01/01/2019, 01:21:PM
01/01/2019, 01:21:PM
Property purchaser's generally, require finance for the property transaction. Finance is usually arranged through a broker or directly with the lender. The prudent property purchaser before commencing this search for the property will seek out loan approval from their financier.
Risk mitigation needs to occur at this point. The best way to describe the risk where lending is needed is by the case of Box v Midland Bank Ltd [1979] 2 Lloyd’s Reps 391, 395. The applicant, in this case, sought finance from the lender. The bank manager explained to the applicant certain conditions for the loan need to be met and that arranging finance was just a formality. The applicant then relied on the bank managers comments and entered into contracts. The bank then refused to settle on the agreements signed by the applicant, and the applicant became bankrupt. The applicant sued the bank for negligent misstatement. The court found that the bank was liable for failing to exercise reasonable care in making the predictions to an applicant without proper qualification.
When loan approval is required from a lender, it is essential to obtain confirmation in writing. After receiving confirmation it is critical to determine if it is unconditional, or there are conditions, which have to be satisfied. Where there are conditions that need to be finalised for the lending, it is fundamental they are understood in their entirety to fully appreciated as to how the lender may refuse to settle on financing that is needed.
