Having recently recommended Travelers as preferred insurers, the Law Society and the Solicitors Regulation Authority are to take on the insurer over its aggregating of fraud claims and subsequent capping of a solicitors’ professional indemnity insurance policy. Such a move by Travelers has significant implications on the industry.
According to on-line insurance magazine The Post the original claim arose out of the activities of a conveyancing partner at a long-established Berkshire solicitors firm, Willmett Solicitors. Before resignation the partner had been, for some years, involved in a number of allegedly fraudulent conveyancing transactions, which SRA and Law Society claims unbeknown to other partners. Once the losses came to light as a result of the financial crisis numerous claims were brought against Willmett Solicitors and its partners by various lenders, including the claimant Godiva.
Willmett Solicitors has subsequently gone into liquidation and has no funds to meet the claims. Travelers assert that all activities arising from the individual partner's involvement in alleged frauds can be aggregated as ‘one claim' and therefore refuse to pay further sums beyond the £2m. In consequence, some of the innocent partners at Willmett have already been made bankrupt and the remainder are facing bankruptcy.
Law Society chief executive, Desmond Hudson, said: "It was vital that we, as well as the SRA, were able to intervene in this case. The insurer's interpretation of the aggregation clause, which led them to cap their insurance indemnity, could have widespread significance for the public as it will affect many claimants' right of redress.
"It is also of great concern to the profession in terms of their PII coverage and hence to the Society to ascertain how aggregation applies in a case such as this. Our members need to have confidence in their PII cover, and this could cast doubt on what they and their clients are protected against."
Wednesday, 18 January 2012
Thursday, 12 January 2012
Did she really just say that ?
Following on from HSBC’s controversial decision to restrict their conveyancing panel just 43 firms (down from approximately 4000) the bank may have added fuel to the fire by certain assertions about the quality of the restricted panel.
The Guardian Newspaper yesterday quoted HSBC spokeswoman Suman Hughes who said that while previously it "couldn't guarantee the consistency" of conveyancing firms, using the panel "guarantees a better service".
I am no litigator but that phrase “guarantees a better services” jumps out to me as a rather bold (and potentially dangerous statement)
1) Could that statement open up HSBC to a misrepresentation claim in the event that a customer receives poor legal advice ?
2) Does the reference to “better service” create a higher a duty of care on the part of their lawyers?
Only time will tell.
The Guardian Newspaper yesterday quoted HSBC spokeswoman Suman Hughes who said that while previously it "couldn't guarantee the consistency" of conveyancing firms, using the panel "guarantees a better service".
I am no litigator but that phrase “guarantees a better services” jumps out to me as a rather bold (and potentially dangerous statement)
1) Could that statement open up HSBC to a misrepresentation claim in the event that a customer receives poor legal advice ?
2) Does the reference to “better service” create a higher a duty of care on the part of their lawyers?
Only time will tell.
Wednesday, 11 January 2012
Why conveyancers need to know parish of Hebden Royd
Hebden Royd is a civil parish with a town council in the Metropolitan Borough of Calderdale in West Yorkshire, England. According to the 2001 census it had a population of around 9,000.It includes Hebden Bridge, Mytholmroyd and Cragg Vale.
The reason why this parish is relevant to conveyancers is because Nationwide has identified this as the only area in the UK where they will lend on freehold flats. In a change to Section 5.6.1b of Nationwide’s Part 2 of the Handbook on the 10th January, the lender added properties in the parish as an exception to their general decision not to lend on freehold flats.
In answer to the question “Does the lender lend on freehold flats?” The new Section 5.6.1b now reads:
Generally no Exceptions-
i) see 5.7.1
ii) coach house flats - where there is one flat in a block built above garages and/or an access way there is no need to report details to us.
If there is an element of flying freehold - the requirements in part 1 paragraphs 5.6.2 must be adhered to.
Insurance - where the purchaser arranges insurance on more than one garage or garages owned/used by other parties, please ensure that the insurance company is aware of the arrangements.
iii) for properties in the parish of Hebden Royd see 5.6.1a above.
LENDERmonitor provides conveyancers with a subscription service that sends out email alerts advising when a lender makes a change to their policy. The recipient is then able to click through from the email to see the change in more detail on the LENDERmonitor website.
