Do I Need a Solicitor for a Bridging Loan?

Bridging loans,also known as commercial bridging loans, are available to businesses of all sizes requiring speedy access to funds. They are secured against existing property or a property being purchased, and can be a useful tool for short term finance.

When entering into financial agreements, it is wise to take expert advice and understand your options; however, does this extend to seeking legal advice for a loan?

Here, in this ABC Finance deep dive, we examine whether it is advantageous to use a solicitor when taking out a bridging loan, or if self-representation is as complicated as it seems. Read on to understand your options.

Understanding bridging loans

Bridging loans are a type of flexible property finance that is used to bridge the gap between two events happening, such as purchasing one property, and another being sold.

Initially bridging loans were offered in the residential market to fund property purchases before the borrower’s existing property was sold and a mortgage paid off. Now, however, the commercial bridging loan market continues to grow rapidly and represents a £4.8bn industry, as of 2022.

These loans can assist in plugging a gap in a business’ finances, typically the time between an outgoing payment being due and a source of income being made available to cover the payment. They are typically paid back from 1-36 months, and interest is paid on a monthly basis.

Click here for an in-depth guide to bridging loans from our experts.

Legal aspects and considerations for bridging loans

Taking a bridging loan involves a lender putting a legal charge on a property. This means that the lender has an interest in the property and can sell it to recoup the loan if the borrower defaults.

A bridging loan will require a property as security and this will require a series of compliance checks to assess the value and condition of the property; this is where using a solicitor can be helpful in terms of completing paperwork and understanding what is required to complete the lender’s requirements. As a bridging loan almost always requires the purchase or sale of a property, legal professionals representing the other parties will be involved in the process. Using a solicitor for a loan means that they will be able to deal directly with their legal counterparts and this is likely to speed up paperwork.

If, however, you use bridging loans frequently, and have a clear record of paying back loans it may be that you can approach a lender directly without using a solicitor. This may be the case if you are a property developer and using bridging loans is part of a regular cycle of financial activity for your business. In general, taking out a loan and paying it back on time builds trust and improves your credit rating.

In some instances, a lender will require you to use a solicitor when arranging a bridging loan. If, however, you are able to self-represent and choose to do so there will still be a range of compliance requirements and legal documents needed to apply for finance.

To apply for a loan, you must be aged 18 or over and for commercial bridging loans your company will need to be based in the UK.

The key documents you will need are:

  • Bank statements.
  • VAT returns.
  • Business plans.

You will also need to show proof of ownership or details of the property you are intending to buy with the loan. You must also provide an ‘exit’ plan demonstrating how the bridging loan will be repaid to the lender, this is ordinarily by securing a long-term mortgage or selling a property.

The need for legal representation

Using a solicitor is a personal choice and very much depends on your confidence and ability to deal with complex matters, paperwork and an increased demand on your time. There are, however, a number of situations where the use of a solicitor will be fully expected, particularly in the case of high value loans, or loans that involve multiple parties.

Management takeovers and acquisitions

When dealing with multi parties, a solicitor will manage your interests and ensure that arrangements are equitable and do not favour one party above another. Group purchases can be complex, with a variety of properties and funding sources and carry a risk of failure if due diligence is not completely thoroughly.

The advantage of using a solicitor

Solicitors will act on your behalf, making sure you are treated fairly.

In cases where expert advice is sought it is usually because it will save you time or money, or likely both.  Importantly, a solicitor can scrutinise contracts to ensure you are entering into a fair and reasonable agreement with no hidden clauses.

Whilst often it is possible to self-represent, this can be time consuming and complex. Using a specialist solicitor with experience of bridging loans means that they will be familiar with the process, less likely to make a mistake and take away the stress of dealing with paperwork.

What is the role of bridging loan solicitors?

Here are some key areas where solicitors will support your through the bridging loan process:

Legal advice and contract review.

Using a solicitor means that you will receive advice tailored to your specific circumstances and the implications of your loan. For example, some loans will have a number of fees and repayment clauses such as exit fees. A solicitor will evaluate whether a contract is fair and reasonable and if any parts of the agreement are unclear or unreasonable. They will also prepare a legal pack

Due diligence.

A solicitor will conduct checks on the property being purchased to ensure there are no issues, or liaise with the conveyancing solicitor to ensure required information has been provided.

A comprehensive assessment would cover the following areas:

Property condition including a structural survey
Restrictions on property use
Environmental factors, such as the potential for flooding that will have implications on the ability to insure the property
Preparation of a legal pack including key documents such as title deeds, the loan agreement, property records and searches.
Undertaking the process to apply, and remove, a legal ‘charge’ on the property with the Land Registry so it can be used as collateral.

The disadvantage of using a solicitor

Using a solicitor will, of course, come with an extra cost for using a professional service. If your budget is tight and you feel you can undertake the loan process without support then it may save money.

