shared objective – success – all do have a different set of responsibilities and requirements, with collaboration key to achieving a smooth and quick completion. This is where the roadmap is invaluable – clearly setting out each party’s role, responsibilities, requirements, and timings to avoid any unnecessary challenges. This should be made available to all, a factor the solicitors must agree to from the start.
So, what does an ideal roadmap look like?
Work Backwards in Order to Make Great Strides Forward
The process should start with the lender’s solicitor producing a timeline. This should start with the required completion date and work backwards, in order to ensure the date is realistic and achievable. This will take into consideration a number of factors, such as if there is sufficient time to order and consider property searches.
Clearly Define the Steps
The roadmap timeline must define the steps, who is responsible for making them and most importantly by what time those steps need to be concluded. It should also capture the implications of any delays in achieving them in relation to a delay in completion.
Harness the Benefits of Technology
Coupled with the human touch, software is invaluable in building the roadmap, with a breadth of legal systems available to help streamline the process.
Keep it Simple
Whilst the timings of every transaction will vary, the most effective roadmaps are those that are simple. Keep the number of stages to a minimum and the timings realistic. Ideally the roadmap will look something like this:
AN EXAMPLE ROADMAP
This stage will see the issuing of the timeline along with pre loan enquiries and a request for the undertaking. The borrower will be required to pay the monies for the undertaking in the required timescale and the borrower’s solicitor responsible for replying to the pre loan enquiries, for which the borrower has to ensure the required information is available.
It is important for the pre loan enquiries to be responded to as fully as possible. The issuing of the undertaking can often cause delays and so it is important it is conducted at this stage. In the absence of this lenders may impose a higher legal fee, to be charged at completion and deducted from the gross loan.
Clearly here there is a risk for either the lender’s solicitor or the lender, but there is also an upside in relation to speed and reward for taking a contingent risk.
The second stage will see replies to pre loan enquiries considered by the lender’s solicitor, with a report drafted or certificate on title prepared. At this point further final enquiries can also be raised.
The next step in the roadmap will see the lender’s solicitor prepare and issue the security documents to the borrower’s solicitor. Delay can be avoided here by the borrower making sure they instruct a solicitor that is commercial opposed to just residential, as the suite of documents (especially on a loan to a company) can total up to 10-15, all of which the Borrower/Directors/Guarantors need to review, seek advice, and sign.
At this stage further requisitions will be fully replied to, and original documents delivered to the lender’s solicitor; at which point completion can take place.
Five Key Do’s
- Do use a solicitor that is local. AML/KYC will be quick, and the execution of security documents/having advice can happen at a face-to-face meeting.
- Do use a solicitor that is familiar with property finance.
- Do make sure that you are ready to pay your solicitor the monies for an undertaking and are available to go through and provide information for the pre loan enquiries.
- Do meet face-to-face where possible and address matters in person. Organising video calls and having non solicitors print documents often results in incorrect documentation and/or execution and this causes delays.
- Do be realistic. The most successful loans are those based on accurate timings. It’s better to prepare for the worst-case scenario, than to be surprised by it.”
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