Remortgaging farm properties – how to reduce costs, stress and time
© Tim Scrivener Remortgaging farm properties is a similar process to buying, so good preparation is vital to keep time, cost and stress to a minimum.
Lenders will want to ensure that their security is solid and not at risk so will usually want a full review of the property, including conveyancing searches, says Alexandra Phillips, an associate at Midlands law firm MFG Solicitors.
Farmers and landowners thinking of remortgaging should contact their solicitor two to three months before starting the process so that any issues that may hold up the process can be sorted out, she advises.
The remortgage process involves:
Offer – made by the lender, usually subject to valuation and other conditions such as certainty of title.
Valuation – undertaken on behalf of the lender. If the solicitor identifies any matters that might affect the bank’s valuation these will need to be cleared by the valuer.
Acceptance of offer.
Drawdown of funds requested by solicitor.
Conveyancing searches – these typically take two to four weeks and will reassure the lender on local authority matters relating to the property, mainly including planning and building consents.
The searches also cover property designations (such as conservation areas), status of roads and public rights of way.
Environmental issues such as flood risk, contaminated land and energy proposals, such as solar parks or shale gas wells, may be revealed, as are the status of any drainage and water supplies, as well as confirming whether the property is potential subject to any chancel repair liability.
The solicitor will usually ask for funds upfront to pay for the searches.
Title – the lender will need assurance that the person applying for the borrowing has good title to the property. This can be covered by a certificate of title or a report on the title, issued by the solicitor.
If the title is registered, this often makes things more straightforward, says Ms Phillips. Although most lenders will lend on an unregistered title, they could potentially require the property to be registered before the mortgage is entered into.
For an unregistered title, the deeds should clearly show ownership (and are often held by the current lender) but it is common that many documents associated with the title will need to be checked by the solicitor.
Pre-contract enquiries – standard enquiry documents for each house, cottage or other dwelling, consisting of 30-plus pages of questions. For the agricultural aspects, an Agricultural Law Association enquiry document is commonly used.
These pre-contract questions will need to be answered by the person applying for the borrowing and can take a significant amount of time to complete.
Signing the mortgage – sometimes the lender requires this to be done in the presence of the solicitor.
What can hold up a remortgage application?
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Missing documents – deeds, tenancy or grazing agreements, other occupation agreements, certificates or guarantees.
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Inaccurate or poorly drafted documents – check these and address any issues early. For example, defects in the title such as missing formal rights of access can often be sorted but this may take time.
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Absence of written agreements, such as on occupation of land or buildings.
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Lack of planning approval for changes made to buildings or land use – unless the work undertaken has damaged the structural integrity of a building, this can often be dealt with through the purchase of an indemnity policy or by achieving retrospective planning consent. In some cases, the full planning process has to be gone through but this is something that would come up if the property was to be put on the market, says Ms Phillips, so it is as well to deal with it.
Remortgage advice
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Start in good time – collect any documents you think might be needed.
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Raise with your solicitor any issues that might come up – sometimes landowners are reluctant to mention something that may cause a problem, but it is likely to come to light anyway, so it is as well to deal with it before it causes a delay or a question.
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Begin title checks two to three months before evidence is needed of a full, unchallengeable title. This will also help to ensure that the valuation is conducted on the correct basis.
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If others (tenants or graziers) are occupying your land or buildings, check the terms of any written agreements are sound. Where there is no written agreement, put one in place.
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The landowner is the borrower – if anyone else is living at the property, they must be informed that if the lending were to be withdrawn, they may have to move out. They may be required to obtain independent legal advice before the borrower enters into the mortgage.
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Get an estimate of costs from your solicitor and keep track of what costs are being incurred, and review this regularly.
Source: Alexandra Phillips, MFG Solicitors