April 2018
By Daniel Fireman, head of banking and real estate finance at Howard Kennedy
Borrowers' expectations of solicitors arise from their reliance on the solicitors - representing all parties to a secured loan transaction - to co-operate and act as necessary, so as to properly facilitate said transaction. Broadly, borrowers expect that the property due diligence, the borrower due diligence and the loan and security formalities will be quickly and efficiently processed, enabling funds to be remitted in a timely manner. The reality is that the expectations as to the steps to be taken are usually met, but the expectations regarding speed and efficiency may not always be, for a number of reasons.
Throughout the last three decades I have represented lenders and borrowers on the legal aspects of property finance transactions - particularly specialist finance. In that time I have received plenty of feedback, admittedly often through brokers and intermediaries, on the extent to which borrowers feel their expectations of the solicitors involved have been met. On occasion I sense that, whether acting for the borrower or lender, and notwithstanding their essential role, solicitors are viewed by some as an expensive but necessary evil who rarely add value.
To be fair though, most borrowers within the specialist lending field - certainly those that regularly use specialist finance - understand that every lender has to be satisfied as to the adequacy of the security and the capacity and ability of the borrower to repay the loan. Most borrowers fully understand that lenders need legal advice and assurances in respect of the security, the identity and solvency of the borrower, and the adequacy of the loan and security documentation. Borrowers rightly expect their own solicitors to do what is necessary to ensure all information required in this regard is made available.
Specialist lenders are aware that some borrowers' solicitors lack familiarity with their requirements, which usually imposes 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, ideally, borrowers’ expectations may be better managed if they are encouraged by any broker or intermediary involved to consider whether their solicitor is the most suitable. 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.
I am aware that satisfying lender requirements - which sometimes seem dogmatic and inflexible - can be stressful for a borrower, particularly for one committed to complete a purchase or loan repayment before a looming deadline expires. The absolute reality though, as I often advise borrowers, is that whatever requirements the lender's solicitor may seek to impose, and however unreasonable or unnecessary they may seem to the borrower, if they want the funding anytime soon, the best policy is usually to grit their teeth and do what’s necessary.