Financial transactions involving property usually require a solicitor to carry out the legal work.
Solicitors play a vital role in bridging finance transactions so it's very helpful, particularly where you require a speedy completion, that you have a solicitor who is experienced in this area.
It's completely your choice whether you appoint your own solicitor or use the same firm appointed by the bridging lender, which is known as 'joint representation'.
You will have to pay the lender's legal fees as well as your own, so opting for joint representation will be less expensive than appointing your own solicitor. An indication of the lender's legal costs can be found using an online bridging loan calculator.
What is the solicitor's role in bridging finance transactions?
The solicitor will deal with several different aspects of the bridging process, including:
When Stamp Duty Land Tax is payable on a property purchase, the solicitor will calculate how much has to be paid, as well as collect the money from the buyer and pay it to HMRC.
A calculation of the Stamp Duty payable on any property type, including residential, buy-to-let, and commercial property, in England, Northern Ireland, Scotland, or Wales can be done using an online Stamp Duty Land Tax calculator. This is useful for budgeting purposes as you can work out the total cost of the Stamp Duty Land Tax, which can't usually be added to a finance facility, before making your offer.
Money laundering checks
The solicitor will carry out anti-money laundering checks to ensure that the source of funds is legitimate when cash is being put into a property purchase.
Clearing and placing charges
For re-mortgages, the solicitor will be responsible for clearing any current charges on a property (for example, when bridging finance is being used to clear a mortgage) and placing the bridging lender's charge on the security property. For first charge purchases, they will ensure that the property being used as security has a clear title before placing the bridging lender's charge on the property.
When funds are ready to be distributed between lenders and customers, this will go through the solicitor.
Why is it important to have a solicitor who is experienced in bridging finance?
Bridging is a specialist area of finance, so you need to work with experienced professionals throughout the whole process, and this includes the solicitor.
A lot of customers take out bridging finance because they need to source funds quickly. In some circumstances, bridging lenders can complete with a day if the legal work is completed.
This will only be possible if the solicitor is experienced in bridging finance and knows the process inside out.
The legal process can hold up a bridging application in a number of ways.
- Taking out a bridging loan is different to taking out a mortgage in a number of ways. So, a solicitor that is experienced in conveyancing but not bridging may not be used to what a bridging lender requires in terms of checks, searches, and client information. This can cause delays in the process as the solicitor may have to go back and forth between you and the lender more than necessary.
- Solicitors with heavy workloads or backlogs, which is particularly common at the moment, could take days, or even weeks, to look at your case and start searches etc. If you need bridging quickly, then a solicitor who is snowed under with other cases, may not be your best option!
- The solicitor will need to conduct several different searches when you are purchasing a property, for example land registry, local authority, environmental, etc. This can take time – sometimes up to eight weeks. Again, if you need bridging done quickly, then this can slow down the process significantly.
However, many bridging lenders will accept an indemnity policy in place of the search. These policies can be organised and put in place the same day, which means that the loan can complete before the searches come back.
So, if you choose to appoint your own solicitor when taking out a bridging loan, make sure that they have considerable experience in this area and that they can operate quickly and handle your case straight away.
Copyright 2021. Featured post made possible by Holly Andrews, Managing Director at KIS Finance.