Some years ago, the late Princess Diana, in a television scoop interview with journalist Martin Bashir on Channel 4, told Bashir that “there are three people in this relationship”.
This was a reference to the breakdown of her marriage to Prince Charles and to Camilla Parker Bowles with whom Charles was having a relationship.
This phrase, “three people in the relationship”, always comes to mind when I am dealing with purchasers of residential property who are borrowing from a lender.
The purchaser, in a frenzy of enthusiasm, may be perfectly happy to proceed with a purchase where I, as solicitor, have serious concerns.
My concerns, for example, could be to do with a right of way or access to the property, or could be a planning or services problem. I explain the problem to my client but they are still anxious to proceed and are willing to overlook the problem on the basis that they may remedy the situation later on or fail to see the seriousness of the situation.
This is where the “three people in this relationship” phrase must be given an airing. Because the third party in the relationship between my client and me is the lender when the client is borrowing money.
This is because I must give the lender a solicitor’s undertaking at the outset as part of the loan process. This undertaking is that I will obtain good marketable title to the property and register the bank’s loan as a charge. The bank will then rely on my certificate of title once the transaction has been completed.
However, I have a problem a) giving an unqualified undertaking and then b) certifying title if there is a problem with the title to the property. This is the moment in the transaction where I may be unwilling to proceed without further confirmation of approval from the lender whilst the purchaser will be gung ho to fire ahead.
I will have to contact the bank and seek approval in writing to go ahead, if the bank is willing to do so. It may not. But I must let them know what the problem is and advise the lender that I must qualify my undertaking as a consequence of whatever problem has arisen.
It is up to the lender at that point to give the green light, or not.
The purchaser is still my client at all stages of the transaction, and the bank never becomes my client. But the solicitor’s undertaking and certificate of title system, which is an intrinsic part of the lending arrangement, means that there is indeed a ‘third person in the relationship’, something which the client occasionally struggles to understand and accept.
That’s the reality, however, and if you are house hunting and borrowing it will be helpful if you understand this triangular relationship between you, your lender and your solicitor.