Conveyancing in London for FTBs on the increase

New data revealed by the CML shows a marked increase in London conveyancing for first time buyers. For the third quarter of 2013 there were 13,100 conveyancing transactions involving first-time buyers in London. This represented an increase of 24% on the previous quarter and a rise of 32% compared to the third quarter of 2012. 

Property price increases in London, and the knock on effect on the typical loan amount has resulted in stronger growth in the value of lending to first-time buyers.  In total, £2,960 million was advanced in the third quarter of 2013, a 25% increase compared to quarter two and up 42% compared to the same period in 2012.

Right to Buy Conveyancing - 2013 to 2014, Quarter 1

Key points from the latest statistical evidencing an increase in right-to-buy conveyancing are:

• in 2013 to 2014 quarter 1, local authorities sold an estimated 2,149 dwellings under the Right to Buy scheme; this is nearly 5 times the 443 sold in the same quarter of the previous year 
• there were approximately 300 fewer sales in 2013 to 2014 quarter 1 than in 2012 to 2013 quarter 4; this was the first quarter on quarter reduction in sales after 3 quarters of increases 
• local authorities in London accounted for 18% of sales in 2013 to 2014 quarter 1, this compares to a maximum of 21% in the previous 7 years 
• in 2013 to 2014 quarter 1, local authorities received approximately £129 million from Right to Buy sales, more than 5 times higher than the £24 million in the same quarter of 2012 to 2013 
• the average receipt per dwelling in 2013 to 2014 quarter 1 was £60,000, this compares to £54,000 in the same quarter of the previous year  
• there were 65 dwellings started on site or acquired in 2013 to 2014 quarter 1, this compares to 14 in the same quarter of the previous year

The reason Why Professional Indemnity insurers are Asking About 'Right to Buy' Transactions

Did you spot the following question on your Professional Indemnity Insurance renewal form for 2014?

In the last 10 years have you carried out any “right to buy” conveyancing transactions? If yes provide full details on page 10 including total number of transactions each year, number from referrals (e.g. brokers or marketing professionals and number of direct approaches).

Did you ask the question as to why it was there? 

Many firms will soon find out the reason why as solicitors face thousands of claims for professional negligence over their involvement in ‘right to buy’ work.

The Master of the Rolls has recently published a new Practice Direction supplementing the Civil Procedure Rules 1998 concerning Right to Buy claims. The new Direction provides for the transfer of existing and new claims to the Chancery Division and the appointment of a designed judge, Mr Justice Sales, for the purpose of further case management and trial or trial of issues arising from such claims. Read the Direction in full here (pdf).

Manchester law firm Tandem Law – which alone has around 6,000 cases on its books – is named in the practice direction as being responsible for maintaining a list of all claims.

These claims against the mortgage broker and/or solicitor will be for relatively small sums of a few thousand pounds. The larger claims against solicitors accuse them of failing to advise clients properly, both in terms of conveyancing and mortgage issues, with the close relationship between some mortgage providers and solicitors under particular scrutiny.  

On their website Tandem Law give some example of poor advice relating to council house purchases including:

• Overcharging for professional fees 
• A dereliction of duty of care towards the borrower, including not carrying out the required checks that are a standard part of the conveyancing process
• An adviser failing to explain the additional living costs, such as buildings insurance, associated with being a homeowner

Mike Fong, Head of Technical and Legal Practice at Tandem Law, says, "Thousands of people, right across the UK instructed their solicitors to help them achieve their dream of buying their own homes - and those solicitors failed their clients."

Leasehold service charges under attack at Westminster

A heated debate has recently taken place at Westminster Hall where it was argued that the current leasehold system favors property management companies. 

Jim Fitzpatrick MP has opened fire on “rip-offs” faced by leaseholders in a call for reform of unfair charges and a confusing legal system. 

Mr Fitzpatrick said: “Urgent action is needed to level the playing field between leaseholders and property management companies. 

He added: “The government needs to rein in predatory property management companies with legislation that gives leaseholders a fair say and the ability to challenge any and all charges.” 