The reason why this parish is relevant to conveyancers is because Nationwide has identified this as the only area in the UK where they will lend on freehold flats. In a change to Section 5.6.1b of Nationwide’s Part 2 of the Handbook on the 10th January, the lender added properties in the parish as an exception to their general decision not to lend on freehold flats.
In answer to the question “Does the lender lend on freehold flats?” The new Section 5.6.1b now reads:
Generally no Exceptions-
i) see 5.7.1
ii) coach house flats - where there is one flat in a block built above garages and/or an access way there is no need to report details to us.
If there is an element of flying freehold - the requirements in part 1 paragraphs 5.6.2 must be adhered to.
Insurance - where the purchaser arranges insurance on more than one garage or garages owned/used by other parties, please ensure that the insurance company is aware of the arrangements.
iii) for properties in the parish of Hebden Royd see 5.6.1a above.
LENDERmonitor provides conveyancers with a subscription service that sends out email alerts advising when a lender makes a change to their policy. The recipient is then able to click through from the email to see the change in more detail on the LENDERmonitor website.
Increasing water pressure on Lenders
It looks as though Water Industry Property Information Network (WIPIN), the trade association representing the 10 Water and Sewerage companies of England and Wales who provide Drainage and Water Searches, are finally reaping the rewards for lobbying lenders on the issue of personal water and drainage searches.
Personal water and drainage searches exist in the marketplace as an alternative to the official Law Society approved CON29 Drainage and Water Enquiry, the standardised and underwritten product provided by the water companies. WIPIN warn of the potential for misunderstanding by conveyancers that personal searches are comparable substitutions for the CON29DW. The organisation posits that personal searches do not contain the same robust guarantees as the CON29DW, exposing the lender and homebuyer to unnecessary risk.
LENDERmonitor has recently notified hundreds of conveyancers that subscribe to their service of changes to Section 5.3.5 of the P2 of the CML Handbook for Yorkshire Bank Home Loans Ltd and Clydesdale Bank Plc.
The answer to the afore mentioned section has changed from :
Yes, provided the firm has adequate professional indemnity insurance. This will be treated as being the case if the firm is registered with the Council of Property search Organisations and the firm states that it complies with the Code of Practice for Compilers or Search retailers as the case may be.
To
For Local authority searches, yes, provided the firm has adequate professional indemnity insurance. This will be treated as being the case if the firm is registered with the Council of Property search Organisations and the firm states that it complies with the Code of Practice for Compilers or Search retailers as the case may be.
We do not accept personal searches in respect of other statutory searches or other utility undertakings.
Personal water and drainage searches exist in the marketplace as an alternative to the official Law Society approved CON29 Drainage and Water Enquiry, the standardised and underwritten product provided by the water companies. WIPIN warn of the potential for misunderstanding by conveyancers that personal searches are comparable substitutions for the CON29DW. The organisation posits that personal searches do not contain the same robust guarantees as the CON29DW, exposing the lender and homebuyer to unnecessary risk.
LENDERmonitor has recently notified hundreds of conveyancers that subscribe to their service of changes to Section 5.3.5 of the P2 of the CML Handbook for Yorkshire Bank Home Loans Ltd and Clydesdale Bank Plc.
The answer to the afore mentioned section has changed from :
Yes, provided the firm has adequate professional indemnity insurance. This will be treated as being the case if the firm is registered with the Council of Property search Organisations and the firm states that it complies with the Code of Practice for Compilers or Search retailers as the case may be.
To
For Local authority searches, yes, provided the firm has adequate professional indemnity insurance. This will be treated as being the case if the firm is registered with the Council of Property search Organisations and the firm states that it complies with the Code of Practice for Compilers or Search retailers as the case may be.
We do not accept personal searches in respect of other statutory searches or other utility undertakings.
Significant case could hinder conveyancers on sub prime negligence claims
In a recent article entitled “Significant case helps conveyancers on sub prime negligence claims” Alexia Ward argues that the decision in the case of Paratus AMC Ltd & RMAC 2005 NS1 Plc v Countrywide Surveyors Ltd is good news for solicitors. I beg to differ.
