Wednesday, 30 April 2014

The Law Society's 9-Month Change of Heart

“A number of rated insurers have withdrawn from this segment and the gap has been filled by unrated insurers, some of whom enter for a few years before withdrawing or, worse, becoming insolvent. This is extremely detrimental to the profession”. Des Hudson, August 2013:

"The fact that an insurer is unrated does not of itself mean that they are risky – some well-established, trusted insurers have chosen not to seek a rating".  Des Hudson, April 2014: 

To be fair to Mr. Hudson his critical comments about unrated insurers just nine months ago coincided with the launch the Law Society "rated" PI scheme. 

Could facing facing a 20% drop in Law Society membership rolls as lender panels require firms to have 'A'-rated insurance, combined with the threat that the SRA may ban unrated insurers, have changed his thinking?

Tuesday, 29 April 2014

Could Conveyancing Firms Survive Stress Tests?

News that Britain's biggest banks and building societies could be forced to demonstrate their ability to withstand a house price slump of roughly 35% got us thinking about the repercussions of that scenario for conveyancing firms. 

Consider the aftermath of that scenario for conveyancing firms:

Quite apart from the strain on the financial stability of a conveyancing firm in a housing slowdown, could firms cope with high levels of repossessions which will inevitably result in lenders looking to pursue lawyers for losses?

Would a firm be confident if 100 of their cases were reviewed for compliance with CML Handbook provisions?

With all they have at stake, perhaps conveyancers should be stress-testing themselves.

Monday, 28 April 2014

Lenders Scale Back Commitment to Submit Electronic DS1's

Lenders such as RBS, Direct Line, Virgin One and National Westminster Bank have scaled back from their previous commitment to 'endeavour to submit an Electronic DS1 to HM Land Registry within five working days'. The CML Handbook Part 2 change has resulted in the lenders stating 'wherever possible we will endeavour to submit an Electronic DS1 to HM Land Registry within a reasonable timescale.' To see all the recent changes (13 lenders published changes yesterday) you will need to sign up to LENDERmonitor.

Sunday, 27 April 2014

Teachers Want More

Teachers Building Society have changed their BSA Mortgage instructions to require more post completion documents from their conveyancing panel. 

The following documents are now required by the society: TID, the Original Mortgage Deed (with the Solicitors Certificate completed) If applicable Consent to Mortgage forms, NHBC documentation and Indemnity Policies. 

With regard to Leasehold properties we the Society requires a copy of the Lease, Notice to Freeholder. With regard to Buy to Let properties they  require the Assured Shorthold Tenancy Agreement and the Undated Rental Mandate.

Standard documents for the Teachers Building Society conveyancing panel are available from

Managing Conveyancing Risk? Embracing Change.

Most of my meetings with conveyancing partners or compliance officers centers on one big, game-changing question: “What is the one thing that we can do to make a real difference to avoid a claim?”

They are quick to acknowledge that there is room for risk mitigation and recognise that it is an almost-impossible task to keep up to date with lender requirements without the assistance of technologies such as COMPLETIONmonitor. Who in the world of conveyancing does not recognise that it has become a more complex and risky business over the last 20 years?

This gap between knowing the risks and not addressing them is usually rationalise by their exasperated response that there isn't to change processes and, often, the team doesn't want to embrace change.

The consequence is that the same pattern of behaviour and results continue. The evidence: conveyancing has represented more than 50% of claims for the last 20 years. If anything, the percentage continues to rise.

Marshall Goldsmith, executive coach to over 150 CEOs notes - “our default response in life is to experience inertia. In other words, our most common everyday process – the thing we do more often than anything else – is to continue to do what we are already doing.”

The longer these important things are put off and or avoided, the easier it becomes to stay in the groove of the existing rather than step out in do what is required.

And yet for some firms that do take action the sense of progress, breakthrough and results are ultimately rewarding.

Friday, 25 April 2014

High Street Bankers Had a Busy March

Word today from the BBA that mortgage approvals in March were up 43% from last year. Gross mortgage borrowing of £11b was up 38% in the same comparison.