New government legislation will make it easier for leaseholders to seek redress against the property management companies, which will have to sign up to a watchdog early next year. Agents will be forced to tell leaseholders what their fees and charges are before the lease is signed.

Accord Mortgages Conveyancing Panel - Five requirements for Sole Practitioners to be aware of

Whist Sole Practitioners are currently welcome apply to be on the Accord Mortgages conveyancing panel there are a number of conditions (as of today’s date) that you should be specifically aware of as a sole practitioner:

• All solicitor applicants located in England and Wales - regardless of whether they are sole practitioners-  who apply to join the Accord Conveyancing panel will require Conveyancing Quality Scheme (CQS) accreditation.
• If on a sale or remortgage you require title deeds or other documents from Accord in connection with a personal mortgage you can not request the deeds. Rather you must nominate a different firm on the Accord panel to request the deeds or documents and to handle the conveyancing.
• Your office(s) will be open during normal office hours in your locality. Accord Mortgages must be able to contact you between the hours of 9am to 5pm through Monday to Friday, 
• You must arrange for appropriate cover where necessary. Your locum must be a member of the Accord Conveyancing Panel (local arrangements are asked for on the application form)
• To notify Accord promptly in writing of any changes to the structure of your practice, including but not limited to a change from a sole practitioner to a partnership or, in any case, a change to a limited liability partnership, legal disciplinary partnership incorporated practice or alternative business structure.

Conveyancers to take note of study into residential property management

The Office of Fair Trading (OFT) has recently announced its intention to conduct a market study into residential property management services for leasehold homes in England and Wales. In time the findings may have implications for leasehold conveyancing.

The OFT is particularly interested in

• Whether leasehold owners feel that they have sufficient involvement in decisions taken about appointing managing agents, and if it is difficult to establish whether the property manager is providing value for money or a sufficient standard of service.
• Whether property managers and freeholders have the same interests as leaseholders in, for example, keeping down costs of maintenance work or buildings insurance.
• Whether there is effective competition, including evidence about how easy it is to switch between providers.
• Whether residents receive good value for money and reasonable quality of service.
• The time, effort and resources required to complain and seek redress.

Views can be submitted on the market study's proposed scope by writing to the OFT by 17 January 2014. Comments can be submitted by email to propertymanagers.study@oft.gsi.gov.uk or sent to:

Ever thought of specialising in Lease Extensions?

There are up to 1.43 million homes in the UK  are at risk from shortening leasehold terms – threatening borrowers and lenders with negative equity. This represents a significant amount of potential conveyancing work. 

As the leasehold tenure falls below eighty years, the value of the property begins to fall and value of the property plummets rapidly once the lease runs down to below 60 years. 

Apartments are particularly at risk given that most UK flats are leasehold rather than freehold. Of the 1.43 million leasehold properties in the UK, 817,000 are flats, while the remaining 612,000 are houses. This means inner city urban areas are disproportionately affected by the problem of shortening lease terms. 

Searches on Google have increased dramatically over the last five years surrounding key words around lease terms.The team at Lexsure have experience in building lease extension calculators for law firms. 

Interest-only mortgage borrowers are most at risk. If the borrower is just servicing the mortgage on a leasehold property, once the unexpired lease runs below 80 years the value of the property falls close to the outstanding balance off the mortgage and shortly afterwards can fall into negative equity.

A large block of interest-only borrowers are potentially at risk. Since 2002, there are estimated to have been 1.28 million interest-only loans granted for house purchase loans which have no repayment plan. This represents 14% of total house purchases over since the turn on the century. 

What are you doing to contact your existing clients about extending their leases or attracting new clients that may need a lease extension?

SRA and CML take opposing views on retention of conveyancing files

The CML has recently expressed concerns with the SRA’s proposals for shortening the retention period as they relate to property deeds and associated conveyancing files.  

In an effort to reduce expenses the SRA have proposed to put in place a retention period of purchase files for 7 years from date of file closure; or a period of 2 years from the date of intervention for registered deeds or documents.  

The CML are urging that the Solicitors Regulation Authority retain the current retention period of 7 years from the date of intervention. 

