Acting for lender (contract and exchange)

Acting for a lender

solicitor ensures property is good security for loan

Lender’s objective

property must be valuable and easily saleable

Buyer vs lender

buyer may accept risks, lender is risk-averse

Substantially common interest

shared goal between clients allowing same solicitor to act

Residential joint representation

solicitor can act for buyer and lender

Reason no conflict (residential)

both want good, marketable title

Limitation on solicitor (residential)

must follow lender’s standard instructions

Mortgage offer

formal offer by lender setting loan terms and conditions

Mortgage offer expiry

lender may withdraw or change terms after expiry

UK Finance Handbook

instructions for solicitors acting for lenders

Part 1 (Handbook)

standard instructions

Part 2 (Handbook)

lender-specific requirements

Legal charge

deed creating lender’s security over property

Charge by way of legal mortgage

gives lender right to repossess

Mortgage vs charge

terms often used interchangeably

Commercial lending (separate solicitors)

lender usually has own solicitor

Reason for separate solicitors

higher risk of conflict and complex terms

Lender’s solicitor (commercial role)

specifies searches and enquiries required

Lender’s solicitor (review)

reviews title and may request further enquiries

Lender’s solicitor (documents)

drafts security documents

Certificate of title (commercial)

may be drafted by borrower’s solicitor but approved by lender’s solicitor

Facility letter

commercial equivalent of mortgage offer

Types of facility

term loan or revolving credit facility

Security (commercial)

fixed charge over property

Additional security (company)

floating charge over company assets

Certificate of title (purpose)

confirm good and marketable title to lender

Reliance on certificate

lender relies on it before releasing funds

Solicitor liability

lender can claim under PI insurance if certificate negligent

Residential certificate of title

standard Law Society/UK Finance form

Short form certificate

used by most lenders incorporating long form

Dual function (residential)

confirms title and requests mortgage funds

Commercial certificate of title

CLLS standard form

CLLS certificate

detailed statements assuming perfect title

Disclosure requirement

solicitor must qualify incorrect statements

Drafting certificate (commercial)

usually borrower’s solicitor prepares

Approval of certificate

lender’s solicitor reviews and may amend

Report on title (purpose)

advise buyer on risks and decision to proceed

Report on title (format)

flexible and client-friendly

Certificate of title (purpose)

confirm security suitability to lender

Certificate of title (format)

strict lender-required format

Key distinction

report = advice to buyer, certificate = assurance to lender

Key exam point

residential = joint representation, commercial = separate solicitors