Whether you're looking to fund a new venture, or simply looking for a more economic deal, there are a number of things to consider when financing all or part of the farm.
Instructing a solicitor who specialises in agricultural property will ensure you receive practical legal advice from a professional who understands your business and will see that your new mortgage is completed as smoothly and efficiently as possible.
A summary of the legal process:-
Reviewing the title deeds
The Bank will require your solicitor to report to them the title deeds to the farm. During this part of the process your solicitor will:
- Review and report to the bank on the title deeds and the quality of the title to the property (for example, is it all freehold, does it have an absolute title, are there any rights or covenants of an onerous nature?)
- Consider the existence and requirement of any necessary legal rights (for example, rights of way or rights to use any pipes, wires, drains or cables which serve the property and pass in, under, over or through any neighbouring property).
- Compare the title plan(s) to any plan(s) provided by the surveyor instructed by the Bank. Any discrepancies may need to be reported to the surveyor and/or resolved before your new finance arrangement is complete.
- Consider ownership of the property and the relationship of the legal owner to the borrower. For example, is the legal title to the farm/land held in the name of a sole trader, the partnership, or a limited company? Is the borrower the same person/entity as the legal owner (also known as the 'Mortgagor'), or will the Mortgagor be entering into the new arrangement as a guarantor for the borrower?
Submitting and reviewing the results of any necessary searches
The Bank will require searches to be submitted against the property. Such searches will usually include a local search, an environmental search and, where relevant, a water and drainage enquiry.
Amongst other things, these searches will reveal:
- Local Search: express planning permissions and building regulation approvals granted or refused within the last 10 years; planning or building regulation enforcement notices; notices served in respect of contamination; whether the roads adjoining the farm are maintained by the local authority, any public rights of way that affect the property and whether the property is within an area subject to any special planning constraints (for example, conservation areas, SSSI's etc.)
- Environmental Search: whether the paper records a likelihood of flooding or contamination on the land.
- Water and Drainage Enquiry: whether the property is connected to mains water and drainage, the location of any mains pipes and whether there are any concerns with regards to low water pressure or water quality. This search will not be required where the property benefits from private water and drainage.
Reviewing the mortgage offer, the survey/valuation and raising any enquiries
The Bank will instruct a chartered surveyor to value the property, to ensure it represents good security for the level of borrowing. Once available, the valuation report will be sent to your solicitor who will consider this against all of the documentation reviewed to date. Your solicitor may revert to you should he/she need to iron out any discrepancies.
Signing the mortgage deed and submitting pre-completion searches and the report on title
Your solicitor will advise you on the the main terms of the mortgage deed and you will then be asked to sign and return the deed. Your solicitor will then submit his/her final report on title to the Bank and this will also act as a request for funds. It may take 7 days for the Bank's securities department to process the report. During this time it is sometimes the case that you are required to speak to or meet with your relationship manager to agree and fix final rates for the new facility.
Once the report on title has been processed, your relationship manager will be issued with a 'safe to lend' and funds will be made available to you. Your solicitor can then complete the mortgage and deal with post completion matters, including registering the mortgage with the Land Registry.
Things you can do at the outset:
- Discuss any proposed finance/re-finance arrangement with your agricultural accountant or financial adviser to make sure the transaction is structured in the most effective way for your business.
- Locate your title deeds - provide your solicitor with the title deeds to your property together with any relevant documentation (such as planning permissions, building regulation certificates, wayleave agreements) as soon as possible. This is even more important if your property is not yet registered with the Land Registry.
- Plan - the valuation report may take a few weeks, so provide your solicitor with a plan showing the extent of the property you are looking to mortgage. This will ensure that any necessary searches can be submitted without delay.
- Confirm the name(s) of the borrower and mortgagor as soon as possible to allow your solicitor to consider any guarantor relationships. The Bank will often require that any guarantor receives independent legal advice before they sign the mortgage deed.
We find it comforting when a client's bank and accountant are specialists in the Agricultural Sector, knowing that they are receiving proactive advice from experts in the discipline. In the same way we hope that our specialist knowledge in dealing with the financing of agricultural property will allow the transaction to proceed with minimal fuss. There are often complications peculiar to agricultural property and we always seek to find the simplest, quickest and most effective way to achieve a speedy conclusion.