The CML have expressed concerns that reducing the time period for holding conveyancing files from the current requirements, would cause potential difficulty for claimants, including lender claimants, if they are unable to access historic conveyancing files required to pursue claims that are outside of typical limitation periods. This can occur where the claimant is relying on latent damage, Nykredit–type claims and claims where there has been dishonesty and concealment, which may require access to these files to assist in the case. 

Additionally, the CML point out that an intervened conveyancing firm, by its nature, is more likely to be subject to actions which may require access to historic files and documents. 

The CML have suggested the SRA to consider holding conveyancing files digitally to decrease costs rather than the proposed reform. Whilst acknowledging  there would be cost in converting the paper files to a digital format, this would allow for the extant retention period, but remove the physical storage costs, which the SRA note is a significant proportion of the overall expense.

Santander solicitor panel portal to launch in 2014

It looks as though CQS is facing a credibility challenge as the single conveyancing panel management facility supported by the CML. It appears that the CML as well as lenders such as RBS and Santander are supporting a new lender panel portal to be launched in 2014. The Lender Exchange formerly known as http://www.convey-panel.co.uk is a privately run entity through First Decision Limited.

The new panel management facility has two stated objectives – to minimise the costs and administrative burden on conveyancing solicitors responding to regular duplicate information requests from multiple lenders and to help lenders minimise fraud and negligence through robust due diligence (although it is not yet clear how this second element is to be achieved). 

The panel software will give conveyancing firms throughout the UK (not just England and wales) an easy way to submit and update information to lenders about their conveyancing practice through a, secure interface, saving them time and duplication of effort in meeting the terms of their lender panel membership.

Lenders such as Santander, in turn, will be able to access information to enable them to assess the continued suitability of a firm to be on their lender panel, depending on their own individual requirements.

BSA cause confusion on their mortgage instructions

LENDERmonitor has advised conveyancers via their update service about uncertainty relating to BSA mortgage instruction changes. 

The BSA introduced mortgage instructions (their version of the CML Handbook) for its members in January 2010. The BSA Mortgage Instructions are currently being used by 31 lenders.

As is the case with the CML Handbook, the BSA Mortgage Instructions comprise of two sections: a core set of mortgage instructions; and specific requirements setting out individual lenders’ requirements. 

The following warning was issued by LENDERmonitor: Please note that the BSA have recently made some wholesale changes to their website including the formatting of their Mortgage Instructions. We have identified a number of potential errors including important questions having been removed. We strongly recommend that before completing on any transaction with a BSA lender that you contact the lender directly to send you their updated mortgage instructions.

National -V- Local Conveyancing

If there's no really good reason for a conveyancing to be done locally, it will migrate to the web.

Conveyancing firms that migrate to often need economies of scale, but eventually those businesses quickly coalesce into just a limited number of winners. 

The winning strategy for the local conveyancing firm, then, is:

a. provide a conveyancing service that truly works better when it's local (e.g speedier or more personalized), and 

b. do it in a way that the conveyancing process works better when it's small, custom, connected and not in search of economies of scale.

Proposed London Airspace Consultation: implications for practitioners

The proposed new air traffic routes have significant  implications for practitioners working in residential conveyancing and commercial property.

The London Airspace Consultation (LAC) will run from 15 October 2013 to 21 January 2014 for stakeholders and the public to view and leave feedback that will help with the modernisation of the UK’s airspace structure.

This consultation is the first stage in a wider programme of proposed changes to deliver the UK’s Future Airspace Strategy (FAS), developed by the Civil Aviation Authority (CAA) with the support of the aviation industry. It will deliver significant benefits, including fuel savings for airlines, which will also mean fewer CO2 emissions, and less noise overall for people living below.

Practitioners need to be aware of the proposals and consider whether it is necessary to make enquiries to establish whether the property or land in question may be affected. While there is a possibility that the scheme will not go ahead, there is still the potential for blight. Lexsure is offering COMPLETIONmonitor clients the ability to conduct a postcode search designed to enable you to determine whether the proposal potentially affects an area in question and provides summary details of the potential effect.

Property or land may be temporarily affected by the new routing and the resultant noise pollution.

