Complexities, costs and completions: why transactions take more time

COMMENT A recent LinkedIn post from Belcor partner Oli Cohen picked up on a very interesting point, as did Chanté Bohitige’s subsequent article. But it is not just agents noticing the often-unnecessary amount of time that transactions take to be concluded – it is the entire industry, from lawyers to agents to bankers, and the developers and investors that rely on all of the above. And the problems aren’t only apparent in the leasing market. We live in an age where computers should be creating more efficiency and assisting us in the property industry. Certainly, when it comes to obtaining information and values they provide great comfort. Often, however, computers have made the industry much harder for human intervention and subsequently create a lot of unnecessary cost and excessive delay due to the reliance on them.  They also strip out the ability of an entrepreneur to be able to participate in an industry which becomes ever more institutional and institutionalised owing to that lack of contact and ability to progress their aims.  First-name basis From the post-war property boom up until the 2000s, planning was less restrictive and objectives could be easily met. Small to mid-scale developments would typically take around three to five years from planning to completion.  Today, such projects can take twice that amount of time and the cost would be prohibitively high to an entrepreneur who would have to risk large sums on soft costs before a brick has even been laid. The time delay also, by implication, means the finance in today’s works often doesn’t work.  Back then, there were also solicitors who could work through the night, and they were often partners with their clients on the transactions, so the emphasis on getting the deal done meant an extra level of commitment.  Then there is the finance. The golden age of property was when an investor or developer knew their bank manager on first-name terms and the manager could anticipate or assist with any arising lending request. Bankers would often work late into the night and would even visit the prospective properties in order to progress the finance.  Nowadays, computers often run the process from the valuation to the drawdown and there can be little input from the bank management themselves at all. There is more paperwork and more boxes that need to be ticked than ever before – that is rightfully to protect all parties with ever-changing legislation. Many banks openly tell their clients it will take at least three months between passing credit committee and actually drawing down.  Moving goalposts Next there is the professional side of property. Put aside the moving goalposts of high construction costs and there are the sometimes difficult new pieces of legislation to tackle, which delay transactions to the point of both sides being unable to commit on completion dates.  We negotiated to buy a block of 32 flats in South Acton, west London, in a joint venture. The seller, a well-known nationwide housebuilder, handed over to us a brand-new block of apartments. Simple transaction, one might think. What we didn’t realise at the time was that due to the new cladding and fire safety laws that had been brought in by the government, we would need something called an EWS1 certificate. Obtaining such a certificate was then extremely arduous, with several surveyors being engaged and many unable to fully grasp the new laws in so far as the requirements needed. We finally completed on the transaction having obtained the necessary certificates and were very happy in the end, but I couldn’t help but think that many other investors probably would have given up on following through on the purchase on the basis of the complexities involved and all the unnecessary paperwork and curveballs that had arisen.  Whether future proptech models are able to simplify an industry that has only become more complicated over the years remains to be seen. We all have to work together as an industry to help simplify the transactional side – as we all have plenty of challenges already. Simon Lyons is a director at Enstar Capital Image: Tumisu/Pixabay