Finance

Question 1

What funds must a buyer have to purchase a property?

Answer 1

Sufficient funds to complete the purchase:
- cash to pay deposit on exchange
- balance of price on completion
- agreed price for any extras
- tax
- solicitor’s fees
- solicitor disbursements

Question 2

Residential - where does funding usually come from?

Answer 2

• Client’s own resources
• Proceeds of a related sale
• Mortgage loan

Question 3

Commercial funding

Answer 3

• Companies might raise finance for a purchase by equity finance
• High value properties, money may be raised from a group of lenders (syndicate)
• A lender may fund the development

Question 4

What are the types of residential mortgage?

Answer 4

• Capital repayment mortgage: borrower repays the capital sum by monthly payments, with an interest added each month. At the end of the term, the loan is paid in full
• Interest only mortgage: borrower only pays interest on the loan. Capital remains outstanding, no matter how long the loan is in place. Capital is generally only repaid by sale of the property. The borrower may end up better off as they will have the equity (increased value of the property) that is not required for the mortgage
• Endowment mortgage: in general, no longer available in UK

Question 5

What are the lending documents?

Answer 5

• Mortgage offer - formal offer by the lender to lend
• Facility letter (commercial equivalent of a mortgage offer)
• certificate of title
• legal charge (deed that creates the security interest and is registered at the Land Registry)

Question 6

Certificate of title

Answer 6

Is a document, provided by a solicitor to a lender, in which a solicitor certifies that the property is satisfactory for lending purposes

Question 7

CCLS certificate of title

Answer 7

Certificate of title for commercial property as a prescriptive format, from the City of London Law Society Certificate of Title

Question 8

What steps must be done pre-exchange in relation to the certificate of title?

Answer 8

For a commercial transaction, the buyer’s solicitor must ensure that the lender’s solicitor has approved the draft certificate of title (before exchange)

Question 9

What steps are taken pre-completion in relation to the certificate of title?

Answer 9

Buyer’s solicitor will send the certificate of title (in its final form) to the lender and request the loan advance in time for completion and send lender’s solicitor an undertaking relating to the mortgage money

Question 10

What will the lender’s solicitor do in a commercial transaction?

Answer 10

• Specify what enquiries and searches are needed
• Ask buyer’s solicitor to send copies of all searches and replies to enquiries
• Review them and ask the buyer’s solicitor to make such additional enquiries as the lender’s solicitor requires
• Draft the legal charge and other security documents

Question 11

What is a mortgage offer?

Answer 11

A formal offer by the lender to lend, subject with the lender being satisfied with the transaction and security. Sets out terms and conditions of the loan

• Facility letter is the commercial equivalent

Question 12

Advising a buyer client on their deposi

Answer 12

1. Pre-exchange
   - Buyer’s solicitor needs to make sure to request the deposit from their client in plenty of time before the exchange of contracts
2. Advise how it will be held by the seller’s solicitor
   - If there is a prolonged period between exchange and completion, the deposit money is held by the seller solicitor in their account. However, this cannot be released to the seller until completion
   - If there are only a few days between exchange and completion, it is likely that the deposit remains in the buyer solicitor’s client account

Question 13

Steps a buyer’s solicitor takes to ensure the seller’s mortgage is discharged

Answer 13

Steps to ensure existing mortgage is removed:
- Obtain undertaking from seller’s solicitor that mortgage will be paid off following completion. Evidence is sent to the buyer’s solicitor, to then forward onto the Land Registry

• Seller’s solicitor then obtains a redemption certificate from the mortgage lender which details the exact amount required to redeem the mortgage