Owners of affected property may also find that their close proximity to the new route results in a reduction in the value of their property.

Paving the Way to Yet Another Concern for Conveyancers

Recent changes in Permitted Development rules aim to apply sustainable drainage (SuDS) to new or replacement paving around existing homes protect against flooding of properties.

Coveyancers can find useful guidance at here.

Historically conveyancers need not concern themselves with enquiries about such works. Paving anywhere in a garden related to a house or bungalow with any materials was considered to be ‘permitted development’ – effectively, planning permission without a planning application was automatic But not any more. As awareness of the restrictions grows, there are calls for the legality of recent paving to be covered in conveyancing pre-contract enquiries.

Permitted development rights no longer apply for new or replacement drives or other paving unless permeable paving has been used or unless the water drains into a ‘rain garden’ area within the curtilage of the property. In England, these measures took effect in October 2008 and apply to paving over 5m2 and in the front garden only. But in Scotland, they apply to work initiated after 6th February 2012 for paving of any size between the house and any street-not just to front gardens.

To satisfy the requirements, there is a growing choice of concrete block systems available from manufacturers, designed specifically for permeable paving. Essentially they have the same impressive performance as conventional precast concrete paving products, being slip resistant, durable, strong and sustainable. If, as a conveyancer, you discover that new paving has been put down at the property, you will need to check whether planning permission was obtained or if work falls within Permitted Development rules.

Building Regulations do not generally apply to paving. However, you will need to make sure that any alterations do not make access to the dwelling any less satisfactory than it was before. So, for example, changing levels to introduce steps where none existed before would be a contravention of the regulations. If a new access has been created into the garden across a footpath,you will need to obtain copies of the  permission from the local council to drop the kerbs, and the pavement may need strengthening. This regulation protects any services buried in the ground such as water pipes.

BTL Lenders set out new Tenancy Requirements via CML Handbook P2 changes

One might expect a simple ‘Yes/No’  answer to the following question within the CML Handbook Part 2 : Does the lender require counterpart/certified copy tenancy agreement to be sent to you? 

In recent years lenders have shoehorned in all sorts of obligations into their Part 2 requirements and last night’s changes are a good example of how lenders utilise Part 2’s to expand their legal conditions to conveyancers.

Investec and The Mortgage Works in answering question 6.6.3 as to whether they require a copy of the tenancy state as follows:

No,not required for properties let under a standard Assured Shorthold Tenancy within the meaning of section 20 of the Housing Act 1988 as amended by the Housing Act 1996 and subject to a maximum tenancy term of up to 36 months. If the AST is of 13-36 months duration please notify TMW/Investec accordingly but there is no requirement to send in the tenancy agreement.

Where the tenancy is not in the standard form(non AST)and let to a Local Authority,Housing Association, Government Department or Corporate Company we will require a copy of the agreement to be sent to us to verify the suitability of the tenant. In such cases you must confirm that the tenancy agreement meets the following requirements:

1)the tenant must be letting the property to a current employee of its organisation (if NHS, government department or limited company).

2)the tenant must use the property to provide accommodation for homeless persons under the Housing Act 1996 or similar legislation (if local authority or housing association).

3)the tenant must not use the property for business or create any business tenancy.

4)there must be no security of tenure afforded to the occupier or tenant.

5)the agreement recognises the existence of a mortgage and the potential for the mortgagee`s right to repossess.

6)the agreement provides for rent to be diverted to the mortgage lender or their representatives.

7)the tenancy is no more than 3 years in duration.

8)the agreement must contain no other provisions which adversely affect the lender`s security or its right to enforce its remedies under the mortgage deed executed by the borrower.

Tenancy agreements or tenants that do not meet the above requirements are not acceptable and TMW/Investec  must be informed immediately.

Ivestec and The Mortgage Works panel solicitors can see full details of the change here.

Why Conveyancing Lawyers Need to Get a Grip on CPR

No, I am not talking about cardiopulmonary resuscitation,but rather Consumer Protection from Unfair Trading Regulations 2008 (known as CPR).

