The most common cause for delays in short-term finance transactions over the last quarter was third party, external factors such as property chains, seller deadlines, Brightstone Law has found.
This was followed by lender red tape, such as a lack of empowerment at underwriting level, credit committee approvals or leaving issues identified early in the process until final credit approval stage)
Jonathan Newman, senior partner at Brightstone Law, said: “The short-term finance market is complex. The sector services ground up development, heavy refurbishment, multi-security portfolios, difficult developments subject to all manner of planning and other issues.
“These deals are taking time and with good reason. They’re not simple. It’s no surprise that these transactions will and do take more time.
“But is it just the fault of the borrower’s solicitors, who I am commonly told, do not understand bridging, its nuances and timescales?
“Do they really know what to produce and when they do, do they operate to the timescales of all interested parties? We carried out some research as we wanted to see if the general perception matched reality.”
The third most common cause was naïve or inexperienced borrowers who were unfamiliar with what a lender requires, followed by borrower delay in funding initial costs and valuation fees, miscommunication by the intermediary.
Other causes were the title or legal issues requiring a solution, the borrower solicitor inefficiency, valuation provided late in the process, raising issues requiring legal and other investigations and a change in terms or revised offers and the use of third party firms for ID verification.
Newman added: “Our findings, based on facts and real case studies, show that the borrower’s solicitors inexperience is not the single most cause of delay. In fact, it’s pretty low down the list at seven and there are far more pressing and weighty influences that need to be dealt with.
“That should not be so surprising, given the nature of these transactions. The borrower’s lawyer is not actually required to solve issues, nor draft technically complicated pieces.
“More often in refinances, they are principally a post box, with added requirements of advisor, ID validation. In acquisitions, they simply supply copies of the documents that they will have, or should have, in their possession in any event.
“At Brightstone, we can and do, seek to manage these lawyers new to short-term finance through the process. Most are receptive, cooperative and grateful.
“There is danger in believing all you read and hear on completion times. The industry needs to resist rushing into perceived solutions, which may at first glance present as a cure-all, when in reality, the problem more often than not, as we have found, lies elsewhere.”
Brightstone Law is urging greater collaboration between lenders, solicitors, conveyancers and insurers to speed up application to completion times.
Newman said: “The suggested remedy (such as panel imposition, dual representation) is not necessarily a remedy at all and can have more wide-ranging damaging side effects.
“The solution rests in greater cooperation between all parties involved in short-term finance deals. It’s incumbent on all the stakeholders including lenders, lawyers, valuers and intermediaries to look inwards.
“Are their processes as efficient and streamlined as they believe them to be? Is decision-making quick and decisive? Are decisions communicated to the right people and on time?”
