Bridging loans for property purchases, developments or business opportunities.
As you weigh up your options you may be thinking about the legal side of things. A common question is do I need a solicitor for a bridging loan?
You do need a solicitor and they play a big part in protecting your interests, ensuring compliance and managing the complexities of property transactions. Yes there are costs involved in legal services but the risks of going without proper guidance are huge.
This article explains when you need a solicitor, what they do and how to choose the right one for your bridging loan.
Solicitors for Bridging Loans
Solicitors are involved in bridging loan transactions and their role goes way beyond just reviewing documents.
When you instruct a solicitor they will do full legal due diligence on the property you are using as security. This will involve checking the property’s title at the Land Registry, ensuring there are no outstanding legal issues that could affect your ownership or the lender’s security.
Your solicitor will also review the loan documents, explaining complex legal jargon in plain English. They will clarify your obligations, the loan terms and any risks so you fully understand what you are committing to.
During the transaction your solicitor will handle the transfer of funds, ensuring they are allocated correctly and all financial aspects of the deal are in order. They will also ensure the whole process is compliant with UK property law and protect you from any legal traps.
UK solicitors are regulated by the Solicitors Regulation Authority (SRA) which sets the professional standards and client protection. This added layer of regulation gives you extra peace of mind.
Dual Legal Representation
When dealing with any type of secured loan or mortgage there is legal work for you the borrower and the lender. Each has their own formal requirements and priorities.
This means two legal firms; one for the borrower and one for the lender.
Dual representation is where one law firm represents both the borrower and the lender in a bridging loan transaction.
This can really speed up the conveyancing process.
Under dual representation the solicitor must be impartial and balance the interests of both parties. They will deal with all legal aspects of the transaction from property searches to fund transfers.
The main advantage of dual representation is speed.
With one team handling everything the communication is smoother and the process can move faster. This can be particularly useful in time critical bridging loan situations.
But dual representation isn’t without its downsides and not all lenders offer it.
The shared solicitor can’t give advice that favours one party over the other. So you may not get bespoke legal advice tailored to your specific needs.
In terms of costs dual representation can be more expensive but the big advantage is it speeds up the legal process.
Dual representation is common in the bridging loan market for simple transactions. But it depends on your individual circumstances and the loan.
Please contact us to discuss your own particular situation.
Independent Legal Advice for Company Directors
When borrowing through a company or SPV directors often need to provide personal guarantees. In these cases Independent Legal Advice (ILA) becomes part of the process.
ILA is where a separate solicitor advises company directors on the implications of providing a personal guarantee. This advice is independent of the main transaction and focuses solely on the director’s personal liability.
The purpose of ILA is to ensure directors fully understand the risks they are taking on by personally guaranteeing a company loan. It protects both the director and the lender by showing the guarantee was given with full knowledge and understanding.
Read more: What is a Personal Guarantee?
Legal Costs
Knowing the legal costs involved in a bridging loan will help you budget and avoid surprises.
Firstly you will need to pay your own legal fees.
These can vary greatly depending on the complexity of the transaction and the experience of your solicitor.
You will also be responsible for the lender’s legal fees.
Lenders will require what’s called a ‘legal undertaking’ – a promise from your solicitor to pay these fees regardless of whether the loan completes.
Additional costs will include property searches, Land Registry fees, general disbursements and bank transfer fees.
Also consider stamp duty implications if the bridging loan is part of a property purchase.
To manage these costs ask for detailed fee breakdowns upfront.
Some solicitors offer fixed fee services for bridging loans which can help with budgeting. Remember while it may be tempting to go for the cheapest option the quality of legal advice can make a big difference to the smoothness and success of your bridging loan transaction.
No-Undertaking Bridging Loans
We work with a few select lenders who don’t require solicitors to provide upfront legal undertakings – meaning you won’t need to pay legal fees in advance of your loan application starting.
This can significantly speed up the process for properties valued up to £1,250,000 in London and the Home Counties. Combined with our use of Automated Valuation Models (AVMs), which replace physical property inspections in suitable cases, we can often complete loans within 5 days.
In a recent case, we saved our client two weeks on their completion timeline:
- The property passed the AVM confidence score assessment
- No physical valuation was required
- The lender didn’t need an advance undertaking from solicitors
- Legal work proceeded immediately without waiting for upfront fees
- Completion achieved within 5 days
This approach works particularly well for:
- Standard residential properties
- Urgent purchase requirements
- Quick refinancing needs
Note: These streamlined terms are available for suitable properties meeting specific criteria.
How to Choose the Right Solicitor
Choosing the right solicitor can make a big difference to the success and smoothness of your bridging loan.
Look for a solicitor with experience in property finance and bridging loans. These transactions move fast and require specialist knowledge so general practice solicitors may not be the best fit.
Check the solicitor’s credentials and SRA registration. This will ensure they are properly regulated and bound by the professional standards.
For bridging finance you will probably want a solicitor who can move fast and keep you updated throughout the process.
Ask them about their fee structure upfront. Some solicitors offer fixed fees for bridging loan work which can help with budgeting. Others charge by the hour which may be more suitable for complex cases.
Ask potential solicitors about their experience with bridging loan transactions, typical turnaround times, communication methods and fee structures.
We can recommend suitable solicitors and conveyancers, we choose firms that match your needs. Learn more.
So, Do You Need a Solicitor for a Bridging Loan?
Yes, you do.
A good legal adviser brings valuable expertise to your bridging loan transaction. They will protect you from the pitfalls and explain your rights and obligations.
If speed of transaction is important to you then you need to make sure your solicitor is experienced in bridging finance and the property type you are buying (residential, commercial etc).
To make it even more efficient consider dual legal representation where one solicitor firm does all the legal work.
Remember every bridging loan scenario is different. While this guide provides general information it’s always best to get personal advice for your situation.
Need some help?
If you need a short-term bridging loan then a specialist broker is a good place to start. You will get expert help and advice along with a wide range of lenders to choose from.
To speak with a specialist broker, please call us on 020 3556 9137