Whilst estate agents have long been obliged to tell the buyer the truth if asked a direct question, the difference is that now they should give information that they suspect may affect the buyer's opinion of a property–-even before the prospective buyer comes to view it.

Estate agents have been told by the OFT that they need to comply with the Consumer Protection from Unfair Trading Regulations 2008 (CPR) and the Business Protection from Misleading Marketing Regulations 2008 (BPR). And these are more powerful in terms of the protection afforded to the buyer than the current Property Misdescriptions Act, which will be repealed in October.

This new requirement may potentially impact conveyancing because CPR erodes the doctrine of ‘caveat emptor’, thus offering a new layer of protection to the buyer’s conveyancer. Already one agency, part of the Countrywide group in Wales, has been prosecuted by Trading Standards under CPRs, for omitting to tell a prospective purchaser about the existence of a mine shaft.

Perhaps the greatest irony in this story is that estate agents were vehemently against HIPs which, once abolished, resulted in CPR coming into sharper focus. Agents were somewhat protected via the Property Information Questionnaire that introduced the concept of caveat vendor. The abolition of HIPs has, therefore, resulted in greater exposure. It’s a classic case of ‘be careful what you wish for’.

Of course, it's the seller who ultimately pays the estate agent, and it's the agent's job to get the best price for the property. However, operating under CPR and BPR, the estate agent has to understand that the buyer is also a consumer in the process, so there is a tortious liability of a duty of care and a responsibility to tell the truth. The regulations state that it is the 'consumer' who must be treated fairly. Logically if the duty of care to make disclosures to the buyer is extended to the agent, then the duty of care to discover on the part of the buyer’s lawyers is diluted.

Stuart White, managing director of estate agent Century 21, said: "This is a fundamental change to the Property Misdescriptions Act 1991, under which an agent was only obliged to disclose something if asked. It has never been the case that an agent has had the ability to hide information, however the new rules change this status by ensuring that the consumer is treated fairly, which in essence means potentially adverse information should be disclosed."

In a potential erosion of ‘caveat emptor’, the new rules mean that agents need to be up front about problems. So if there is a sewerage plant at the end of the garden, the agent who deliberately crops this construction from a photo could be breaking the rules.

To complicate matters, the new regulations don't specify precisely how the legislation applies in individual scenarios. Instead, it is left open to interpretation by the agent, and according to the Property Ombudsman Christopher Hamer, agents should err on the side of caution by openly describing all aspects of the property.

Buyers should be told of the reasons behind previous abortive transactions if they were due to a problem that interfered with the sale.. This would typically be something that comes up during the survey, but it could also be a problem that has been highlighted during the conveyancing process--i.e. something the previous buyer’s solicitor has found. For example, if the survey highlighted a structural defect, the Ombudsman says this is something that the agent should make clear to all interested parties, not only if they are asked.

Agents should no longer hide material facts that might put off someone viewing  or offering on a property. For example, according to the Ombudsman, if a motorway is 200 yards from the door, this should be clear on the picture and description it shouldn't be left to the buyer to notice it from the map alone.

He even reckons that it should be mentioned if a property is next door to a primary school, because some buyers would not want to travel a distance to view a property with potential noise.

However, Hamer does give an example where the agent would not be required to disclose a potential issue. He said that if a neighbor kept a large number of pets (in this case seven dogs and 14 cats), the agent wouldn't need to disclose this fact up front, although it should be mentioned if a potential buyer asks about the neighbors.

But he offers the following examples of things that agents should disclose: a previous murder having taken place in the property, woodworm infestation, loud church bell ringing nearby, lack of planning permission or building regulations on an extension, or previous flooding.

So what should conveyancers do in light of the above? First, familiarise yourself with the legislation and use it as a form of defense. If your client complains because something negative about the property was not picked up, you should consider whether CPR was applicable and whether the agent had a duty of care to make a disclosure. Secondly, you should carefully consider introducing a Property Information Questionnaire (PIQ) into your conveyancing process and sending it to the agent to complete. Would it be remiss of you not to extend the representations beyond that of the seller but also to their agent? It is conceivable that, in time, lenders via the CML Part 2s will require a PIQ to be completed by the agent (where there is any agent involved). I am starting to talk to lenders about the benefits to them of a specifically drafted PIQ. For an example of an agent-focused PIQ, please email your request to piqtherightsoftware@conveycentric.com.