The facts of the case are well explained in the article by Alexia. In short, the court decided against the lender in assessing the retrospective market valuation of a property a valuation method which relied upon comparable sales evidence obtained from the Land Registry for the period immediately prior to the historical valuation was to be preferred to one which primarily relied upon the application of a price per square metre to the floor area of the property.
The court’s decision itself is uncontroversial as the defendant was found not to have negligently overvalued the property; what is of interest are the judge’s ruling on the recoverability of the loss in light of the consequences of loan’s securitisation; and his comments on both the quality of GMAC's underwriting for the purposes of contributory negligence and on the market approach adopted by sub-prime lenders at the height of the property boom.
Alexia Ward comments “ The obiter dicta raised in this case suggests that courts will hold lenders to account for careless lending, even if valuations are found to be negligent. If large percentages of any damages are taken away by the courts for contributory negligence, then it may well not be financially worth taking these cases to court. More consideration to the circumstances in which the loans were approved will have to be given, before lenders decide to pursue claims against surveyors through the courts”
I would stress that this is a first instance decision and the judge's comments on contributory negligence were either fact-specific to the case or made obiter dicta, so they are not binding on any successive cases. It is also worth pointing out that the judge's view was that a “sub-prime lender” should only be measured against the standard of care expected of a lender in that market and that a LTV of 90% was not in itself negligent.
The conclusion Alexia reaches is that this case will result in “..fewer lenders making negligence claims against professionals after the issue of contributory negligence is raised”.
I tend to take the opposite view and would suggest that if one did have a persecution complex (something that conveyancers are entitled to have in the current climate) then one could argue that this decision will result in more claims against conveynacers.
If the lending industry’s confidence is knocked by this decision then instead of pursuing surveyors for their losses they will turn their attention to conveyancers. It is fascinating that two of the more recent reported cases against solicitors indicate that in relying on a breach of the CML Handbook and a claim for Breach of Trust, issues of contributory negligence disappear. Indeed, in the case of Mortgage Express v Iqbal Hafeez Solicitors (Ch) the lawyers sought to avoid a claim for breach of trust by arguing the firm was entitled to relief under s.61 of the Trustee Act which could mean that could reduce the damages as a result of the contributory negligence on the part of the lender. In this case it was held that it was not appropriate to make any deduction for contributory negligence.
The facts of the case are well explained in the article by Alexia. In short, the court decided against the lender in assessing the retrospective market valuation of a property a valuation method which relied upon comparable sales evidence obtained from the Land Registry for the period immediately prior to the historical valuation was to be preferred to one which primarily relied upon the application of a price per square metre to the floor area of the property.
The court’s decision itself is uncontroversial as the defendant was found not to have negligently overvalued the property; what is of interest are the judge’s ruling on the recoverability of the loss in light of the consequences of loan’s securitisation; and his comments on both the quality of GMAC's underwriting for the purposes of contributory negligence and on the market approach adopted by sub-prime lenders at the height of the property boom.
Alexia Ward comments “ The obiter dicta raised in this case suggests that courts will hold lenders to account for careless lending, even if valuations are found to be negligent. If large percentages of any damages are taken away by the courts for contributory negligence, then it may well not be financially worth taking these cases to court. More consideration to the circumstances in which the loans were approved will have to be given, before lenders decide to pursue claims against surveyors through the courts”
I would stress that this is a first instance decision and the judge's comments on contributory negligence were either fact-specific to the case or made obiter dicta, so they are not binding on any successive cases. It is also worth pointing out that the judge's view was that a “sub-prime lender” should only be measured against the standard of care expected of a lender in that market and that a LTV of 90% was not in itself negligent.
The conclusion Alexia reaches is that this case will result in “..fewer lenders making negligence claims against professionals after the issue of contributory negligence is raised”.
I tend to take the opposite view and would suggest that if one did have a persecution complex (something that conveyancers are entitled to have in the current climate) then one could argue that this decision will result in more claims against conveynacers.
