Bridging loan times are going through the roof, and developers are furious. A new report from EY reveals that only 3% of bridging market respondents expect the average time to complete a bridging loan to decrease this year. In fact, almost a quarter expect those times to get even longer!

What’s the Problem?

The legal process is a major sticking point. Talking to Bridging & Commercial, experts like Mark Harrison, director of Breeze Capital, are calling it “tortuous” and “horrific.” He blames a lack of communication between all parties, particularly between the borrower’s and lender’s solicitors. This leads to back-and-forth delays as queries go unanswered.

Is It Just the Lawyers?

It’s not just the solicitors in the firing line. Steve Burns, partner at Word On The Street, says lenders are asking lawyers to do more, leading to longer times. He also highlights the growing importance of AML (Anti-Money Laundering) checks, which require more detailed responses.

James Bloom, director of Alternative Bridging Corporation, points the finger at inexperienced solicitors. He says borrowers often use residential conveyancers who lack the knowledge and experience to handle short-term loans, causing delays.

But It Doesn’t Have to Be This Way!

Jonathan Newman, senior partner at Brightstone Law, insists that bridging loans can be completed quickly under the right conditions. He points to the importance of all parties being equally motivated and working together.

Potential Solutions

So, what can be done? While dual representation (where one solicitor represents both the borrower and lender) is touted as a solution, experts are cautious.

Steve believes it’s still possible to get a slow lawyer, even with dual representation. Jonathan goes further, questioning whether solicitors should represent both sides in commercial transactions. He warns of potential conflicts of interest and increased liability for lenders.

Other solutions include:

• No Search Indemnity: This can speed up the process by avoiding physical searches.
• Faster Funding: Borrowers should put their solicitor “in funds” as soon as the loan is approved, rather than waiting for valuations, which can take weeks.
• Clear Documentation: Clear and comprehensive documentation requirements communicated to all parties can streamline the process.
• Technology: Utilising technology for document submission and verification can help avoid incomplete or missing paperwork.
• Collaboration: Everyone needs to work together – brokers, lenders, and lawyers – to keep the process moving smoothly.

The Bottom Line: Bridging loans are a vital part of the development industry, but the current legal process is causing headaches and delaying projects. With a bit of collaboration and a focus on streamlining processes, the sector can overcome these challenges and get back to building.