Is the Law Society looking to cash in on the Balva collapse?

Baron Rothschild, the 18th century British nobleman and member of the Rothschild banking family, is credited with saying, "The time to buy is when there's blood in the streets." He should know. Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.

On 17 June 2013, the Financial and Capital Market Commission (FCMC) decided to withdraw all operating licences issued to Balva and commence the winding-up process by appointing a liquidator. Hundreds of law firms who insured with failed Latvian insurer Balva face being caught in an ‘unrated cycle’ after offers from other unrated insurance providers. Balva are the latest of a number of unrated insurers  who have gone to the wall in the last few years.

In 2009, Quinn Insurance – which was soon to collapse into administration – lost €333m [£282.7m] in the UK alone, prompting it to pull back from solicitors’ PI. And only last year, another PI provider, Gibraltar-based Lemma Europe Insurance Company slipped into liquidation.

With the spotlight on unrated PI insurers I expect that the commercial gurus at the Law Society may consider that the opportunity is ripe to launch a professional indemnity scheme for small firms.

Such a scheme could be pitched at firms from one to four partners, an area considered riskier than large firms,.  The Law Society has warned that such firms were increasingly “turning to unrated insurers”. It would be a perfect opportunity for them  to  cross-sell other Law Society services such as CQS, Lexcel and compliance services in which they have a stake.

The Law Society has recently urged law firms to buy cover from a rated insurer this renewal period.   The Society mentions the “devastating personal consequences” an insolvent insurer can have on partners. And this week it told solicitors it was becoming increasingly concerned about the level of commission paid to insurance brokers.

The Law Society has a history of making such opportunistic commercial moves. The timing of the introduction of CQS was no coincidence. It occurred as soon as lenders started to cull their conveyancing panel and was applied for by most firms as a protective measure to maintain panel status.

Meanwhile the SRA has confirmed that it is considering introducing a financial rating criteria for insurers who write PI policies.  According to policy director Agnieszka Scott, “There have been numerous calls for us to allow rated insurers only, but we have resisted this restriction as it would be an unwarranted barrier to entry into the solicitors PII market. Until now, it would have been disproportionate for us to introduce a financial rating criteria.

“However, in the light of the insolvency of Lemma last year and recent developments with Balva, we decided that we need to look again at the impact of introducing a financial rating criteria,.”

The SRA will make its decision in time for October 2014 renewals.

The danger of double charges

PI insurers are still seeing a significant number of claims relating to mortgage redemption statements.

A leading insurer recently advised me of a case where the solicitor was completing the sale of his clients' property, on which he knew there were two charges. He had obtained statements on each charge, and on the day of completion he asked a junior colleague to phone the bank for a final figure. His colleague only saw one of the two statements on the file, and the solicitor had not warned her that there were two charges. When he was given the redemption figure, he did not check that the figure included both. He paid the bank the amount that his colleague had been told, and paid the balance to his client, you can guess the rest.

To avoid this type of problem you should use a system like COMPLETIONmonitor which can only be signed off by the lawyer. Alternatively, mark the file clearly to show what charges are on a property, together with account numbers. Where possible, get redemption figures in writing from the lender, and always check that all charges have been included. More importantly, do not delegate crucial tasks to a colleague without giving a full explanation of what is needed and without allowing time to check that they have understood your instructions.

Conveycentric on Notice of Imminent CML Handbook Changes

Conveycentric has been notified by the Council of Mortgage Lenders that they intend to publish important amendments to the CML Lender's Handbook for England and Wales on July 8, 2013.  Members and relevant stakeholders consulted on the changes for the new Part 1 question added as 5.20.4, which were made necessary by the Green Deal.  

The specific new Part 1 question states, "Check Part 2 to see whether we require you to disclose the details of any existing Green Deal Plan(s) on a property".  