If the lending industry’s confidence is knocked by this decision then instead of pursuing surveyors for their losses they will turn their attention to conveyancers. It is fascinating that two of the more recent reported cases against solicitors indicate that in relying on a breach of the CML Handbook and a claim for Breach of Trust, issues of contributory negligence disappear. Indeed, in the case of Mortgage Express v Iqbal Hafeez Solicitors (Ch) the lawyers sought to avoid a claim for breach of trust by arguing the firm was entitled to relief under s.61 of the Trustee Act which could mean that could reduce the damages as a result of the contributory negligence on the part of the lender. In this case it was held that it was not appropriate to make any deduction for contributory negligence.
Sunday, 8 January 2012
Law Society spin Drs kick into gear in response to HSBC panel pruning
Last Friday HSBC launched the latest attack in war against the majority of conveyancing solicitors by announcing a limited a panel of 43 firms to handle its mortgage work, which customers will not be obliged to use as well – but it will be much cheaper if they do.
The Law Society have used the point that all the solicitors on the panel are members of the Law Society’s Conveyancing Quality Scheme to spin the news in their favour. The Law Society Gazette headline reads “Quality hallmark for HSBC’s conveyancing mini-panel.”
The fact remains though that if HSBC attached any real value to CQS surely they would limited their panel to all CQS firms. This news could result in significant drop off in firms reapplying for accreditation.
The HSBC conveyancing panel is not closed and others can apply to join. HSBC has 5% of the UK’s mortgage market. It introduced the new panel in response to the Financial Service Authority’s recommendations for tackling mortgage fraud.
Sole practitioners , who might be forgiven for having a persecution complex, are particularly likely to be hit by this news. It will be interesting to find out how many of the 43 firms are sole practitioners. I suspect that it is round number.
The Law Society have used the point that all the solicitors on the panel are members of the Law Society’s Conveyancing Quality Scheme to spin the news in their favour. The Law Society Gazette headline reads “Quality hallmark for HSBC’s conveyancing mini-panel.”
The fact remains though that if HSBC attached any real value to CQS surely they would limited their panel to all CQS firms. This news could result in significant drop off in firms reapplying for accreditation.
The HSBC conveyancing panel is not closed and others can apply to join. HSBC has 5% of the UK’s mortgage market. It introduced the new panel in response to the Financial Service Authority’s recommendations for tackling mortgage fraud.
Sole practitioners , who might be forgiven for having a persecution complex, are particularly likely to be hit by this news. It will be interesting to find out how many of the 43 firms are sole practitioners. I suspect that it is round number.
Friday, 6 January 2012
HSBC publishes new Part 2 requirements on the CML website
HSBC Bank PLC have, within the last 24 hours published their CML Handbook Part 2 requirements on-line for the first time. Up until now,HSBC had issued their blue booklet of conveyancer requirements direct to lawyers with their mortgage offers.
Up until now, if you were searching on-line for the CML handbook Part 2s for HSBC you would be faced with the wording ‘This lender does not subscribe to the CML Lenders' Handbook. Please contact the lender direct’. This lender has now given specific answers to 73 sections. As of yesterday, conveyancers should be checking the HSBC Part 2’s on-line before submitting the COTs”
The new Part 2s vary the previous conditions in the booklet. A change of particular note is the fact that personal searches are now acceptable.
The minimum lease terms requirement looks very generous and I would expect this to be changed within the next 12 months. Changes to HSBC’s P2 requirements as well as other lender’s requirements are tracked by LENDERmonitor.
Up until now, if you were searching on-line for the CML handbook Part 2s for HSBC you would be faced with the wording ‘This lender does not subscribe to the CML Lenders' Handbook. Please contact the lender direct’. This lender has now given specific answers to 73 sections. As of yesterday, conveyancers should be checking the HSBC Part 2’s on-line before submitting the COTs”
The new Part 2s vary the previous conditions in the booklet. A change of particular note is the fact that personal searches are now acceptable.
The minimum lease terms requirement looks very generous and I would expect this to be changed within the next 12 months. Changes to HSBC’s P2 requirements as well as other lender’s requirements are tracked by LENDERmonitor.
Thursday, 5 January 2012
Why do some firms not embrace risk management?
I am in the business of risk management and talk to lots of lawyers about the changing landscape of conveyancing,COLP compliance and risk. Some firms embrace risk management and some don’t but all see the need for it.
