In light of: 

1. The recent decision of the Council of the Law Society to introduce a ban on solicitors giving undertakings to lending institutions in commercial mortgage lending, such ban to become effective on 1 December 2010, and
   
2. The strong advice from the Society that solicitors should not between now and 1 December 2010 give such ‘commercial undertakings’ even if insured to do so,

it is anticipated that a very limited number of commercial undertakings will be given between now and the introduction of the ban.

After 1 December 2010, undertakings in relation to small commercial loans up to the de minimis limit set out in the regulation dealing with the ban referred to above will still be allowed. A new form of undertaking, recommended by the Law Society for use in such cases, is to be drafted shortly by the Conveyancing Committee and will be published on the Society’s website.

The committee would like to remind practitioners giving undertakings in commercial loan cases between now and 1 December 2010 that some banks may pay loan funds directly to borrowers, for example, where the loan is provided by way of overdraft for working capital facilities, stocking facilities etc.

The documentation provided by some banks in commercial loan cases may specifically provide that the mortgage security documentation must be in place before the solicitor lodges the undertaking with the bank, and it may require the solicitor to confirm that he/she is in funds for stamping and registration fees before lodging the undertaking. Solicitors should carefully check the wording of undertakings and covering letters from banks in relation to all commercial loans. As there are no agreed procedures or agreed documentation for commercial loans, solicitors should not assume that the procedures or documentation are similar to, or the same as, those used in residential mortgage lending.