To no one's surprise, the main high street banking groups account for some 2/3 of all UK mortgage lending outstanding, based on the Bank of England’s ‘lending to individuals’ data. They include the six largest UK retail lending groups: Barclays, HSBC Bank, Lloyds Banking Group, Royal Bank of Scotland Group, Santander UK and Virgin Money. 

The BBA says higher capital repayment (in part reflecting homeowners switching lenders) contributed, to monthly contractions in net borrowing through much of 2013, but since the turn of the year, the overall mortgage stock has started to rise as greater demand feeds through.

Mortgage assistance schemes are helping first-time buyers and housing chains generally, as housing market activity rises. Compared to the same time a year earlier, approvals in March 2014 were: House purchases + 43%; Remortgaging +14%; Other -9%.

The Start of MMR Signals the Latest Lender Panel Restrictions

Today's big conveyancing news is both the onset of the long-awaited introduction of MMR and a decision by Yorkshire Building Society to restrict its conveyancing panel to only firms with PII coverage via A-Rated insurers. 

The increased lender scrutiny of solicitors firms which represent them in mortgage activities, as YBS has done, is indicative of a housing market still scarred by the 2008 global financial crisis.

Financial transactions across all sectors are more tightly monitored -- hence the introduction of MMR -- and the risks more acutely managed. It's no surprise that the UK housing sector and conveyancing solicitors who service it should feel the impact.

Sunday, 20 April 2014

Is the Welcome Mat Gone from the HSBC Conveyancing Panel?

Two years after complaints from customers and lawyers forced HSBC to ditch its controversial plan to drastically reduce their conveyancing panel, confusion reigns as to whether the lender's panel is, in fact, now closed regardless of whether a firm is accredited by the Law Society's Conveyancing Quality Scheme (CQS).

Recall, HSBC relented and allowed all members of the CQS to act for it and the borrower in the legal work needed to buy a property. The decision increased the number of firms that consumers can choose from to more than 2,500 lawyers.

The question on whether HSBC's door is shut to additional solicitors was raised by Council for Licensed Conveyancers CEO Sheila Kumar.  On whether the HSBC conveyancing panel is closed to non-CQS firms, she said:

"We've been in very detailed conversations with the HSBC around the messaging and perception of what's being said.  The clear message that we've got is that their panel is closed at the moment, because actually, they've got enough people.  It's not closed, just because of CQS or not CQS.  It's actually that they are not looking for anything.  Our conversation with them has been, that, because we are aware of the fact that there have been some messages at some levels, about if we open the panel again it will only be open to people who have got CQS behind them"

Meanwhile, I have spoken to firms who have been advised that the HSBC conveyancing panel is open. That point was made at the same CLC webinar where Kumar made her comments, as one of the delegates said he'd received a letter also confirming the panel is open.

Neither the CQS or HSBC have made any public comment on whether the HSBC conveyancing panel is open or closed.

We anxiously await some resolution.

Wednesday, 16 April 2014

Defending a bad valuation: Reading between the lines of the surveyors £100k victory

It seems like conveyancing solicitors have become the punching bag for industry errors.

While the £100,000 sum ordered to be paid in a recent court decision against Goldsmith Williams made the headlines, two points caught my eye.

The surveyors’ case is that the law firm failed, in breach of the terms of its contract with the lender, to advise that an applicant for a mortgage against a Peak District property had been registered as a proprietor for less than six months. He'd paid £390,000 for the property - much less than the surveyors’ value of £725,000 - and E-Surv argued that it would have realised its mistake if the solicitors had flagged up the relevant history.

The first point is that Goldsmith Williams are not the first and won't be the last in failing to comply with a lender requirement. It must be recalled that the CML conditions reflect some fundamental duties of solicitors. Insurers recently revealed that over 50% of cases against property lawyers are lender driven. One way to reduce the chance of ensuring lender compliance is to have comprehensive checklist -countersigned off - something that insurers have been recommending for years. This was indeed the logic behind the building of COMPLETIONmonitor. The software checklist has a direct question that picks up the whether the borrower had owned the property for less than 6 months and whether the lender had been notified. Flag raised, problem likely avoided.

