Karen Walsh: Planning a commercial mortgage
I am farming and have had an offer accepted to purchase agricultural land nearby. I have loan approval from my bank.
What is the next step? What needs to done to put the security in place, obtain funds and close the sale?
Firstly, you must inform the auctioneer of the identity of the solicitor who will be looking after this transaction for you.
Contact your solicitor to carry out a full investigation of title and prepare the loan documentation.
Your solicitor will ensure that the vendor has full power to sell, that the title is good and marketable title and that you will have no trouble becoming the registered owner of the land which will allow you to sell it on again in the future should you choose to.
As this is a commercial mortgage, the bank will appoint their own solicitor to represent their interest in the transaction. You may also be responsible for the bank’s solicitor’s fees.
It is important to ensure that the address and acreage of lands to be charged in favour of your bank and the folio number, if the title is a Land Registry title, are correctly referred to in the Letter of Loan offer.
If it is incorrect, the letter of loan offer will need to be amended as soon as possible to avoid delays at a later stage.
Instruct an engineer to carry out a planning search and to confirm that the boundaries of the property on the ground are comprised within the map. The cost of an engineer in advance of purchasing can save you thousands in the long term.
It is important that you obtain a structural survey if there are buildings on the agricultural land or if there is a dwelling house passing with the property.
A pre-purchase survey gives you an independent assessment of the overall condition of a property. It identifies any aspects of a building that may need repair or replacement. It allows you to make an informed decision.
When problems or defects are identified, it does not necessarily mean you should not buy the property, but you will know in advance what to expect.
Access is extremely important. Do you have access to the property on paper? It is impossible to overemphasise how terribly important access rights are. Be certain that permanent, legal, transferable access is specified in the deed.
Never buy any piece of property without access. There is no point in the friendly neighbour assuring you he has no objections to you using his land to access your land.
A minor disagreement with that man, or his successors in title, and all that could change in the blink of an eye.
Alternatively, that land you are purchasing may enjoy a wayleave to access water from a neighbour’s land; a Deed of Wayleave will need to accompany the title to the property also.
In addition to you entering into a Deed of Charge with your bank, it is common that a lender may also insist upon a guarantee by a third party to be answerable for the default of another and in that instance it is vitally important that the proposed guarantor obtains independent legal advice as to the nature and effect of venturing into the guarantee.
If you are taking out the loan in the name of a company the bank may also seek a guarantee by you personally for the default of the loan and in that instance it is vitally important that independent legal advice is offered to the proposed guarantor in relation to the nature and effect of venturing into the guarantee.
A lender will also generally insist upon a Life Assurance Policy on your life for the value of the loan being taken out.
Failure to timely organise such things as life policies, direct debit mandates, identification, buildings insurance etc. as required can often cause delays in completing a lending transaction.
In a partnership a partner has no implied authority to bind the partnership in commercial borrowing unless it is expressly stated in the partnership deed so the lender will be anxious to get all partners to sign any guarantee.
While all of the above may seem a little overwhelming it is important to seek legal advice as soon as possible and your solicitor can advise you of what is required and guide you through the process.
Telephone: 021-4270200
Email: info@walshandpartners.ie
Web: www.walshandpartners.ie
While every care is taken to ensure accuracy of information contained in this article, solicitor Karen Walsh does not accept responsibility for errors or omissions howsoever arising, and you should seek legal advice in relation to your particular circumstances at the earliest possible time.
