In the first part of this series, we helped you to identify suitable properties for security. With the properties identified, the next step is to collate information in relation to these properties to help you to answer the lender’s queries without delay.
Lender’s requirements are always more stringent in relation to new build properties (i.e. properties less than 15 years old) and in this second part of the series, we will identify the information that lenders will expect to see in relation these properties.
1. Planning permission
The lender will require a copy of the planning permission for the original development of the property and for any subsequent alterations or amendments that have been made to the property, for example:
- Outline planning permission and reserved matters approval
- Full planning consent
- S73 consent – for a minor amendment
The lender will require evidence from the planning authority of discharge of all pre-commencement and pre-occupation conditions. If the development is complete they will also require evidence of final discharge of all conditions.
You will also need to check the planning permission for any restrictions on use as this will have an impact on the valuation (i.e. limiting the use of the property to social housing).
2. Section 106 agreement/CIL
The lender will require a complete copy of any section 106 agreement affecting the property. They will also require evidence from the planning authority of discharge/satisfaction of any obligations in the section 106 agreement and confirmation of payment of all financial contributions.
The section 106 agreement will also need to include a mortgagee exclusion clause in relation to the affordable housing provisions in the section 106 agreement. If the agreement does not include such a provision the lender will usually limit the value of the properties or require the agreement to be varied. An example of a suitable mortgagee exclusion clause would read as follows:
“…provided always that the covenant shall not bind mortgagees, charges or receivers of an Affordable Housing dwelling who have entered possession or mortgagee successors in title to the Owner or people who in respect of an Affordable Housing Unit have staircased to 100% or purchased under right to buy or right to acquire.”
Where possible, it is most expedient to insert these provisions into the section 106 agreement at the point of negotiation with the Council (if you are involved in these negotiations).
If applicable, the lender will also require confirmation of payment of all CIL contributions in relation to the development.
3. Building regulations completion certificate
The lender will require a building regulations completion certificate for each individual unit comprised within the development and for any subsequent structural additions or alterations that have been made to the property.
Building Regulations may sometimes be regulated by NHBC and this will be clear on the NHBC buildmark warranty final certificate.
4. Building warranty
The lender will require a building warranty (such as NHBC, Zurich, LABC or the equivalent) for each individual unit to be charged. Evidence of cover will need to be supplied to the lender’s solicitor prior to completion.
5. Access to the property
The lender will require confirmation that the property benefits from sufficient rights of access to and from an adopted highway and that suitable arrangements are in place for the long-term maintenance of any access roads serving the property.
Ideally, the lender will require that the access to the property is adopted or subject to an adoption agreement (supported by a bond). However, lenders will also accept properties serviced by private roads provided that the property benefits from sufficient rights of access and arrangements are in place for their continuing upkeep, maintenance and repair. An example of this would be where the estate roads are owned by an estate management company with the owners of the properties on the estate being obliged to pay a service charge to the management company towards the upkeep of the same and the management company being obliged to undertake the maintenance works.
The lender will require confirmation that the property benefits from sufficient rights of drainage for foul and surface water and that suitable arrangements are in place for the long term maintenance of any sewers serving the property.
Ideally, the lender will require that the sewers serving the property be adopted or subject to an adoption agreement (supported by a bond). However, lenders will also accept properties serviced by private drains provided that the property benefits from sufficient rights of drainage and arrangements are in place for their continuing upkeep, maintenance and repair. An example of this would be where the estate sewers have not been adopted and the owners of the properties on the estate being obliged to pay a service charge to the management company towards their upkeep and the management company being obliged to undertake the maintenance works.
Once you have identified a property as potentially suitable for security purposes you should start to collate the information identified above so that it can be provided as soon as possible to your solicitor. Ideally, with new developments moving forward we would advise that this information be collated and saved centrally when the development site is acquired and the development progresses. This good practice will help avoid lengthy delays at the point of re-finance if you have to try to obtain duplicate copies of documents from the local authority or the contractor/developer.