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”.