Lenders will simply not lend if there are questions about the saleability of a property on default. With this in mind, developers must be able to evidence a project’s soundness to improve their chances of getting better terms, and a better relationship, with their lenders.
warranty provider that is on the approved list of that lender. Generally a lender will need to see that the building was monitored by the provider that issues the warranty/ies. In cases where the warranties are provided by the contractors themselves, such as the building contractor, the architect, structural engineer and so on, the lender will expect warranties to be provided not only to the developer, but to the lender as well and for these warranties to be assignable on a sale. In the case of residential properties without warranties, many lenders will accept a Professional Consultant’s Certificate which is valid for 6 years. This can be obtained from the consultant such as the architect, surveyor, or structural engineer. who was involved in the build project from the out- set and who must confirm that they have visited the property at various stages of the construction. A lender will almost never accept a retrospective certificate where the consultant has not been involved throughout.
Ray Oshry explains how lenders approach these types of funding decisions.
Demonstrate Ownership First
Of foremost importance to lenders is ownership. Anyone looking to raise money against a property will need to prove that they own the property and that it is registered in their name to the Land Registry. However, in recent years the time taken between completion and registration has become substantially longer, primarily because of Covid-related issues. Given this, it is advisable for borrowers to wait until title has been registered before getting time- limited finance terms and placing themselves under undue time pressure. This can be very costly indeed as developers may need to obtain expensive bridging finance to deal with the registration gap. In appropriate cases an application can be made to expedite registration.
Planning Conditions
Next, all planning conditions must be adhered to. Planning conditions can be pre-development, meaning that the condition should have been satisfied before works commence; or pre- occupation, meaning that the condition should be satisfied before occupation. Often work is started before the pre-development conditions are satisfied, or the premises are occupied before pre- occupation conditions are fully completed, resulting in innumerable issues and delays. Pre-development planning conditions can range from things like the provision of refuse areas through to more fundamental items such as the materials used in the construction. Where these pre-conditions are not complied with, there is a risk that
Obtain Warranties & Building Control Certificates
Lenders will expect all necessary building control certificates and build warranties to be in place before drawdown. For example, lenders will want to see a building control completion certificate confirming that the property has been constructed/converted in accordance with the building control consent and to acceptable building standards. Warranties are also almost always required. These are normally for 10 years and must be given either by an NHBC registered contractor for residential properties or by a
THE LEGAL CORNER MAGAZINE | ISSUE 005 SEPTEMBER '23 | PLANNING, OWNERSHIP & THE ENVIRONMENT HB 6
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