A Precise Approach to Builders' Deposits

Precise Mortgages have a made an important change to their Part 2 CML Handbook requirements relating to incentives.

In an amendment to Paragraph 6.4.4 Precise clarify that an an unacceptable incentives includes  “..builders' deposits (with the exception of up to a maximum of 5% of the purchase price of residential purchases which are not for buy-to-let), vendor's deposit, discounted purchase price, purchase from family at discounted purchase price and purchase from a company in which the customer(s) has an interest.”

Other than the above change Paragraph 6.4.4 remains the same. Two other sections were however changed relating to minimum unexpired lease term (5.14.1) and the requirement for a CH2 application (14.1.4). Lawyers on the Precise Mortgages Conveyancing Panel should take note.

Leeds Follow Other Lenders Giving Short Leases a Wider Berth

Conveyancers need to take special note of the recent trend in lenders increasing their minimum unexpired lease terms via amendments to section 5.14.1 of Part 2 of the CML Handbook.

If I was still in practice I would definitely be referencing this trend in the report on title sent to clients purchasing leasehold flats with less than 95 years remaining.

Next month Lexure will be publishing their CML Handbook Data Report for 2015. This annual overview of Part 2 changes makes for interesting reading especially the section addressing changes in leasehold requirements. Those wanting to pre-order the report please contact me.  

Leeds Building Society is the latest lender change their minimum lease term requirements.

In a change that would be easy to miss here is the old and new wording:

Old wording : Mortgage term plus 40 years.

New wording : 85 years remaining from the start of the mortgage.

CML Lenders' Handbook Amendment for Mortgage Credit Directive

The CML will be publishing a change to the Handbook on 1 February 2016. as a result of the Mortgage Credit Directive. 

Additional wording in clause 10.2 is to be introduced to reflect the mortgage credit directive and concepts of binding offer and reflection period. The wording allows for the conduct of the borrowers agent (in this case, the conveyancer) to act as the acceptance of the mortgage offer on the borrowers behalf, by submitting a Certificate of Title (COT) to the lender.  This will allow the lender, in the case where the lender does not require the borrower to formally accept the mortgage offer, to have evidence of the acceptance by virtue of the COT being submitted; it also indicates that the borrower has bought the reflection period to an end.

This change is in conjunction with clear explanations in customer literature by lenders about accepting the offer and the reflection period; and a proposed change in the Approved Certificate of Title for E&W which reflects the wording in the Handbook.

Section 10.2 is due to change to : We shall treat the submission by you of the certificate of title as confirmation that the borrower has chosen to proceed with our mortgage offer and as a request for us to release the mortgage advance to you. Check part 2 to see if the mortgage advance will be paid electronically or by cheque and the minimum number of days notice we require.  

Law firms need to start thinking about adapting their Terms and Conditions in light of pending Handbook change.  

Tesco Direct Lawyers on Black Friday

By way of a change to their CML Handbook instructions, Tesco Bank, as of today, require conveyancing lawyers acting for them to notify them of the details of the seller’s lawyer.

Section 3.2.3 of the CML Handbook deals with the question : Does the lender require notification of the name and address of the solicitors firm or licensed conveyancers firm acting for the seller?

By way of an amendment to section 3.2.3 of their P2’s Tesco Bank now require (“direct”) lawyers :

Yes we require you to provide us with this information by calling us on 0345 051 8446 within five working days of receipt your instructions. We will not disburse funds until we are in receipt of this information. You must also inform us immediately if the vendor instructs new solicitors or licensed conveyancers at any point prior to completion.

Leasehold: 85 is the new 70

Penrith Building Society became the latest lender to change their requirements concerning the unexpired term of a lease offered as security. The change to the lender’s BSA mortgage instructions took place a couple of days ago the adjustment being from 70 to 85 years as a minimum requirement.

Penrith Building Society is the 20th lender to amend their minimum lease term requirements in 2015. Nine of the 20 lenders made a change from 70 to 85 years. Four of the said Nine in 2008 accepted leases with 55 years plus remaining.

Are Bank of Ireland Closing the Door on Leasehold Properties?

Yesterday, Bank of Ireland became the 14th lender this year to change their minimum lease term requirements via amendments to the CML Handbook Instructions.

Section 5.14.1 (What minimum unexpired lease term does the lender accept?) used to read "70 years unexpired from the date of completion of the mortgage".

This has now been changed to "Yes, subject to a minimum lease term of 85 years. The unexpired lease term must be at least the mortgage term plus 45 years."

Changing to an absolute minimum of 85 years remaining is not only going to render a significant proportion of properties unmortgageable to BOI but may catch some lawyers out who may be about to sign off on COTs.

Coincidentally, yesterday at a Law Society event, Mr Blüthner Speight, a senior manager at professional indemnity insurer Zurich, accused lenders of placing “onerous obligations” on solicitors by way of the CML Handbook and enjoying the advantages of “guaranteed insurance cover” when it all went wrong.

