The bridging market is still small but growing. The number of lawyers that regularly deal with bridging work for lenders is smaller still and can be probably counted on the fingers of two hands.
This market has developed slowly and organically. From a few specialist lenders which were known to each other there grew a scattering of law firms known to those lenders. These firms built up the necessary skills to work together in the high pressure gauge of quick underwriting and urgent completions.
Coming from an unregulated market those lenders relied on their lawyers to look after their backs and it was therefore the norm for law firms to only act for the lender.
Separate representation remains the norm in bridging cases. There are innovators such as Precise Mortgages which allows joint representation, when appropriate, but in those cases it limits the firms it is happy to deal with.
Typically, the borrower’s conveyancer is not able to act for the lender as well. Brokers in the bridging market need to understand this and direct their clients to firms who are acceptable to the bridging lender.
If the broker does not know this, the client certainly will not, causing embarrassment for the broker if their client has to swap representation half way through their transaction. It may result in an even worse situation for the client if they have to pay more for two conveyancers- one for himself and one for the lender.
Despite being around for some time now it is surprising and disturbing how often lenders’ requirements about their protection are ignored by conveyancers. Apart from having to ensure there is satisfactory mortgagee protection, conveyancers will also need to be aware of lender requirements on a final staircasing.
If there is a right of pre-emption in the original shared ownership agreement this could deter some lenders and cause them to withdraw their offer or, as we have experienced recently, require a deed of variation to be completed before advance sums are released.
If the conveyancers get it wrong then the borrower is likely to be prejudiced as well as the lender.
Help to Buy
There are specialist rules around conveyancing in Help to Buy transactions which require good and detailed knowledge on the lawyer’s part.
Specific documents need to be completed and filed in a certain order as part of the process of the transaction. If the process is not followed properly it could result in money not being released at all or in time and this would cause a disruption to the transaction and rebound on the buyers.
Take a look at the first instalment which examines the legal complexities of buy-to-let mortgages.