Solicitors

Have borrowers' solicitors been made the scapegoat for transaction delays?




Blaming a borrower's solicitor for delays can act as an easy get-out that often masks other problems, according to one specialist finance broker.

Recent research from Brightstone Law found that third-party external factors and lender red tape were the top two most common causes of delays in short-term finance transactions.

A common complaint in the short-term finance industry is that borrower solicitor inefficiencies are one of the main sources of delay.

However, Brightstone’s research found that this was only ranked at number seven in the most common causes of delay. 

Is the industry surprised by Brightstone’s findings?

“I think the reasons for delays are well covered, but I suspect the order is open to debate; each lender will be affected in different ways,” said Chris Fairfax, managing director at Positive Lending.

“I would note that we do experience delays caused by lender’s solicitors as sometimes they are incredibly busy and do not have suitable capacity.”

Guy Harrington, CEO at Glenhawk, added: “We work … to try to anticipate problems before they arise to ensure we do not encounter delays that could have been alleviated, so we are a bit surprised by these findings. 

“We essentially guide borrowers through the lending process as if they are new, so we try to do as much hand holding as possible.”

Louis Alexander, managing director at the BridgeCrowd, felt that borrower solicitor inefficiency should have been higher on the list. 

“Often the borrower’s solicitors have little understanding of bridging, nor the urgency required,” Louis claimed.

“We also find they can be reluctant to pick up the phone to our solicitors to discuss any points they don’t understand, which would speed up the transaction.”

Arwel Griffith, partner at Robert Sterling Surveyors, agreed: “…I can say that the legal firms we get contacted by that are not the ‘usual’ ones often display an ignorance of what’s needed in the short-term and bridging lending field. 

“Often we will send in a report several weeks earlier and then get a rushed report on title with a ‘hurry up’ message [stating] that the deal completes tomorrow and the decision is dependent on us. 

“No, it isn’t. 

“It needs an experienced and balanced legal head who manages the process properly and in due time to enable a transaction to complete easily and on time.”

Terry Pritchard, head of origination at Lendy, added: “I was interested in several of the remarks, especially the ones aimed at the funders, including the lack of empowerment of underwriters. 

“This is only an issue if the credit teams at the lenders are not trusted or respected by their funding partners.”

The Financial Intermediary & Broker Association (FIBA) has recently founded a professional partners panel to encourage law firms with the right qualifications to join the panel. 

“From our point of view – and the research we have done in talking to lenders, brokers and solicitors – one of the pressing issues that kept coming up was trying to find law firms [which] had the necessary competence and experience to handle commercial deals,” said Adam Tyler, executive chairman at FIBA.

“Many conveyancing departments are not prepared to admit that they are not equipped for the unique difficulties that can surround commercial finance and property.”

What should or shouldn’t be on the list? 

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“I would like to think that ‘miscommunication by intermediary’ could be taken off the list, but sadly we do hear complaints from lenders that this takes place on too great a frequency, which surprises me as a key part of using an intermediary is to ensure things are accurate and done right first time,” said Chris Whitney, head of specialist lending at Enness.

Sarah Jackson, head of underwriting at Pivot, said it could see first-hand where the bottlenecks lay. 

“Lack of broker understanding does cause delays on complex cases – it can often be easier and quicker to speak to the borrower direct to solve any issues.”

James Bloom, managing director of short-term lending at Masthaven, added: “Funding lines can also cause delays in some cases. 

“The rigorous procedures that some lenders must go through to drawdown funds can often cause delays.”  

Jonathan Sealey, CEO at Hope Capital, said that there were a number of variables that could also cause delays. 

“Valuers taking too long to go out and value a property.

“Borrowers not disclosing all the facts early on in the loan process; when these come to light near the end of the process, it can mean a lender has to go back to square one in the underwriting process. 

“Lenders with external credit committees taking a long time to grant approval for a loan (21% of our brokers cited this as an issue with other lenders).

“Lenders delaying matters due to funding issues.”

Are borrowers' solicitors seen as the scapegoat for delays?


 
“If you listen to most people, it’s the borrower’s solicitor that often causes delay, but personally I think that is an easy get-out that often masks other problems,” said Luke Egan, head of specialist property finance at Pure Commercial. 

“Some brokers/lenders don’t understand or fully explore the problems, they just jump to the wrong conclusion and then everyone gets led a merry dance until the root of the problem is finally realised and only then do you get anything solved.”

Lucy Barrett, managing director at Vantage Finance, didn’t see lawyers being used as scapegoats. 

“The process where full title investigation is required can be slow due to the volume of information required and queries raised off the back of the replies. 

“My experience is that where a lawyer who knows the process and has worked with that lender before is involved, it becomes much easier end to end.”

Benson Hersch, CEO at the Association of Short Term Lenders, added: “While I agree that borrowers’ solicitors are not necessarily the major causes of short-term finance delays, there is no doubt in my mind that it is important for the borrower to have a solicitor who understands the issues involved in short-term finance.   

“It’s not just the delays … it’s also the fact that [solicitors inexperienced in the requirements for short-term loan cases] may be unable to advise their clients satisfactorily.”

Nick Hayes, partner at Pure Law, concluded: “Openness on all sides and the provision of complete and accurate information at the earliest opportunity allow for a genuinely collaborative approach between lender, borrower, broker and solicitors and this represents the quickest way to get to drawdown.”

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