Simon Seaton, CEO of Conveycentric, commented, "We are grateful to the CML who continue to be very helpful in preparing us for major changes so that we can assist the users of LENDERmonitor and COMPLETIONmonitor.  We will be notifying about 3000 solicitors and conveyancer of lender-specific requirements on July 8th.  We expect amendments to be made to the BSA Mortgage Instructions by October".

LENDERmonitor, supported by the CML, provides conveyancers with a free subscription service that sends out email alerts advising when lenders make  changes to policies.  To sign up of free notifications, click here.

The LENDERmonitor LM04 Policy Search allows conveyancers to establish if there have been any changes to lenders’ policy over a specified date range.  Commenting on the search, the CML say,  “Lenders regularly change their Part 2 policies. There is now a link from the CML Lender Handbook to Conveycentric’s LENDERmonitor from where conveyancers can easily carry out an LM04 Search before submitting their COT to the Lender and ensure that there are no changes to the Policy that may leave them exposed”.

Is the Green Deal a charge against a property?

It is a common misconception amongst the public and conveyancers that the Green Deal creates a legal charge over a property. It does not. The Energy Act 2011 prevents a Green Deal Provider from taking a charge over a person’s property by way of security for payments due under the Plan.

Buiding Societies publish thier solicitor panel requirements

Newbury Building Society and Newbury Mortgage Services Ltd yesterday extended their conveyancing panel requirements by making changes to Section A.12 of their BSA Mortgage Instructions .

Acceptance to the panel is now subject to application and subject the following criteria:

• The firm must have at least two qualifying partners.

• The firm must be registered with the SRA / CLC.

• Professional Indemnity Insurance with minimum £2m cover.

• For solicitors, the firm must have CQS accreditation.

Firms that are set up as Alternative Business Structures are accepted if the underlying legal practice has been in existence at least 5 years and meets the above requirements.

Conveyancers that are not on the panel will be invited on receipt of a mortgage application where the client proposes them to act. For commercial applications the lender will instruct their own solicitor (separate legal representation). Contact Newbury Building Society’s Mortgage Underwriting Team 01635 555700, for an application.

These lenders are following the lead of Santander who as of a couple of months ago will now only accept solicitors on their panel who have CQS accreditation.

HSBC solicitors panel in Scotland asked to apply English law

One of the many obligations imposed on a conveyancing solicitor is to check the mortgage documents and ensure that the borrower (client) understands the obligations contained within the mortgage deed but also within the loan offer. This is no doubt one the reasons why the solicitor is sent the mortgage offer in the first place. This is reaffirmed at paragraph 11.1.2 of the CML Handbook which states “You should explain to each borrower (and any other person signing or executing a document) his responsibilities and liabilities under the documents referred to in paragraph 11.1.1 and any documents he is required to sign”.

Imagine the shock when Scottish solicitors realised that the HSBC loan documents stated that the conditions were to be governed by English law. Notwithstanding the CML obligations at Paragraph 11.1., the vast majority of Scottish lawyers cannot be expected provide advice on English law contracts.

In a recent letter published in the Journal of the Law Society of Scotland Willie MacRae of Liddle & Anderson  wrote “The current state of affairs seems to be nonsensical. If there was ever an argument, the lender would either have to raise separate actions for default in England and repossession in Scotland or raise a combined case in Scotland. A Scottish court would require to apply English law to the loan agreement notwithstanding the potential difficulties with the interface with Scottish property law. It therefore seems a bad idea all round as (1) clients cannot be given proper advice; (2) the lender no doubt is trying to streamline their situation and apply the same rules UK wide, but this inevitably will not happen given the Scottish dimension and could well backfire; and (3) it again seems to be attempting to sideline both Scottish law and the vast majority of the Scottish legal profession, which at the end of the day will simply disadvantage the majority of clients who will not be able to get full, local advice". 

MacRae goes on to say "I hope that rather than simply shrugging shoulders, the Society’s Property Committee is actively seeking to change HSBC’s view in this matter and dissuade any other lenders from taking a similar route".

One can only be left to speculate what would happen if situation was reversed and Scottish Lenders required solicitors in England and Wales to advise borrowers on Scottish contract law. The reaction from Scottish law firms seems rather sedate so far.