We were trying to arrange funding for a small property in London. This was an auction property, where the tenancy was described as unknown. This is common when it comes to repossessions, which this happened to be. This was not the first time we had come across this deal. Hence we already had sight of the tenancy agreement, and knew this was an Assured Shorthold Tenancy. In other words, a standard rental contract. The administrators were not privy to this fact, so the property was advertised as unknown tenancy.
What should have been a reasonably straight forward funding, turned out to require a lot of focus and energy to get over the line. An auction contract requires immediate exchange followed by 28 days for completion. If you fail to complete you get served notice which gives you another 10 days.
The first lender we applied to took issue with one of the clients being part of a large debt, even though this was not totally his debt – he was named on the agreement. It still appeared in his credit report, and the lender was not prepared to dig deeper. The second lender we applied to wasn’t comfortable with the amount of unsecured debt with the other client, this was a joint application. In the interim the clock was ticking.
From one point of view this whole charade is unnecessary. Simple basics should tell any lender this property first was being bought about 30% cheaper, and second, they had a 75% Loan to Value first charge on it. Therefore, the actual loan to value they are lending sits at just over 50%. In other words, they are unlikely to lose any money, even if the property market crashed.
But simple common logic is not common. Transactions are bogged down with compliance, lenders protecting their FCA licence, underwriters just getting under one’s skin.
Given the state of the lending market, it is inevitable the rise of the bridging market in London. There must be hundreds if not thousands of lenders on the market, some mainstream ones, others who lend out family wealth, without getting involved in the hassle factor of development. They tend to look at the deal in a more straight forward and pragmatic manner. This was our lender of last resort. It’s a private lender who dispensed with the need for a valuation, and was happy to lend the money, basically on a handshake. Their lawyer, however, was a different animal. They have to be ‘seen’ protecting their client. Seen being the operative word. My cynical mind says it’s to protect themselves and justify their fat fees, which predictably increased due to the time constraint of this case.
After jumping through many hoops the deal was done. The time and energy a small deal like this takes up is not proportionate to its size, or potential gain. However, once you’re committed you need to take it to the finishing line. We duly completed on the bridge, and now we have a little breathing space to remortgage with a high street lender.