SEVENTY-FIVE per cent of senior pension fund advisers and administrators who responded to a recent survey on property investment think liquidity is important.
The study, sponsored by AMP Asset Management and carried out by the City University on behalf of the Investment Property Forum, concludes that property is regarded as illiquid due to its indivisibility, the perceived difficulties in buying and selling it, and the time taken to complete transactions.
A few weeks ago I received instructions to act for a foreign investment fund on the proposed purchase of an office building in Central London. From the time of the initial contact, there was a period of three weeks during which the seller and the buyer's agents were negotiating the deal – plenty of time for the seller to prepare for the disposal.
I expected that once terms had been agreed and handshakes exchanged there would be the traditional breakneck dash to exchange contracts.
But when that time arrived, the seller's solicitor did not know where all the deeds were; no contract had been drafted; no thought had been given to replies to enquiries; and no searches had been carried out.
The seller had lost the chance to maintain the momentum of the transaction and to ensure the deal was closed and the money banked at the earliest possible opportunity.
Such opportunities are being lost across the country every day because of the old-fashioned and inefficient approach so many sellers of property take to the disposal of their assets.
A code of practice has now been published by the IPF covering the collection and preparation of information and documentation and the drawing up of terms.
The code sets out a list of the information and documents the seller should consider making available to the buyer, including management information. It is still all too common for property managers to turn pale when asked for schedules of rent and service charge arrears.
The code also discusses the pros and cons of vendor commissioned surveys and environmental investigations, outlining topics for inclusion in a survey report and a phase-one environmental audit.
The code recommends property should be put into a state of readiness for sale when newly developed; immediately following its acquisition; and when disposal is contemplated. It also contains a list of topics which might be included in a full set of terms. Frequently, the terms are too superficial, leaving important issues unaddressed which then causes delay.
Finally, the code asks parties to encourage their lawyers to produce clear and comprehensible documentation, expressed in everyday English.
This is one recommendation on which there will surely be unanimous agreement