Discharging mortgages protocol—is it working for commercial properties?

Discharging mortgages protocol—is it working for commercial properties?

Is the new protocol for discharging mortgages of commercial property proving effective? Roger Hawkins, consultant in real estate finance at Berwin Leighton Paisner, and Jenny Sargeant, senior solicitor and specialist in real estate finance in Macfarlanes’ commercial real estate team, comment on progress so far.

Original news

Guidance: Protocol for discharging mortgages of commercial property

The City of London Law Society Land Law Committee has prepared a protocol setting out a procedure to be followed by solicitors and their clients when dealing with the discharge of mortgages of commercial property. Currently there is no Law Society endorsed code for completion relating to commercial property. The Committee said it sees the protocol as providing a guide as to the steps that might be adopted, which are appropriate and fair to all parties.

What were the most significant changes brought about by the new protocol?

Roger Hawkins (RH): There has been a similar protocol for purely residential deals for some time. That had not been intended to apply to commercial deals, possibly because commercial transactions would be less routine and not suited to a single set of rules. For that reason, the new protocol does not set out to be anything more than suggested guidance, rather than a compulsory set of rules.

Jenny Sargeant (JS): The most significant change brought about by the new protocol is to hold out a ‘fair’ market standard. There is now pressure for outgoing and incoming lenders to accept the protocol requirements on the basis they represent best practice.

What issues were the protocol designed to address?

RH: The aims of the protocol are modest—namely to specify some standard wording for the contractual terms and solicitor's undertakings to cover the mechanics for discharging mortgages and repaying the loan at the point of completion. The idea was simply to avoid time being wasted in settling the required wording separately on every deal.

JS: Prior to the protocol being issued, the mechanics for releasing security for real estate transactions were frequently being hotly negotiated. There was little consistency of approach between lenders and even scope for a lender to adopt a different appro

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