In some instances you may feel a solicitor will slow a process down by conducting comprehensive checks; this is the role of a legal professional and whilst taking expert advice has clear advantages as outlined in this article, choosing to engage a solicitor depends on your risk appetite.

Choosing to self-represent

There may be some situations where you may choose to represent yourself and not use a solicitor. Not all lenders allow self-representation and if you are considering this as an option then speak to your broker, or lender to let them know this.

Whilst legal advice is certainly recommended, and often mandatory,  for larger and complex arrangements – it can be possible to manage your own affairs in straightforward cases. For example:

Small loans:

If you are borrowing a small amount for a short time with a straightforward transaction then it may not be necessary to take legal advice.

Using an existing lender

If you use the same lender regularly, are familiar with the process and requirements and have a good working arrangement then representing yourself may be a practical option.

Single applicants:

If you are taking a loan as a single applicant rather than a group then the process is much more likely to be straightforward and legal advice may not be required.

Obtaining a fast loan:

If you are looking to organise a loan quickly, using a solicitor may slow the process down slightly. In this situation, however, it is highly recommended that you use a specialist bridging loans broker.

Is it more difficult to secure a bridging loan without a solicitor?

Depending on the complexity of the loan, it could be more difficult to secure a loan without a solicitor. A solicitor will be aware of the lender’s requirements and undertake the necessary compliance checks needed.

Unless a loan is particularly straightforward, or you have a great deal of experience in managing the bridging loans process, it is likely that lenders will expect legal professionals to be involved.

How can a solicitor affect the speed of a bridging loan?

Whilst it may feel that engaging a legal professional is adding another step to the loan process, using a professional can often speed up the process by preparing documents, undertaking checks, and dealing with queries from other legal and finance professionals.

Why would I use a bridging loan instead of a mortgage?

Often there is a need to move quickly to buy a property, particularly with auction sales where payment is required within a short time frame. Taking a bridging loan can cover the period where an investor can raise funds.

In some circumstances investors will look to secure a longer term mortgage that is less expensive than a bridging loan. Lenders will not approve mortgages on properties that are in disrepair and so often a bridging loan is used to buy a property whilst renovations take place

A bridging loan can be a stopgap to work to be undertaken to improve the condition of the property to allow it to be mortgageable.

Dual Representation

Dual representation is where you use the same solicitor for your loan and your property purchase. This can be helpful as your solicitor will have access to all the required documentation, which is likely to save time and reduce costs.

It is important, however, that you choose a legal professional with specific experience in both conveyancing and also bridging loan finance. You will also need to ensure that there is no conflict of interest for the solicitor in representing both parties, you as the borrower and also the lender providing the loan.

Author: Gillian West

Finance writer and communications specialist.

Frequently Asked Questions

Do I need proof of income for a bridging loan?

No, proof of income is not usually required. The loan is secured by a property and lenders require a clear repayment, or exit, strategy that shows the loan will be paid back, typically with interest.

In complex cases, such as management take-overs and buy-outs, personal loans may be used if a property alone will not cover the collateral needed to secure purely commercial funding. In these situations income and personal guarantees are relevant to lenders and will form part of their decision making process.

How difficult is it to get a bridging loan?

Bridging loans are quicker and simpler than mortgages in the majority of cases.

A lender will review an application, taking into consideration a number of factors and so it is helpful to share as much detail as you are able about your plans.
One of the key pieces of information a lender will want to see is a clear exit strategy for the loan showing how it will be repaid.

For example, bridging loans often paid off through the sale of property.

What security do I need for a bridging loan?

The majority of bridging loans are secured on property, this may be a single property or several properties. Bridging loans are short-term arrangements that in most instances ‘bridge’ the gap between a property being bought and sold.

As the property being bought, or sold, is used as collateral it is essential that the loan is paid back according to the lender’s terms as a default could result in a loss of ownership.

How much do bridging loan solicitors charge?

The amount you will pay for a bridging loan solicitor will vary depending on your circumstances. and whether you have a straightforward transaction involving one party and property, or multiple parties.

When you take a bridging loan you will pay for the lender’s solicitor. This is likely to be a minimum of £2,500 plus VAT. 

What other fees should I be aware of?

Facility fees: There will also be other fees such as a facility fee and that will be a percentage of the full loan amount. The facility fee can range from 1.5% to 3%. Some lenders may charge an administration fee and this can be up to £500.
Understand the importance of legal advice when obtaining bridging loans. Our comprehensive review helps you navigate your options for short-term financing.

Exit and administration fees: As taking a bridging loan requires putting a legal charge on the property, this will need to be removed once the loan is repaid and an important part of the loan process. Exit fees cover the legal work to ensure that the borrower no longer has an interest in the property used as security.


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