Financing: getting your house in order

Posted by Louise Howells on
With a house building target of 7,500 by 2016 we were delighted when the Welsh Government announced that it is to inject a further £400 million (a mixture of private finance and a direct contribution from the Government to supplement private finance) into new social housing over the next three decades and that plans are being finalised for a new innovative mechanism to make available £140million finance for social housing.

As the Housing Associations are all too aware in these times of austerity private funding has been required to bridge the gap left by the social housing grants. Unfortunately the requirements of those lenders are more stringent than ever, their lawyers are more risk adverse and have required the Housing Association to commit a high level of properties to security (as at November 2012 gearing levels had increased by 16% over the preceding five years).

Given the time pressure to build the requisite social homes by as early as 2015 it is never to early to ensure that, so far as possible, all is in order to enable the drawdown of funds whether by way of security with a private lender, a development loan or a Bond.

We regularly act for Housing Associations in relation to finance facilities, both from a property and banking perspective, and it is our experience that during the financing or refinancing exercise we often encounter issues that could potentially delay drawdown or lead to Existing Use Value (rather than Market Value) being applied to a property. To ensure a smooth path to drawdown of funds we would be happy to work with you to take the initiative to deal with as many of these potential stumbling blocks now.

For example we could assist by: -

  • advising you on the things to consider at an early stage in the funding process including assisting you to negotiate the heads of terms with a lender at the outset and anticipating the conditions precedent to drawdown and providing assistance in putting these together;
  • reviewing the titles to the properties which potentially are to be charged, highlighting any adverse entries;
  • acquiring freehold reversions where the Housing Association currently only has a leasehold interest with an unexpired term less than 90 years;
  • putting on risk indemnity insurance for any defects in title;
  • collating and ensuring that the title deeds are held in one place, submitting applications to register any unregistered land or preparing statutory declarations to deal with lost title deeds;
  • obtaining release of old charges still registered against the titles;
  • review of terms of existing leases and, if required, seeking a Deed of Variation to ensure that Market Value is afforded to the property rather than the lower Existing Use Value;
  • obtaining a release from the Council in respect of any provision of the Section 106 Agreements which have been complied with;
  • reviewing planning consents and highlighting where there is a reference to restricted use which may impact on value; and
  • working with you to collate documents such as planning consents, confirmation of discharge of conditions, building regulations consents, warranties and NHBC, Zurich or equivalent Certificates.

If our assistance could be of benefit to you we would be happy to visit your offices to discuss the above and highlight any pitfalls associated with the negotiation of Facility Documents, for further information please contact either Louise Howells, Senior Associate or Reshma Jogia, Associate.

About the Authors

Louise is an experienced commercial property Lawyer based in Wales acting for many of the firm's commercial clients.

Louise Howells
Email Louise
029 2068 6142

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Reshma is a Legal Director in our Banking and Finance team and acts for a variety of lenders as well as borrowers.

Reshma Jogia
Email Reshma
029 2068 6132

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