Conveyancing typically refers to the work involved in the legal process of transferring the ownership of land or property from one person to another. The term is prevalently used in real estate transactions when buyers and sellers transfer ownership of land, buildings, or homes. It is done using an instrument of conveyance – a legal document such as a contract, lease, title, or deed – typically involving the vendor, the purchaser, the solicitors representing them and the lender. The document stipulates the agreed-upon purchase price and date of actual transfer, as well as the obligations and responsibilities of both parties. The process can take up to 6 weeks, but it is possible to get it done in as little as a month. The various issues that commonly delay the conveyancing process will be discussed in this article.
Real Estate Financing
Real estate financing is an essential aspect of any real estate transaction. It refers to the process of securing funding to purchase or invest in real estate properties. There are several ways to finance real estate deals, including traditional bank loans, private loans, cash financing, and hard money loans.
Traditional bank loans are a common option for financing real estate. They typically involve the borrower going through a credit check to determine eligibility and interest rates. Bank loans can be secured or unsecured and usually have a fixed or variable interest rate.
Private money loans, on the other hand, are loans from individuals to other individuals. These loans are typically used for short-term investments and are often easier to obtain than traditional bank loans. Private money lenders may include family, friends and investors specialising in real estate financing.
Cash financing is another option for real estate financing. It involves using your funds to purchase a property outright without needing a loan or mortgage. While this method can be effective, it requires significant capital, which may only be feasible for some investors.
Finally, hard money loans are specifically designed for real estate investors who plan to buy and sell properties for profit. They are typically used for short-term investments and have higher interest rates and fees than traditional bank loans.
”90% of all millionaires become so through owning real estate”
We had an exciting opportunity to interview two professionals with significant experience in this field. Their expertise and know-how gave us an in-depth insight into the world of conveyancing and financing big real estate deals. Philip Kay, a Senior Asset Finance Advisor representing specialist debt advisory firm Arc & Co., and Matthew Stayt, a Real Estate Partner of the law firm Fletcher Day, have taken their time to answer a few of our questions.
Below is a transcript of our engaging conversation with Philip, providing us with viewpoints and experiences he has faced during his time in the industry.
Briefly tell us about your background and experience.
Before beginning work as a property finance broker, I worked at a commercial bank in the City of London for 8 years where I was involved in building up a real estate lending business across the UK. Prior to this, I worked in Wealth Management, predominantly at UBS in London.
Can you share insights from your previous experiences in financing big deals in London?
Deals I have worked on in London include a range of structures, low to high LTVs, across residential assets in Prime Central London. At one of the spectrum, I’ve worked on large Buy-to-Let loans on single trophy assets with private banks or specialist commercial banks to foreign national clients. At the other end, I’ve worked on flexible loan structures for ‘buy and refurb’ strategies for high-end flats in Kensington & Chelsea. I’ve also worked on a developer exit loan for a newly-developed penthouse apartment in the Hyde Park Estate, where I structured a senior and Mezz loan at very attractive pricing.
Regarding the buyer and seller’s communication, how important is it for the legal teams to clarify the terms and any updates during the process?
The way that I work is to stay central to the execution of the loan, including throughout the valuation and legal process, all the way to the drawdown of the loan and beyond. That way, I can manage expectations on both the client and lender side and also push the lawyers at the right time or step in more actively if a commercial view needs to be taken by the lender in order to overcome a point raised by the lender of their lawyers. The only way I can facilitate this is for the various legal teams to communicate clearly and efficiently; I can then update the client directly on how matters are progressing.
Why would it be beneficial for clients to work with a financial advisor rather than trying to do everything themselves?
A financial advisor can be enormously beneficial to obtaining both the best terms and efficiency of the lender as we cover the entire lender market and are constantly in touch with lenders as they update their lending criteria or even launch new products. An advisor can also step in if there’s an issue down the line with the loan, as that advisor will have a long-term relationship with the lender with multiple loan origination activity, meaning that the lender is keen to protect that relationship.
Finally, what are the 3 lessons learnt from your experiences?
First and foremost, the key is to be working with a lender that can deliver. That’s where I think a broker’s help is indispensable. I’ve seen situations where the terms offered by the lender appear to be the best of the market, but I know that lender can be tricky to execute. If the lender can’t deliver the loan, their terms are irrelevant.
Second, I would say that a trusted and efficient lawyer that is a solution provider is also key to successfully closing a loan in a timely manner.
Third, a trusted advisor for the client is also critical for the efficient flow of information to the lender, amongst lawyers and third-party professionals.
It was an insightful interaction with Philip from Arc & Co. on financing real estate deals and the importance of seeking advice from a financial advisor.
Next is the conversation we had with Matthew Stayt of Fletcher Day, providing us with an invaluable understanding and personal experiences he has encountered during his time in the industry.
Briefly describe your background, experience and what you do at Fletcher Day.