I have asked myself the question: Why do some firms, even when they recognise the need to make changes, take no action. Is it simply lethargy? Perhaps the answer is even simpler. Perhaps they simply don't want to manage their risk.
Perhaps some law firms are afraid that once they start focusing on it would mean having to be ware of what is under the carpet.
Until a lawyer quiets the resistance and commits to actually putting in place processes to manage their risk, all the SRA practice notes in the world and notes furiously taken down at CPD seminars aren't going to make a real difference.
You don't need a new risk management plan for 2012. You need a commitment.
I have asked myself the question: Why do some firms, even when they recognise the need to make changes, take no action. Is it simply lethargy? Perhaps the answer is even simpler. Perhaps they simply don't want to manage their risk.
Perhaps some law firms are afraid that once they start focusing on it would mean having to be ware of what is under the carpet.
Until a lawyer quiets the resistance and commits to actually putting in place processes to manage their risk, all the SRA practice notes in the world and notes furiously taken down at CPD seminars aren't going to make a real difference.
You don't need a new risk management plan for 2012. You need a commitment.
A boost for Legal Translation Services
Those that regard the SRA as patronising have had fuel added to the fire by the recent press release from the SRA entitled “Take care with vulnerable clients, SRA urges”
The SRA main area of concern seems to focused on “…. the risks of the most vulnerable members of society not receiving the right service. Providing appropriate client care that meets the particular needs of a client is an important requirement in the SRA’s outcomes-focused regulation regime through the new principles and code of conduct.”
Executive director Samantha Barrass gave an example: “If a firm specialises in family law and has a client base where some do not speak English particularly well, it is unlikely that simply putting a lot of information into a long client-care letter will be sufficient.
“Yet there are firms who have told me that they do just that! They do it because it is what they have always done, they thought it was compliant with the old code, and are assuming it will continue to be compliant.
Directing the firm to Google Translate will not work. So the alternative is to employ the services of legal translators.
I have seen a number if commentators hold out this release as an example of the ‘old’ headmasterly SRA resurfacing. I think that such a response is over cynical. If you are a law firm in an area where a lot of your potential clients are not fluent in English it is surely to your advantage to have Terms that are readily understood. There is no harm done. At the very least it may actually win you some instructions.
The SRA main area of concern seems to focused on “…. the risks of the most vulnerable members of society not receiving the right service. Providing appropriate client care that meets the particular needs of a client is an important requirement in the SRA’s outcomes-focused regulation regime through the new principles and code of conduct.”
Executive director Samantha Barrass gave an example: “If a firm specialises in family law and has a client base where some do not speak English particularly well, it is unlikely that simply putting a lot of information into a long client-care letter will be sufficient.
“Yet there are firms who have told me that they do just that! They do it because it is what they have always done, they thought it was compliant with the old code, and are assuming it will continue to be compliant.
Directing the firm to Google Translate will not work. So the alternative is to employ the services of legal translators.
I have seen a number if commentators hold out this release as an example of the ‘old’ headmasterly SRA resurfacing. I think that such a response is over cynical. If you are a law firm in an area where a lot of your potential clients are not fluent in English it is surely to your advantage to have Terms that are readily understood. There is no harm done. At the very least it may actually win you some instructions.
Tuesday, 3 January 2012
Renewal time for Conveyancing Quality Scheme
A year has now passed since the launch of the Law Society’s Conveyancing Quality Scheme (CQS). Just over 1000 accredited conveyancing firms across England & Wales with more in the pipeline. But has the scheme has been success for the profession in 2011?
The Law society have stated “ We have already put in place plans for CQS in 2012 and expect it to be equally, if not more successful next year”. But what constitutes success? If success is based on the number of lenders who state that being a member of CQS will protect your membership on their panel then CQS has had no success at all.
2012 is likely to see lenders further focusing on their relationships with law firms especially in light of the recent FSA guidance.
The Law society have stated “ We have already put in place plans for CQS in 2012 and expect it to be equally, if not more successful next year”. But what constitutes success? If success is based on the number of lenders who state that being a member of CQS will protect your membership on their panel then CQS has had no success at all.
2012 is likely to see lenders further focusing on their relationships with law firms especially in light of the recent FSA guidance.
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