Second point is the irony in a news story from August 2012 headlined "Call for Second Valuations to Fight Fraud". Although the story is primarily about avoiding fraud, second valuations would of course put the onus of valuations squarely in the court of the valuer. The story quotes a solicitor's admonition that "If fraudulent valuations are an issue with lenders, then having a second independent valuer go out is going to assist that enormously".  The solicitor? Goldsmith Williams solicitors’ partner Eddie Goldsmith.

Sunday, 13 April 2014

The Conveyancing Portal - Reducing Your Risk Footprint

As businesses go, conveyancing is perceived as high risk, topping the list of claims in the professional indemnity insurance and the compensation fund. The upshot is that firms engaged in conveyancing have a higher chance of being rated as a high-risk for SRA supervision and monitoring.
For that reason, alone, conveyancing firms need to be able to provide evidence and an audit trail of compliance.  And with outcome-focused regulation, robust processes and systems need to be in place to manage risk and deter fraud.    

So, it's against this backdrop that the Law Society are designing a conveyancing portal to reduce the strain and hassle of reducing the size of a firm's risk footprint. The portal, it is claimed, will over time provide verifiable evidence and assurance to lenders and PII insurers that a firm follows best practice and manages risk and performance effectively. 

And while precise details are yet to be disclosed, the Law Society maintain that compliance risk management will be embedded and integrated across the portal to reflect the requirements of industry regulators and key stakeholders.  

Peter Rodd, Chair of the Property Section of the Law Society said recently "The portal is a significant step on the path to achieving the core objectives of the CQS, to create a trusty community of conveyancers, modernize conveyancing, and to deter fraud."

All very commendable but it begs the question: What has CQS done to-date as far as these core objectives are concerned?

From here, it looks like the above statement is as much an admission of CQS underachievement as it is an expression of intention. 

With lenders gravitating towards the Lender Exchange, rather than waiting for the conveyancing portal to materialize, the Law Society is in danger of appearing like the boy who cried "wolf".

The CLC and Access to Justice

Improving access to justice is one of the regulatory objectives set out in the Legal Services Act 2007, which all Approved Regulators - and the oversight regulator, the Legal Services Board - are required to uphold and promote. 

The CLC elected to require individual licensed conveyancers to provide an Access to Justice Statement as part of their Alternative Business Structure (ABS) application.

Read the CLC's review of the access to justice statements. 

Tuesday, 8 April 2014

CLC Issues Reminder on Need for Railway Tunnel Searches

At the request of the Rail Accident Investigation Branch the CLC yesterday issued a reminder to conveyancers ordering searches for sites in inner London (including Docklands) to ensure that all searches consider Network Rail and Transport for London tunnels. Furthermore in respect searches for sites in central Newcastle should consider the Tyne and Wear Metro (Tyne and Wear Passenger Transport Executive) and in central Glasgow the Glasgow Subway (Strathclyde Partnership for Transport).

The background behind this reminder is that in March 2013 a housing developer bored piling shafts through an underground railway tunnel in London. Having investigated, the Rail Accident Investigation Branch (RAIB) has asked the CLC to alert Licensed Conveyancers to some important points of which to be aware in relation to railway tunnels.

The CLC warning points out :

“The developer and builder in this case were not aware of the tunnel until the incident because
  • Routine conveyancing searches did not include the tunnel owner, Network Rail, because the organisation was not included in the options offered by the specialist conveyancing search provider used when the development site was purchased in 2010;
  • The tunnel, in common with railway tunnels in urban areas, is omitted on most mapping, including all current and historic Ordnance Survey maps and plans. Although not relevant to the accident, maps showing underground railways often show a stylised, but incorrect, alignment; and
  • The developer proceeded without understanding the significance of a Land Registry entry for the development site stating ‘so much of the sub-soil as was vested in the Great Northern and City Railway is excluded from the registration’ (this railway company no longer exists but its assets, including the incident tunnel, have passed to other organisations).
It is Ordnance Survey policy not to show railway tunnels considered to be part of an ‘underground system’ on its maps.”

