Case study story: don’t let the small stuff derail settlement

Jess and Louisa Davis* were the beneficiaries of a trust bestowed on them by their grandmother, which included 17 tenanted properties with a substantial amount of outstanding debt. When they encountered problems transferring that debt, and with the clock ticking, they were lucky to have found an appropriately experienced broker.

Jess and Louisa, having inherited 17 properties and several million dollars of debt, needed to find respective mortgagees before they could settle the debt transfers, and needed to do so before the end of financial year to avoid paying extra tax on rental incomes.

With the trust presenting a complicated loan scenario, Jess and Louisa decided to contact a FinanceCorp Finance Manager.

“The trust had about $3 million worth of mortgages secured against the properties. I had to get separate mortgages for the two beneficiaries for their outstanding shares,” their finance broker explains.

“I was using one of the second-tier banks and was dealing with senior management there to get this deal through because, ultimately, it was millions of dollars worth of lending, plus, we were on a bit of a time limit with it needing to be done by the end of the financial year,” he added.

With the new loans organised and ready to go, Jess and Louisa became very stressed when their solicitor called to inform them that their bank wouldn’t settle due to a mistake made by the outgoing mortgagees.

“One of the banks turned up with a single discharge document covering all seven of the properties that they had mortgages on. The other bank turned up with nine individual discharge documents, one for each property,” the broker explains.

“The solicitor acting for the incoming mortgagee contacted my client’s solicitor to say that they were not prepared to take all of the discharges because the incoming mortgagee was not using every one of the 17 properties for security.”

Although only a documentation issue, the dilemma threatened to impede settlement. Jess and Louisa’s broker got straight on the phone to sort out the problem.

“I’ve been in this industry for 40 years. I know what I’m doing. I rang up the general manager of the bank that was the incoming mortgagee,” he says.

“I explained that one of the major banks turned up with a single discharge notice covering all properties. You can’t split that up. You can’t just cut the document into 17 pieces. It was very touch and go as it was a significant amount of money. ”

After their broker explained and negotiated the concern with the bank manager, Jess and Louisa’s solicitor was able to go ahead with the settlement, despite the documentation problem.

“The matter was finally able to be settled on the day that we needed it to be settled. I know what settlement is all about and how it works, so I was in a position of knowledge to be able to make that come about.”

Any loan has the potential to become complicated and, if it does, having a FinanceCorp Finance Manager on your side might make all the difference.

* Names have been changed to protect clients’ privacy.