Jonathan Sealey is CEO of Hope Capital
A key requirement of facilitating any bridging loan is the ability to lend funds quickly based on the security of a property, sometimes within days if required by the borrower. However one of the key elements preventing a transaction from completing within a required timescale is the efficiency, (or should I say, lack of it?) of the solicitor employed by the client. There are many occasions where Hope Capital are ready to send completion funds, only for our legal team to inform us that completion will be delayed as the client’s solicitor has failed to send all the relevant documentation or paperwork we require.
For any broker who is trying to arrange bridging finance for their clients, this will likely be the time when the client is on the phone asking for updates on timescales for the loan drawdown they require, asking why they haven’t received funds yet and what can be done about it to push a deal to completion quicker.
There are some excellent firms of solicitors to choose from to help speed up a bridging loan transaction, indeed we use one of them, but to be effective and efficient they need to know how bridging loans work and operate; they need to have processes in place to turn things around quickly and they need to understand how a bridging loan is different from a mainstream mortgage or a secured loan.
As so many deals are held up by solicitors who don’t fully understand the bridging loan process and are not geared up to act as quickly as the deal requires, there is a lot of value for brokers in having a panel of two or three solicitor firms they can recommend their clients use; solicitors who they know have completed bridging loan deals efficiently in the past and can deliver what the client requires in the timescales needed.
Often it is advised to instruct a larger firm of solicitors as they tend to have the infrastructure in place for dealing with different situations that may arise during the bridging loan process, and they are more likely to have solicitors who specialise in all relevant areas of property law. They may cost a little bit more in terms of fees, however in my experience the extra is often worth paying if speed of funds is the client’s main concern.
This is particularly important if a client is at risk of losing a paid deposit after exchanging contracts on a property purchase. If the client doesn’t acquire the bridging loan before the set completion date, they risk losing this non-refundable deposit of anything between 5% and 10% of the property’s value.
At Hope Capital, we have had situations in the past where our solicitor has helped the borrower’s solicitor every step of the way to complete a bridging loan, having to guide them through the process until the client was in a position to draw down loan funds and all legal due diligence was satisfied. This extended the time taken to draw down funds, and nearly cost the client their 10% non-refundable deposit.
Of course the final choice of which solicitor to instruct is down to the client, but it is always worth pointing out the potential issues of using a high street solicitor who has never acted for a client regarding the facilitation of a bridging loan rather than someone that specialises in the area, and the impact that this could have on the speed and completion of their bridging loan – after all, your reputation might depend upon it.