I am a partner in the Real Estate team at Fletcher Day and joined the team back in March 2021. I commenced my journey in the legal sector at a boutique property firm based in the City of London in 2014 after completing the Graduate Diploma in Law (GDL) and Legal Practice Course (LPC). I grew through the ranks from paralegal to senior associate solicitor over the space of 6 and a half years.
I have a broad spectrum of clients in both the commercial and residential real estate sectors and, on a day-to-day basis, will handle commercial purchases of hotels and commercial warehouses to residential purchases and sales throughout England and Wales. It is this variety of work that I enjoy the most.
Another area of focus and specialism for me is the bridging and commercial marketplace. Based on my expertise in this area, I represent a number of lending institutions and often receive instructions from borrowers looking for specialist advice within tight timeframes.
Could you explain any obstacles or challenges you have faced when conveyancing a property?
This is quite a difficult question to answer generically, as every property transaction is different, and I honestly come across different issues and hurdles every day. I have, however, tried to list a few obstacles and challenges which strike me as important in the conveyancing world today:
- Cybercrime – issues with fraudsters and law firms not carrying out appropriate checks to identify their clients.
- Managing client expectations – since the lockdown first commenced in 2020 (coinciding with the Stamp Duty Holiday) the pressure on the conveyancing sector as a whole has been immense. This is a result of the increase in property transactions and copying with working remotely.
- Getting along with your counterpart – It is always very helpful when the solicitor acting for the opposing party is ‘on your side’. It makes for a pleasant and smooth transaction for all parties, not just us solicitors, at what can be an incredibly stressful time for clients.
Briefly, what are the key conveyancing milestones that purchasers need to be aware of?
The first milestone is the acceptance of the offer either via the selling agents, if the property is being marketed via an estate agent or if sold ‘off-market’ the acceptance of the offer by the vendor(s). Once the sale has been agreed the parties will instruct their solicitors to proceed with the sale.
The vendor(s) will instruct their solicitor to issue a draft contract pack which will contain the vendor(s) legal title to the property, a draft contract and any supplemental documentation, such as any warranties or guarantees the property benefits from. When the contract pack is received the purchaser will instruct their solicitor to commence searches and undertake due diligence before raising pre-contract enquiries.
Once the pre-contract enquiries have been received the vendor(s)’ solicitor will take instructions and provide responses to these. On the assumption that all pre-contract enquiries are responded to satisfactorily, the purchaser’s solicitor will prepare a report on title to their client in readiness for exchange of contracts. Exchange of contracts is when the parties agree on a completion date and once contracts are exchanged both parties are legally bound to complete the sale/purchase on the agreed completion date.
It is common for the parties to agree on a timeframe of 1-2 weeks between exchange and completion but this could really be as long or short as the parties require, just as long as there is sufficient time to arrange for any mortgage monies to be requested.
Again, it is quite difficult to give a generic timeframe as each transaction is different. Some may run smoother than others. If things run smoothly, you can envisage a timeframe of around 5-6 weeks from acceptance of an offer to completion of the purchase.
Can you identify where you have found a solution to a problem and resolved it for the client?
I was recently involved in a transaction where we were acting for a prospective purchaser of a property. The property was made up of 3 titles which is not common, especially with residential conveyancing, and due to errors in previous conveyancing transactions, one of the titles to the vendor’s property was still unfortunately registered in a previous owner’s name. The matter could not proceed and would go abortive if a solution was not found.
Working with the vendor’s solicitor, vendor and estate agent, we managed to track down the previous owner, who, unfortunately for the seller, played hardball and demanded a considerable amount of money for the transfer of the remaining title. The vendor, in this instance, was left with no option but to pay the money and have the title transferred into their name to enable the sale to proceed.
In this instance, I think this is a great example where all the parties in a transaction pulled together to get the deal over the line. It is a commonplace to see that opposing solicitors see each other as ‘enemies’ rather than looking at the bigger picture and working with another. It makes for a much more enjoyable experience for all parties involved. It is something I have adopted since qualifying in 2016.
Why would clients work with a property conveyancer and pay a fee rather than trying to do everything themselves?
Whilst you can carry out your own conveyancing, it has become increasingly difficult to do so with the advances in cybercrime and concerns over fraud. With this in mind, I would strongly recommend to anyone who is considering their own conveyancing to speak with a solicitor to have an initial chat and receive a quote. It is important to understand that a solicitor is there to protect your position as a buyer or a seller.
From my experience, most clients who come to me, whether first-time buyers or seasoned investors want a solicitor who is knowledgeable, professional, prompt, efficient and able to get the ‘deal done’ within the required timeframes. This does, of course, come at a price.
What are the fees charged?
This is a difficult question as no property transaction is the same as the last. In respect of residential conveyancing, our fees can be found on Fletcher Day’s website.
For more information on the topics discussed above, please get in touch with us to know more.