tmgroup spoke to Rebecca Kibby, CEO – Conveyancing Services, and Yanthe Richardson, Senior Associate, at Foot Anstey LLP about the biggest roadblocks to meeting “that 28 day deadline” – and what could be done to address them, including:
• Addressing the AML problem
• Improving the lending process around New Build incentives
• Better managing communication between all parties (especially when there’s a developer involved as well)
• Improving collaboration across property professionals, so even complex chains help to meet that 28-day deadline
• Finding an easier and faster way to manage the Help to Buy process
Q. What is one of the biggest causes of delays and frustration with New Build transactions?
AML! Property professionals connected across a New Build transaction are at the mercy of industry-wide processes that extend far beyond what one profession can influence or control – and AML checks are a classic example of this.
Anti-Money Laundering (AML) checks are inescapable, due to the high risk around residential properties and the heavy regulation in place for managing that risk. Whilst no one would question the “why” of performing AML checks, the challenge is in the “how”.
Currently, homemovers have to provide personal information to all of the different stakeholders – from their mortgage broker and Estate Agent, through to their developer and solicitor – so each can conduct an AML check. This is irritating and time-consuming for everyone involved.
For conveyancers, the situation is exacerbated by the need to also obtain “proof of funds”, and subsequently investigate everything from their client’s income, to their financial story and wealth check, which explains how a client has come to acquire funds into their savings account. It’s complicated and intrusive, especially as clients don’t always provide the correct information up front; resulting in lots of back and forth and significantly eating into that 28-day timeframe. When clients are receiving a gift, very similar checks are then repeated for the donor of those funds compounding the delays further.
Q. What’s the solution to “the AML problem”?
If each homemover had to complete just a single AML check at the very start of the property transaction and this information was shared across all parties, the process could be dramatically improved.
Unfortunately, this is easier said than done, as each profession is governed by their own regulating body – and, as they all have varying requirements for AML, it would be challenging to switch to a “one size fits all” format that every profession could rely on.
Even if this were immediately possible, the technology isn’t yet in place to share this data securely – although Blockchain certainly has the potential as a viable solution, so watch this space!
Q. What else complicates New Build transactions – compared to second-hand home transactions?
Incentives… It is quite common in the sale of New Build properties that an incentive is offered to help “seal the deal” – including white goods and help towards Stamp Duty payments. Whilst fantastic for the buyer, this prompts further work for the conveyancer in complying with the lender’s requirements – adding another roadblock to the progression of the sale.
Why? If an incentive is offered as part of the reservation, lenders need to know about it to ensure that it doesn’t impact value. This is because, historically, lenders have suffered losses in the event of a house being repossessed, due to not knowing about the incentives in place, which may have artificially inflated the overall assumed property value. Therefore, it has become part of a conveyancer’s due diligence to report on such matters and for developers to provide a CML Disclosure of Incentives Form (now UK Finance).
This should be simple – but sadly, it isn’t. As each lender has different requirements for reporting on these matters, conveyancers have to double check Part 2 of The UK Finance Handbook (which is subject to regular changes) to progress every transaction – and can often wait on hold for up to an hour if they have a query for the lender over the phone.
There is certainly room for improvement. The ideal solution would be for mortgage brokers to capture incentive information at the start of the process, and then for all lenders to amend their templates to accommodate this so that incentives were already listed on the mortgage offer. This would give everyone the information they needed in an accessible format upfront (without the conveyancer having to chase around for updates) – and the process would be much faster for everyone involved.
In the meantime, lenders could take steps to better support conveyancers by adopting a more consistent approach to communicating any changes to their section of the Handbook, as well as improving their SLAs on call answering times.
Q. Do complex chains have a significant impact on meeting that 28-day deadline?
Unfortunately, yes. Our own internal figures indicate that around a third of New Build property transactions are connected to a chain – putting that precious 28-day deadline into the hands of other conveyancers, who are often not able (or in some cases, not willing) to work their second-hand properties around developers’ tight timescales.
This situation is compounded by the current lack of buoyancy in the property market, as developers simply don’t have the luxury of being able to qualify out buyers caught up in complex chains – even though they aren’t conducive to meeting that 28-day deadline.
Q. Does the ‘Help to Buy’ scheme help or hinder New Build transactions?
Help to Buy Funding has undoubtedly had a material impact on the market and has been fantastic, particularly for First Time Buyers. However, the legal process is inconsistent and complicated in practice. The process for drawdown of the funding and subsequent repayment later can be primary causes of delay in conveyancing chains and more needs to be done to simplify and tighten turnaround times.
As the scheme was introduced in 2013, many people are now reaching the end of the 5-year interest-free period and wanting to pay off the loan by refinancing or moving up the property ladder. In chain transactions and where one party has a Help to Buy loan to repay, the process of obtaining a valuation and basing calculations on the original purchase price, coupled with the delays in turnaround times from the loan administrators, mean that there is little conveyancers can do to influence the position. Now is the time to look at the process to make it a better experience for buyers.
Q. The developer is often involved in progressing a New Build transaction. What difference does this extra party make?
In any given property transaction, there are many parties involved in progressing the sale to completion. However, for a New Build, there are even more, as the developer typically adds their own plot progressor into the mix.
If things aren’t going particularly smoothly, it’s also fairly common for the developer to put forward even more representatives – potentially a Sales Manager or even Director to monitor progress and help speed up the process.
Having so many points of contact creates communication challenges, as there are simply more people in the process who not only have an influence, but also need updating on progress. Of course, this isn’t a problem for any profession to tackle alone – it’s a challenge for the industry to get this right, by embracing collaboration and the latest technology has to offer.
There is no easy way of updating all at once without clogging up inboxes, and it is disappointing that as an industry we still do not have a central platform for updating everyone connected in the chain simultaneously.
Q. Are homemovers their own worst enemy when it comes to meeting that 28-day deadline?
Although they may not be aware of it, homemovers do have the potential to influence the speed of their New Build property transaction. With such a tight turnaround, every day counts – from how long it takes them to complete a form or return ID, to how quickly they can return a phone call, it all has an impact on meeting (or missing) that 28-day deadline. However the legal process can be daunting and there is a lot to read, take in and digest. People need time to do that against the backdrop of a looming deadline and lots of professionals sending information all wearing different hats.
New Build buyers have the benefit of being signposted towards a panel law firm to assist them in their purchase and who are familiar in detail with the site in advance. However, typically buyers don’t understand the value of working with a panel firm – which includes instructing a genuine specialist in New Build transactions and process, the influential relationships that could help move things along and the economies of scale that will save them money (as panel firms can offer a discount).
It’s not just homemovers that can influence the timescales. The speed of the transaction depends on how good everyone in the chain is at “doing their bit”. From the plot progressor to the mortgage broker and of course the conveyancer, the more everyone pulls together, the smoother the transaction will be.
Q. Any final thoughts?
When you stop to think about the logistical considerations involved in buying a new home; the process itself, the multiple parties involved, the regulation and risk involved and the sheer speed at which it all has to happen, it sometimes feels like a miracle that properties exchange on time! Yet many still do, thanks to the hard work and determination of the professionals connected in the chain and because when the focus is there, it is in fact entirely possible in most cases.