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Question: We have a 10-year loan for some new buildings on my farm with a balance of €120,000. The buildings were completed two years ago and we’ve been working away at paying the loan back each month.
In the last few months, the interest rate has increased which has left me questioning our position. While we can still afford the
repayments at the minute, any further increases would put us under pressure.
Should I stay with my bank and wait for the rate to return to where it was? Or is it worth my while changing banks?
I know there’ll be time and money involved in switching. I’m wondering if the switching effort is worth the possible savings?
Answer: Any land which is being offered as security to the bank must have the benefit of what is known as a good marketable title. This means that the bank can sell the land if you default on the loan repayments and get their money back.
The banks appoint their own solicitors to look after their interests in putting the loan in place while the borrower landowner also has to appoint their own solicitor.
Often the borrower has to pay for both sets of solicitors which could be in the region of €3,000 – €4,000 plus VAT and outlay.
What you need to know
Ingress and egress: How do you get in and out of the land? What the bank wants to see is that a) the land is adjoining a public road and b) that there is a gate from the land out onto that public road, so that there is direct independent access.
Generally, the bank will require written confirmation from the local authority that the road is in charge, i.e. it is a public road.
I have known of some banks’ solicitors to go into Google Maps to confirm that there is a gate in place accessing the road, so it’s important that access is where you say it is.
If the lands do not adjoin a public road, and is accessed via a right of way, that right of way will need to be registered. It may also be necessary to get the neighbouring landowner to sign a deed acknowledging the right of way.
Naturally, this can cause issues if you have an unwilling neighbour and it may be necessary to make an application to the Land Registry to register a right of way that has arisen from long use.
Declaration of identity: This would normally confirm the folio number of land and the acreage. It also confirms that the physical boundaries on the ground correspond with those that are shown on the file plan with the folio.
If there are any buildings on the land being offered as security, it confirms that these are within the boundaries and that any services (slurry pit, septic tank etc) are again within the boundaries.
The declaration will also confirm how the property is accessed, e.g. from a road or from a right of way and what the land is used for, e.g. agricultural use.
The important thing with this declaration is that the engineer/architect giving the declaration must hold professional indemnity insurance
and this must be attached to the declaration of identity for the bank to accept it.
We have seen plenty of cases where a friend/family member says that they will do the declaration to save you money, but as they do not have professional indemnity insurance, their declaration will not be accepted and this could end up costing you more in the long run as it will delay you drawing down your loan.
Land registry compliant map: If the land that you are offering as security is part of a larger folio, you will need to engage an engineer (with PI insurance) to draw a map carving the area being secured by the loan out of the larger folio.
Declaration of compliance with planning/building regulations: If there are any buildings on the land being offered as security, then the bank will look for the planning permission.
Specifically, they will seek a declaration from an engineer/architect, confirming that the property was built in accordance with the planning permission granted and in compliance with any applicable building regulations.
If no planning was obtained, we have seen cases where the bank want a declaration from an engineer/architect confirming that no planning was necessary.
Only more recent planning permissions are stored electronically with local authorities so again, if it is an older building, it might take several days for the original grant of planning to be obtained from the council.
When the bank takes a charge over land as security for borrowings, they make enquiries into the title as if they were buying the land. This often catches the borrower unaware in terms of cost and time.
Consequently it’s important that the land you offer the bank as security ideally has no buildings on it and adjoins a public road.
The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors does not accept responsibility for errors or omissions howsoever arising. Email aisling@agrisolicitors.ie
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