Hello, my name is Matthew Taylor and I am the Business Development Director at Equilaw. I am joined today by Jade Smith our Business Relationship Manager. In today’s podcast we will talk through the key things that clients and advisers will need to take into account when instructing us in a purchase transaction. Today’s content has been provided by our in house solicitor, Kelsey Ross.
Purchasing a house with a lifetime mortgage has become an increasingly common event in recent years, but there are some key differences our listeners need to be aware of compared to the standard conveyancing process with a high street lender.
First question for you Jade, when a client has had an offer accepted on a property they want to purchase, what do they do first?
The client or the financial adviser will need to contact our business development team to obtain a quote for the legal work. Then, once the quote has been accepted, the Estate Agents can be informed that Equilaw are acting in the purchase and we will be provided with the memorandum of sale. This is the document that confirms who is acting on each side of the transaction and enables the solicitors to issue contracts.
At the same time, the financial adviser will be arranging the valuation of the purchase property so that the mortgage offer can be issued. If the clients are also selling a property then we can also act for them in the sale too.
Great thank you. Jade, if the clients want to instruct someone else to act for them in their sale and/or purchase, is that possible?
Yes, so if the clients have already instructed someone else to act for them in their sale but they would like us to act in their purchase then this is not a problem. We will liaise with the solicitor acting in the sale to tie the two transactions together, so that they can complete simultaneously.
It is however, usually much easier and more cost effective for the client to instruct one firm to do both transactions. This is because they will only need to contact one person to obtain updates on both transactions, and it is a much smoother process at exchange of contracts and on completion if there is only one solicitor involved.
If the clients have already instructed somebody else to act for them in their purchase and they only want us, at Equilaw, to act for them in regards to the Equity Release mortgage then this can also be arranged. We would then refer to this as a purchase liaison and we would liaise with the solicitor acting in the purchase to obtain all of the information we need to satisfy the lender.
Thank you, so do any additional issues arise if Equilaw are instructed in a purchase liaison?
Yes, so it can take substantially longer to reach a completion on a liaison case as there is another firm of solicitors involved and we would have to duplicate a lot of their work in order to satisfy the lender’s requirements. We then of course need to charge for our time in doing so, so there is duplication of costs as well as work.
We would always recommend instructing a solicitor who can deal with everything as it makes the transaction much smoother and more cost effective for the client.
The client’s shouldn’t feel pressured into using a solicitor recommended by the Estate Agent, they should take the time at the outset to make sure the solicitor they are instructing is able to deal with this type of mortgage. This will certainly save them a lot of time and stress in the long run.
Too often we are instructed late in the day because the first solicitor didn’t realise there was an equity release mortgage involved and now doesn’t want to act as a result. So, it really is vital that client’s check and double check that the solicitor they are appointing is able to act when there is an equity release mortgage.
Ok, are there be any additional issues if the property is a new build or a leasehold?
Yes, if the client is purchasing a property with additional features, such as it being a plot purchase of a new build or a leasehold property, there will be additional work required. These do not necessarily lead to ‘issues’ as such but the client will need to factor in extra time and cost.
We charge an additional fee for both types of property, in large part because there is a lot of additional paperwork to review and analyse. For example with a new build, we often get served with the pack of title paperwork, planning documents and agreements with the local authority for the whole development. We would then have to read all of this in order to identify and analyse the relevant information.
Likewise with leasehold properties, we have additional title documentation to review, including the lease itself as well as a pack of management information about the building or estate. Leases are very detailed documents, that require thorough examination and lenders can be very particular about what they will accept, so it is important to interrogate this information thoroughly so we can advise the client and identify any potential problems.
In both of these types of cases, the solicitors may also need to liaise with another party such management companies in order to obtain further information they need so this can add in extra time to the case.
It is worth mentioning Matt, that it is quite common for the equity release demographic to choose a new build or a leasehold property, however so we are very much used to dealing with them.
So if the client has decided to instruct Equilaw, contracts have been issued and the mortgage offer is in place, what happens next?
