Acting for Lender Flashcards
Contract and exchange
What is the lender’s interest?
Whether the property has sufficient value and marketability to repay their loan
A lender is unlikely to accept many risks
Conduct issues acting for a lender (residential)
- Residential transactions - same solicitor usually acts for both buyer and lender
- This is under the substantially common interest exception - where there is a clear and common purpose and a strong consensus on how it is to be achieved
- risk of conflict is low as a high street lender will have standard non-negotiable mortgage terms and conditions
Conduct issues acting for a lender (commercial)
Most lenders in commercial transactions will instruct their own solicitors as there is greater potential for conflict
What does the lender’s solicitor in commercial transaction do?
- specify what enquiries and searches are needed
- ask buyer solicitor to send copies of searches and replies to enquiries
- review them
- draft the legal charge and other security documents
- either draft the certificate of title or ask buyer’s solicitor to provide it
What are lending documents?
- Mortgage offer: formal offer by lender to lend. Sets out terms and conditions of the loan
- Facility letter: commercial equivalent of a mortgage offer
What is the certificate of title
Confirms to the recipient matters relating to the property through series of statements of facts and disclosures
- solicitor certifies that the title to the property is satisfactory for lending purposes
Legal charge
The deed that creates the security interest is registered at the Land Registry
Security is a charge by way of legal mortgage. Charge by legal mortgage gives the lender the right to repossess
CCLS Certificate of Title
Certificate of title for commercial property which has prescribed form - City of London Law Society
What are the lender’s aims in a freehold transaction?
The lender will take a security interest over the buyer’s property. If the buyer does not repay the mortgage, the lender can resell the property to cover its losses
Lender will want to know:
- the property is marketable
- the property’s value is sufficient to cover any losses if the buyer does not repay the mortgage
What are the solicitor’s aims when acting for the lender?
Ensure that:
- physical condition of the land is adequate for lender’s needs and property is worth enough to cover any losses
- there are no discrepancies in lender’s understanding of the transaction and the borrower’s circumstances
- security document is valid and enforceable
Different types of surveys (required by lender)
- Basic valuation: if mortgage is being obtained, the lender will insist on at least a basic valuation
Class title required by lender
Need to check the mortgage lenders’ requirements - may not accept inferior class titles (qualified title, possessory title or good leasehold title)
Requirements for mortgage lender to have a legal interest
The legal mortgage (created by deed) must be entered in the charges register
- Lender usually requires a restriction in proprietorship register to prevent the owner selling the property without the lender’s consent
Funding from a lender
The buyer’s solicitor is required to submit to the lender a CCLS Certificate of Title
Risk and insurance (lender’s requirements)
The buyer’s solicitor should advise the buyer to obtain insurance quotes before exchange. The lender may also want confirmation that insurance is in place before advancing the completion funds
When is certificate of title submitted to the lender?
After exchange - and then request the mortgage funds in time for completion date
When does buyer’s solicitor send certificate of title in final form to lender?
Before completion
- and request the loan advance in time for completion
- send lender’s solicitor undertakings relating to mortgage money
Registration of a charge at Companies House
Must register a charge given by a company at Companies House within 21 days of creation (for a mortgage taken out by a company)
If this is not done, the charge is void against any liquidator or administrator and lender is not protected
