In the first part of this series, we helped you to identify suitable properties for security. In the second part, we discussed issues specific to new build properties. In this final part, we will identify the information that lender’s will expect to see in relation to all properties so that any property in your portfolio will be re-finance ready.
1. General Enquiries
The following points should be considered in relation to all properties being offered for security purposes:
- Has the property been extended or altered? Would planning permission, building regulations or third party consent have been required? If so, do you have copies of the relevant consents? A lender will require copies of any such documents relevant to the Property.
- Nomination agreements – is there a contractual arrangement in place with the local authority? If so, does this agreement bind successors in title? The lender will need to see a copy of this agreement and will need to be satisfied that they will not be bound by any of its provisions.
- Is the property subject to right to buy / right to acquire / rent first or such other equivalent scheme or does it have the potential to be? A disclosure schedule will be required by the lender listing any properties affected. If any properties are subject to any such schemes at the time of financing then they may be attributed with nil value.
- Have there been any disputes at the property, for example, with tenants or other third parties? Any such disputes will need to be disclosed to the lender together with details of any dispute resolution in relation to the same.
- Are there any informal rights affecting the property which are not registered against the title? These will need to be disclosed to the lender and they may need to be formalised if the property is to be acceptable for security purposes.
- Energy performance certificates – an EPC will be required for each unit being charged. You should note that from 1 April 2018, any property let will require a minimum energy performance rating of ‘E’. Lenders are likely to only accept properties with an energy performance rating of ‘E’ or above.
- Any electrical works installed on or after 1 January 2005 will require an NICEIC certificate. Any gas works undertaken on or after 1 April 2005 will require a GASAFE certificate and the installation of any glazing on or after 1 April 2002 will require a FENSA certificate. A lender will expect to see copies of all such certificates relating to the property.
- How do you access the property? Does it abut an adopted highway? Are the sewers serving the property adopted? We refer you to our comments in Part Two of this series for further details relating to this.
- Are there any restrictive covenants on the legal title and if so have they been complied with? For example, a restriction on development that may have been breached. In the event that a restrictive covenant has been breached a lender may accept an indemnity policy to protect against the risk of enforcement. However, if a covenant restricts the use of the property to affordable housing this may affect the value of the property from the lender’s perspective.
- Are there any indemnity policies in place to cover existing defects in title? For example, lack of access or rights to use, breach of restrictive covenant, lack of planning permission or building regulations, or chancel repair. A lender will expect to see copies of any such policies together with confirmation that the terms of the policy have not been breached and that the cover remains valid. In certain circumstances, policies may need to be altered or updated to satisfy a lender’s requirements.
- Fire certificates will be required for any communal areas in apartment blocks.
- Commercial properties – a lender may require an asbestos report and a fire certificate.
2. Conditions Precedent (CPs)
In all re-finance transactions the lender will issue conditions that need to be satisfied before the loan can be drawn down. These general conditions are known as conditions precedent (CPs). The following are general CPs that will be required by all lenders:
- A copy of your standard form AST and confirmation that it applies to the property.
- Buildings insurance – the lender will usually require its interest to be noted on the insurance policy as lender.
- Valuation – a copy of this should be provided to your solicitor as soon as you receive it so that they can ensure that any issues raised by the valuer can be dealt with at the outset.
- The lender may also include additional CPs depending on the property and the scheme.
Once you have identified a property as potentially suitable for security purposes you should start to collate the information identified above so that it can be provided as early as possible to your solicitor.