When we have the contract pack we review this and the results of any conveyancing searches received so far. We can then raise our pre-contract enquiries on all of the paperwork. The amount of enquiries and the time it takes to resolve these will vary hugely case by case, depending on the complexity of issues involved and the quality of paperwork and responses coming from the seller’s solicitors. Once we have the offer, we send all paperwork to the lender’s solicitors to review and see whether they have any additional enquiries to raise, based on their client’s lending criteria.
Great, sometimes Jade there is some confusion around the need to work with another solicitor, i.e that of the lender. Do the lenders have to have their own solicitors?
Yes, one of the main differences between a high street mortgage and an Equity Release mortgage is that a high street lender is usually represented by the buyer’s solicitor to avoid duplication of work. However, with an Equity Release mortgage, the lender has to be separately represented. This is a requirement of the Equity Release Council.
This means there are two sets of solicitors that have to complete a full title investigation, hence why the process takes a lot longer. As a rough guide we ask clients to work towards a timescale of 8 – 12 weeks from receipt of the contract pack and mortgage offer through to completion. This is based on an average timescale but as I say, can vary a lot case by case. Some cases will complete much faster and some much slower.
While we are on the subject of timescales Matt, it is probably important to mention that a lot of our clients are very concerned about their offer period. An Equity Release offer is only valid for 40-50 days, which is much shorter than the usual offer periods on “normal” mortgages used to purchase property. This is because they were designed predominantly for re-mortgages which are much quicker to complete. It is therefore very common that the offer will need to be extended, or a re-offer issued, during the purchase process as they are not long enough to take into account the additional time it takes to complete a purchase. If advisers can help manage clients’ expectations on this point it is really helpful for us.
Thank you, that’s really helpful. Jade, what happens once the replies to enquiries are received?
The allocated solicitor will ensure satisfactory replies to both ours and the lender’s solicitors enquiries have been received. We can then proceed to reporting on the mortgage and preparing a series of reports about the property and the title deeds to the client, to ensure they are fully advised about the property they are buying. Once we and the client are happy, we can progress to a signing appointment.
At the signing appointment, a solicitor will visit the clients at their home and carry out the necessary ID checks. They will also witness the clients’ signatures to the mortgage and purchase paperwork. This will then be returned to Equilaw.
Great, so a home visit has been completed. What then what happens to the documents after they have been returned to Equilaw?
The documents are reviewed by the solicitor and then sent on to the lender’s solicitors for their final checks. It is at this point that we will ask the lender’s solicitors to provide authority to exchange.
Our advisers often ask us about timescales with a purchase transaction. How long does it take for the lender’s solicitors to authorise exchange?
This is where delays can happen, as it can take the lender’s solicitors up to 2 weeks to review the documents and respond to us.
They may also decide that they want to raise further enquiries which might involve us having to go back to the seller’s solicitors to obtain further information.
Ok, so assuming authority to exchange is actually given, what are the next steps?
It is only at this stage that we will be able to propose a completion date to the rest of the chain, so we will contact our clients and the other solicitors in the chain to agree on a completion date that suits everyone.
Once a date has been agreed, we will notify the lender’s solicitors so that they can put in the funds request with the lender and contracts will be exchanged.
Excellent, and what actually happens on the day of completion?
A lot of the Equity Release lender’s don’t allow us to request the mortgage advance for the day before completion like high street lender’s do. This means that there can be a delay on the day of completion while we wait for the mortgage advance to reach our account from the lender’s solicitors.
We do try to mitigate this by chasing the lender’s solicitors first thing in the morning on the day of completion, to make sure funds are sent to us as early as possible.
Brilliant, thank you Jade. The main points to take away from today is that a purchase with an Equity Release mortgage can take longer than a purchase using a “normal” high street mortgage. It is therefore very important to instruct the correct solicitor at the outset, who can deal with all parts of the transaction. The Estate Agent will likely try to recommend a lawyer for the client to use and they shouldn’t feel pressured into using them until they are certain that the lawyer is able to deal with the equity release mortgage. This will inevitably save the client time and money in the long run.
Thank you again Jade. I am sure this podcast will be super helpful for our financial advisers and clients.
