We engage our own external legal support for every loan that we provide and will never use the same lawyer as the borrower.
We obtain an independent third party valuation on every property that we lend against. Valuers provide us with comprehensive reports on the property, which will include commentary on the relevant local market, show evidence of comparable recent sales for the property, and address any specific concerns we may have about the property and the local area.
We require all borrowers to appoint a solicitor that is qualified to act in connection with the transaction. Our due diligence on a borrower extends to the borrower’s solicitor. We require the borrower’s solicitor to confirm to us that they have explained all of the obligations under the loan to their client, and that they are understood.
Our payment partner provides rigorous KYC & AML checks on the borrower.
We carry out extensive searches on a borrower before proceeding with a loan. Examples of some the things we require the borrower to provide are; 2 certified forms of ID, detailed information on the business, including the working history of directors of the business, full accounts and financial projections.
Our checks don't end when we've raised the money! Its vital that we proactively continue to monitor and review the market, the value of the property and borrowers position.
The value of UK property can go up as well as down with economic cycles. If the value of a property against which we have lent falls, the borrower may find it difficult to meet their repayment obligations, particularly if they try to refinance their loan based on a reduced valuation. We plan for this risk by issuing loans worth no more than 85% of the property’s value, and understanding market dynamics in the property’s local area.
For all our lending, we obtain a professional valuation, undertaken by RICS registered valuers with local experience, which are backed by professional indemnity insurance. Each valuation is carefully reviewed internally by our experienced team to ensure the security is acceptable to support the lending proposal. Co-Lend has a restricted valuer panel for all valuations and regular reviews are undertaken of the valuation service including the quality of the reports provided to us. The valuations allow us to make informed decisions about where to lend and against how much of the value.
All our loans are backed by security, at a minimum this will be an Equitable Charge secured against the property, this means that Co-Lend must be informed & provide approval before the property is sold. This does not give Co-Lend the immediate right to power of sale, but is sought via the legal process once we consider a borrower to have defaulted on the loan. This may also be called an RX-1.
In most instances, the level of security will be a 2nd charge secured against the property, this gives Co-Lend the legal right to take ownership of a property in the unlikely event that a property defaults on their loan repayments. The specific level of security for each offer will be noted in the offer document.
As with any secured asset, there is a risk that the security is not properly constituted, rendering it unenforceable. A particular risk associated with property investment is the risk of property fraud. We work closely with our solicitors, each of which is a specialist in property finance, and require that the solicitors used by the borrower meet our minimum requirements. This, together with our diligent internal processes, ensures that property risk and security risk is minimised.
Our property finance products typically range from 12 to 60 months in duration and repayments are paid on a monthly basis, with the original capital amount repaid at the end. Before committing to a loan, we examine the viability of the borrower’s payment schedule, including monthly interest payments.
These factors make short-term property finance a target for criminals to attempt to launder money or commit other financial crimes. Our experienced team works with our payment provider MangoPay to undertake robust AML & KYC checks on every customer.
Every loan we underwrite is secured against property. This means that in the event that a borrower fails to repay, we would seek to recover the outstanding loan by selling the property and passing any proceeds on to investors. The secured nature of the loan does not, however, mean that repayment of the loan is guaranteed because the loan outstanding may exceed the property net sale proceeds.
Sometimes, borrowers may require some flexibility. For example, they might warn us of an issue that could make them late on an interest payment. If, having assessed the facts and the evidence provided to us, we are comfortable with the delay, we may allow the borrower to defer payment to a later date.
If the borrower fails to make payments, an investor may not receive the investment income as your capital is at risk and repayments are not guaranteed.