Lawyers and settlement: the last mile of a secured loan

A fast secured loan can be approved by lunchtime and still sit unpaid at 5pm because nobody booked a lawyer. The legal step isn’t slow by nature. It becomes slow when it’s left until the documents arrive. This page explains what the lawyers do, why the step exists and how to make sure it takes hours rather than days.

Why are lawyers involved at all?

When a lender takes security over property, it needs that security to be legally sound and registered against the title. Lawyers make that happen. There are usually two:

• The lender’s lawyer prepares the loan and security documents, checks the title and registers the security once the loan settles.
• Your lawyer explains the documents to you, makes sure you understand the obligations, and often signs a certificate confirming that advice was given.

That certificate protects both sides. It shows you entered the loan with your eyes open, and it means the lender can rely on the documents later.

What does registration actually involve?

Land in New Zealand is recorded on records of title kept by Land Information New Zealand. A mortgage or other interest is registered against the title so anyone checking it can see who has an interest in the property.

LINZ explains that the bottom section of a title lists interests such as mortgages, easements and covenants. It also notes that a caveat stops other instruments, including new mortgages, from being registered until it is removed. That’s why the lender’s lawyer checks the title before settlement — anything unexpected can stop registration.

What’s on your title	Effect on a new business loan
No mortgage	Simplest — a first mortgage can be registered
Existing bank mortgage	A second mortgage may be possible, often with the first lender’s consent
Caveat lodged by someone else	Usually needs to be dealt with before new security can register
Easements and covenants	Normally fine, but can affect value

How long does the legal step take?

When everyone is ready, the legal step can be completed within a business day. When they aren’t, it stretches. The common hold-ups:

1. Your lawyer is in court, on leave or simply busy, and can’t see you until next week.
2. A co-owner or guarantor can’t get to the lawyer’s office.
3. The existing lender is slow to provide a payout figure or consent.
4. Something on the title needs explaining.
5. Documents are signed but a page is missed and has to be re-signed.

None of these are about the lender’s speed. All of them can be avoided with a little preparation.

How do I keep the legal step to hours, not days?

• Call your lawyer the moment you get an indicative yes. Tell them a business loan is coming and ask when they can see you.
• Line up every signer. Directors, trustees, co-owners and guarantors all need to be available.
• Ask your current lender for payout or consent figures early if you are refinancing or adding a second mortgage.
• Check your title yourself. If you know what’s on it, there’s nothing to discover on the day.
• Read the documents when they arrive. Questions answered in the morning don’t delay an afternoon settlement.

For a full view of where the legal step sits, see approval vs funding. If your deadline falls near a weekend, our page on weekend and public holiday funding explains why secured settlements wait for a business day. If you have a date you can’t miss, tell us now so we can plan backwards from it.

Can an unsecured loan skip the lawyers?

Usually, yes. Unsecured and cash-flow loans for trading businesses, typically $5,000 to $500,000, are mostly decided on bank statements and signed electronically. That’s one reason same-day funding is possible for smaller unsecured amounts. Directors may still be asked to give a personal guarantee, but it doesn’t normally need a lawyer’s certificate.

What should I ask my lawyer before I sign?

Your lawyer is there to make sure you understand what you’re agreeing to. A few questions make that conversation more useful, and quicker:

• What happens if a repayment is missed, and how much notice would I get?
• Which property, assets or guarantees does this loan cover?
• Are there fees for repaying early or for extending the term?
• Does this loan need my existing lender’s consent, and has that been arranged?
• What exactly needs to happen before settlement, and who is responsible for each step?

Write your questions down before the appointment. A lawyer who can answer them in one meeting can usually sign off the same day, while a meeting that raises new questions may need a second visit. Clear answers also help you plan the exit — how and when the loan will be repaid — which every short-term lender will want to discuss with you anyway.

Illustrative example: one missing signature

Illustrative only. A Nelson hospitality company is approved for a $220,000 second-mortgage loan to cover a winter shortfall. The directors sign with their lawyer at 10am, but the property is co-owned by a family trust and one trustee is in Queenstown. The lawyer arranges for that trustee to sign with a local lawyer the same afternoon, and settlement happens the next morning. Had the trust been mentioned on the first call, it could have been arranged for the same day.

Planning around a settlement you can’t move?

Tell us the date and the property in a short enquiry. We’ll tell you whether the legal step can fit and what to line up today. There’s no credit check when you first enquire, your details aren’t pushed to other lenders, and a real person calls to plan it with you. Please list every owner of the property on the form — it’s the detail that most often changes the timing.

Start planning your settlement →