2025-02-21 28Hse Editor
When purchasing a property, buyers typically pay the initial and final deposits by cheque. In cases of urgent deals, some buyers may even issue cheques immediately. To ensure maximum security, it’s best to make the cheque payable to the seller’s law firm, which acts as an escrow agent. Both buyers and sellers must engage lawyers to handle the legal procedures involved in the transaction. But what should buyers pay attention to when choosing a lawyer?
The buyer's and seller's lawyers have distinct responsibilities. The seller’s lawyer is tasked with drafting the formal sale and purchase agreement and sending it to the buyer’s lawyer for review. If the property has an existing mortgage, the seller’s lawyer must request the title deed from the bank and provide the buyer with lease agreements and title documents. They also coordinate the signing of mortgage release forms with the bank.
The buyer’s lawyer, on the other hand, focuses on reviewing the formal sale and purchase agreement provided by the seller’s lawyer and forwarding the deposit to the seller’s lawyer. Additionally, the buyer’s lawyer examines the title deeds to ensure there are no ownership issues.
If the buyer needs to apply for a mortgage, the lawyer will notify the bank to transfer the approved mortgage funds to the law firm. The lawyer will then disburse the mortgage balance to the seller’s law firm at the agreed-upon time, completing the property transaction. They will also handle the payment of stamp duty and register the transaction with the Land Registry.
One crucial point to note is that every bank has an internal list of approved law firms. This list is compiled based on the law firm’s track record, ethical practices, and reliability. Only law firms on this list are trusted by the bank to handle mortgage-related matters. But if the law firm handling your property purchase is not on the bank’s list, what problems might arise?
A law firm not on the list cannot process a mortgage with that bank. Generally, when a buyer engages a lawyer to handle mortgage arrangements, the lawyer will inquire about the buyer’s preferred mortgage bank and inform them whether the law firm is on the bank’s list.
Even if the lawyer does not disclose this, when the buyer submits their mortgage application to the bank, they must also provide the law firm’s details. Bank staff will verify whether the firm is on the list and inform the buyer if it is not. Therefore, it is unlikely that buyers would unknowingly proceed with a law firm that cannot handle the mortgage.
If the chosen law firm is not on the bank’s approved list, what can buyers do? Buyers have three main options in this situation:
The first option is to apply for a mortgage with another bank where the law firm is on the approved list. However, this approach may not be suitable for buyers with a short completion period, as reapplying for a mortgage with another bank may not leave sufficient time. It’s also important to note that if a buyer has already signed a loan confirmation letter with one bank but cancels the loan application, they may incur cancellation fees.
The second option is for the buyer’s lawyer to refer the case to another law firm on the bank’s approved list. However, this may result in additional costs, known as “bridging fees,” which typically amount to a few thousand dollars. This process also requires extra time and may increase legal fees.
The third option, which has a lower success rate, is for the lawyer to request a one-time exemption from the bank to handle the mortgage. The bank’s approval depends on the law firm’s past track record and whether there have been significant errors in its handling of previous cases. If the exemption is granted, the law firm can still proceed with the mortgage process.
In summary, buyers need to exercise caution when selecting a law firm, especially if they require a mortgage. Ensuring that the law firm is on the bank’s approved list can help avoid unnecessary delays and additional costs. If issues arise, buyers should consider the available options and plan accordingly to avoid complications in the property transaction.
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