Thursday, 6 March 2014

Latest HSBC CML Handbook Change will Have Conveyancers Tied up in Knots

What should otherwise be a simple ”yes-or no” question instead stands as just the latest example of how lenders use the CML Handbook to heap more complex and onerous obligations on their conveyancing panel lawyers.

But, since nothing is ever simple when it comes to CML Handbook compliance, the question “Does the lender want to receive environmental or contaminated land reports?” is the jumping off point for HSBC to shoehorn in obligations that encroach upon what would normally expect of a surveyor. 

So, rather than “yes” or “no”, HSBC’s answer reads as follows:

Japanese Knotweed - You will need to advise the Bank if you become aware that there may be Japanese Knotweed on or near the property and if not already done so we will instruct a valuer, who will follow the RICS guidelines to assess the risk where the weed has been identified on or near the property (generally within 7 metres) . Where Japanese Knotweed is identified we will only lend if there is a treatment schedule and a completion certificate that confirms the weed has been remediated with a guarantee in place for a minimum of 10 years. These documents need to be submitted to the Bank for consideration.

I am particularly alarmed by the potential broad meaning of the phrase ‘if you become aware that there may be Japanese Knotweed ’ .This is very large hook on which to hang a potential claim in the future if it can be argued that you should have been aware of the problem. Is it not too large a leap to say that a lawyer is now expected to ask the buyer a specific question in this regard if the new protocol forms are not used?

Whilst the TA6 Law Society property information form (3rd edition) does include a question about knotweed,  it is very common for the vendor to answer ‘not known’. By virtue of the seller saying ‘not known’ you fall within the trap of the Part 2 wording ‘there may be’. Surely in such cases conveyancers have to refer the  matter back to the valuer or lender?  

Lenders have previously looked to their valuers to address this issue. In recent years, building societies such as Skipton and Leeds declined mortgage applications on properties where Japanese knotweed was present. Others such as Barclays Bank and Santander, will decline them unless work is undertaken to remove it. Now the conveyancer has to focus his or her attention on knotweed as a CML Handbook requirement. The likelihood is that other lenders will follow HSBC’s move.

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