Kieran de Vares: Head of Real Estate
Islamic Finance is secured by way of an arrangement known as the Diminishing Musharaka. Musharaka is a form of partnership between an Islamic Finance Institution and its customers whereby each party contributes to the partnership capital in equal or varying amounts.
In a Diminishing Musharaka the bank gradually transfers in return for agreed payments, its share in the Musharaka to the customer(s), so that the bank’s share declines and the customers’ shares increase until the latter become the sole proprietor(s) of the venture.
Expert knowledge and understanding is critical in the instance when a deal needs to begin again and have little time to deliver on the scheme!
Our client’s challenge
We were instructed by a client who was originally proceeding with another firm to purchase a new build property using Islamic Finance and the client had already exchanged contracts.
The previous firm was unable to complete the Lender’s solicitors complex requirements. On handover, the client’s lawyers were not willing to release the up to date paperwork – therefore we were concerned that we had to start from the beginning.
The seller’s solicitors stepped in and we were able to obtain critical information to enable the deal to take place on time.
Bridging the gap
Notice was served on the contract at the point we were instructed, which resulted in further pressure from the Developer. Whilst some advice had been given to the client, it was important for us to provide new and expert advice on the Islamic Finance documents at the point of inception. The client was also a Limited company and consequently the director required independent legal advice for a personal guarantee.
Responsive and timely delivery
As with all of these cases, time is of the essence. We delivered this transaction within two weeks from receiving the Islamic Finance offer.
The right result for our client
From the due diligence to guiding our client through the complex paperwork, they were delighted that they got the result they needed. If we had not acted quickly, the Developer would have cancelled the deal and the client was at risk of losing their deposit.
