"It seems that a significant number of delays are caused by lawyers who are unfamiliar with bridging finance."
The average completion time for a bridging loan in Q3 of this year was 52, up from 50 days in Q2, and a surprisingly long period for a type of finance that is known for delivering solutions at pace.
This can be very frustrating for brokers and customers, and at the ASTL we endeavour to encourage all lenders to progress cases with speed wherever possible, but also with the highest possible levels of diligence.
In the current environment, it is understandable that lenders are sometimes taking a little longer over their decisioning, as they need to ensure they are are making those decisions based on the all of the relevant information in a fast changing situation.
However, this element is certainly not the whole story. Our conversations with intermediaries have found that, in general, lenders are still quite quick to offer, and in some cases, they can be very quick to do so. It’s after this point, however, that the process seems to slow down, with many of the complaints levelled at the lawyers involved in the process.
More specifically, it seems that a significant number of delays are caused by lawyers who are unfamiliar with bridging finance. Daniel Fireman, partner and head of real estate finance at Howard Kennedy LLP, commented: “Specialist lenders are aware that some borrowers' solicitors lack familiarity with their requirements which usually impose more effort on the part of the borrower's solicitor than that required by funders financing straightforward domestic or buy-to-let transactions. In those cases, borrowers’ expectations may be better managed if they are encouraged by any brokers and intermediaries involved to consider whether their solicitor is the most suitable, and they may then decide to appoint a solicitor based on experience rather than either cost, which could prove a false economy, or an existing relationship.”
Sarah Ireland from JPC Law said: “It is easy to tell when a solicitor on the other side of the transaction for the borrower has not dealt with many bridging loans, and does tend to go slower when that is the case. Usually the issue is that they and the borrower consider that too many enquiries are raised and they don’t see the need for them. The problem is that most transactional real estate lawyers deal with all sorts of transactions, rather than specialising in one area, such as bridging loans. If such lawyers do not do this work with sufficient regularity, they may not have the systems and strategies in place to process the transaction as efficiently as a specialist.”
However, Jonathan Newman, senior partner at Brightstone Law, argues that experience may not be the issue so much as capacity. He added: “These days lenders, via their own solicitors, do a great job of setting out what is needed and why and when. There a number of firms now specialising in the area who we transact with on many occasions and the engagement works well and smoothly. Lumping the blame for delay on lack of experience is cliched and no longer as relevant as it once was. So, the issue now, in my opinion, is less about ‘experience’ and more about capacity, and their service levels. Solicitors like all businesses are under even more pressure exacerbated by coronavirus. Today their service levels are hampered by some operational difficulties arising out of remote working, lack of available immediate collaboration when needed, and delays in their interaction with other service providers including government agencies, such as Land Registry and search providers.”
At the ASTL, we want to do what we can to facilitate the smooth completion of bridging finance, and so we asked lawyers who are associate members of the association what, if anything, we can do to improve the experience for all involved, particularly the borrower.
James Whiteley from JPC Law said: “If the industry had a standardised set of requirements, rather like the residential mortgage industry does as set out in the UK Finance Mortgage Lenders’ Handbook, then after a few transactions, lawyers would be expected to become more familiar with those requirements, which would help speed things up. Of course, there would be a need to vary those requirements on a case by case basis, to suit each transaction.”
And Jonathan Newman from Brightstone Law added: “It’s all about professionalism, and partnerships in my view. We all have different qualities as human beings. Selecting those who are committed and passionate and proven and set up with lenders in mind generally translates into a better experience. Compare most people’s experience of a call centre with that of interaction with direct engagement.”
Whether it’s direct personal engagement, or experience, the immediate message to brokers is clear – where possible encourage your clients to choose their solicitor wisely. They play a vital role in the transaction and the wrong choice could lead to delays and extra cost. In the longer term, we will investigate what more we can do at the ASTL to encourage fewer delays and smoother completions that will benefit, our members, their brokers and ultimately their customers.