Rod Cordingley, partner and asset management specialist at StephensonsRural, looks at how increasingly detailed lender enquiries can delay rural property transactions, even where the issue has little bearing on the value of the property.
It is black or white now. Grey is no longer good enough for the major lenders.
I say this because we have a number of farm sales that have recently completed or are due to complete shortly, and one of the biggest challenges at present is satisfying the level of detail now required by lenders.
Frankly, some of the enquiries we now have to deal with are beyond reasonable. They can become a red herring, holding up a property sale over an issue that has little or no bearing on the value of the property.
For example, we have just been asked to provide planning consent for a pond constructed 24 years ago on a farm, where the pond is not material to the value of the sale. A reasonable buyer might take a practical view of an issue of that age and significance. Not this lender.
We have been used to insurers providing policies for chancel repair liability in very tenuous circumstances for a number of years. We are now seeing additional indemnity policies requested in increasingly extreme circumstances, such as over a right of way that has not been used for more than 50 years and, again, is not material to the valuation.
The legal profession is blaming the lenders, and I understand the point. But a report on title for a rural property that has not been conveyed for a generation will nearly always contain something on which a practical view has to be taken. Surely the solicitor can still have a role in providing that practical advice?
The auction process provides pre-contract enquiries and a contract, and that is what the buyer signs. The price reflects the risk the buyer is being asked to take.
Perhaps on a private sale, lenders should also be asking the valuer what effect an issue such as a missing planning consent for a pond actually has on the valuation provided. In many cases, the answer would be straightforward and the sale process could move on.
Four to five months is now common between agreeing a sale and exchanging contracts, with much of that time spent dealing with enquiries that can have very little practical impact on the property or its value.
It is time common sense prevailed.