Full details of the RAIB investigation can be found here

Impact of MMR Summarised in Two Sentences

MMR switches responsibility from the borrower deciding whether to take a mortgage to the bank or building society granting the loan. If a mortgage becomes unaffordable, the future risk will be with the lender that the borrower argues that the loan should not have been given in the first place.

Monday, 7 April 2014

New CGT Rules Could Further Complicate Conveyancing

Conveyancing at the higher end of the property market could bear the brunt of changes in capital gains tax (CGT) treatment of UK residential property sales to non-UK residents.

To the surprise  and dismay of many, the Government is proposing to remove the relief that allows second homeowners in the UK to elect, or flip, their primary residence for CGT purposes. The proposal covers both resident and non-resident homeowners.

Sara Maccallum, a partner and the head of the Private Client and Tax Team at law firm Boodle Hatfield, wrote on , “Non-UK corporate owners of residential property will be subject to a two-tier approach. Those who pay the ATED will pay the related CGT charge on all or part of the gain at the usual rate of 28%.  In contrast, all other non-resident companies will be subject to a tailored CGT charge at an as yet unknown rate on all gains arising on the disposal of UK residential properties, including those which are owned as part of a property business.”

The brunt to beat is in how the Government is to collect the tax, a form of withholding tax to operate alongside an option to self-assess. Full details are yet to be published, but the principle is that the seller of a property would be identified as a non-resident and then would have an option to pay the actual tax due or have the tax levied by withholding (carried out by the solicitor acting for the purchaser).

The tax would then have to be paid within 30 days of completion.

Clearly more details are needed but it appears that this puts the onus on the purchaser’s solicitors to retain monies - one can only imagine the complex negotiations surrounding the terms.

Still to be answered in this emerging matter:
  • Where does the liability rest?
  • Is it with the seller, purchaser or purchaser’s lawyers?
  • Who calculates the tax?
  • If tax is due and not paid does not get paid will the revenue place a charge on the property in question? If so, I would imagine the lenders will be concerned as this could impact their security?
  • Have the CML been consulted on this?
  •  Is it possible that this new way of collecting tax will equally apply to affect UK residents (where CGT applies) just as much as non-residents?
“This will clearly be administratively burdensome for the purchaser’s solicitors and could further complicate the conveyancing process,” according to Sarah Maccallum

Solicitors are effectively being expected to police capital gains at no cost to Her Majesty's Revenue and Customs.

Whether it proves to be administratively burdensome or an absolute nightmare, only time will tell.


Tuesday, 1 April 2014

Lender Exchange Extended to HSBC Conveyancing Panel

Until today most lawyers probably knew that Lender Exchange would be the preferred lender panel portal for Santander, RBS and Lloyds. It's now clear that HSBC have joined the ‘Big Three’, albeit initially in a slightly more-limited fashion . 

While HSBC were not mentioned in previous press releases by the CML or Decision First (the company behind the Lender Exchange), in the last few hours the new website has gone live and sets out how HSBC use the service.

With an eye on reducing the potential for delays in the postal service, and to enhance the service provided to home buyers their conveyancing panel, HSBC are about commence sending instructions electronically to firms by harnessing the technologies available through Lender Exchange.

The Website states: 

'Firms wanting to receive cases from HSBC will need to register for this service separately to the Lender Exchange service available for selected other lenders (eg. Lloyds, Santander and RBS). However, firms who are on the HSBC Managed Panel, Licensed Conveyancers, and those solicitors who only act in cases involving properties located in Scotland or Northern Ireland, will continue to receive their instructions from HSBC by a different route and do not need to register for Lender Exchange for HSBC at the current time'.

The silver lining is that registering as a user of Lender Exchange for HSBC is free.....for now. The portal enables firms accredited with the Law Society of England and Wales to receive instructions to act for HSBC as well as its home buying customers, subject to any other limitations that may apply.

It is rather damning that the HSBC have chosen not to use CQS or the new Law Society Conveyancing Portal as the technology partner instead opting for the the Lender Exchange.