A Cautionary Tale for Right to Buy Conveyancing Lawyers

The Local Government Ombudsman (LGO) has criticised South Oxfordshire Council for omitting to properly inform buyers of ex-council houses under the right to buy scheme about the restrictions affecting their properties.

In two distinct complaints the home-buyers involved had purchased former council-owned houses some years ago. 

It is of course likely that the complainants had their conveyancing lawyers in their sights as well.

The homeowners both lived out of the area. When they bought their houses the council advised that as a condition of granting consent they would have to occupy the houses as their main residence and stipulated that they could not sell to a limited company or grant tenancies.

In 2013 the South Oxfordshire DC reviewed its policies and began to enforce a local residence connection on the sale of ex-council houses. When the complainants put their houses on the market and applied to the council's approval they were told that consent would not automatically be forthcoming to a buyer from outside the area. Whilst the council exercised its discretion and granted consent to buyers who were not local it was clear that the restriction could prevent the houses being sold in the future. The sales prices of both houses were affected because of the restriction.

The ombudsman determined that the Council were duty bound to provide full details of the potential restrictions notwithstanding that they may have chosen not to implement them at that time. The council argued that the onus was on the homeowners’ solicitors to check the full details and inform them of the restrictions.

Whilst there is nothing in the decision that indicates that the buyer’s lawyers did anything wrong, conveyancers need to consider their duties and ensure that their clients (including the lender as per the CML Handbook) fully understand the implications of potential restrictions that ex council houses could be subject to even where they have not been explicitly mentioned by the local authority.

Coventry Building Society sets new Conveyancing Requirements for B2L

Lawyers on the Coventry Building Society conveyancing panel need to take note of the latest change to section 6..6.1 of lenders CML Handbook PII.

A new provision was added yesterday stating: 'Legal representative to ensure that where the property is located within a designated selective licensing area under Part 3 of the Housing Act 2004 a licence has been granted by the local authority in respect of the property.'

I am expecting a number of lenders to make similar changes in the coming months. Some lenders may well use the CML Handbook to make it clear where they do not lend to landlords with properties covered by selective licensing.

AmTrust Renews Rewards for Conveyancing Risk Management

AmTrust Europe (“AEL”) a wholly owned subsidiary of AmTrust Financial Services, Inc. (Nasdaq: AFSI) (the "Company"), (“AmTrust”) have renewed their groundbreaking agreement with legal software house Lexsure, which links the use of risk mitigation software with lower expenditure on professional indemnity (PI) premiums for law firms, a move that could be worth thousands of pounds for some firms.

Professional indemnity premiums are a great concern for law firms, as, particularly for smaller firms, they can constitute one of the largest costs to the business aside from salaries. Furthermore, a practice that is refused PI cover can be forced to go out of business, a fate that befell some firms in England and Wales last year.

Law firms can evidence their lower risk profile for conveyancing transactions by using Lexsure’s COMPLETIONmonitor software, an online checklist, tailormade for conveyancers to reduce and eliminate errors and omissions.

In continuing to reward firms that reduce their risk profile by using COMPLETIONmonitor in the conveyancing process firms who insure with AmTrust can expect a per case savings on their PI renewals for each case completed with the software. Even for small firms with active conveyancing practices, this is likely to result in a saving of thousands of pounds.

Head of Professional Indemnity at AEL, Alex Dyer, said:

“We appreciate that the cost of PI insurance premiums has a great impact on law firms, particularly for firms that do a lot of conveyancing, due to the frequency and size of claims in that field. We believe it is right and fair to offer a financial reward to firms that empirically demonstrate risk mitigation by using COMPLETIONmonitor”.

Coventry Building Society : New Panel Requirements

No...I am not talking about Coventry Building Society conveyancing panel requirements.

Rather, the Building Society along with Godiva Mortgages have changed their CML Handbook requirements concerning leases of roof space for solar PV panels.

In the last few hours the answer to section 5.20.3 has changed to :

Yes, the minimum CML requirements must be met. In addition the lease must contain a valid mortgagee break right which is exercisable on possession. The cost of removing the equipment and making good any damage must be met by the Tenant. The mortgagee will not be liable for any breach of the Landlord's covenants before or during the repossession period or any loss of income caused as a result of disconnection of the electricity supply. Please arrange for a Deed of Variation to be entered into on or before completion to ensure our requirements are met. If this is not possible advise the applicants and us that the requirements cannot be met and the case cannot proceed.

TSB Conveyancing Panel to go Through Lender Exchange

TSB as well as five other lenders have decided to make use of the Lender Exchange as part of their conveyancing panel management. Launched last Summer with Santander the Lender Exchange is now being rolled out to the TSB conveyancing panel.

As reported in Inside Conveyancing, Justin Parkinson, Managing Director, Decision First commented: "We’ve been working with some of these lenders since day one, but it simply wasn’t sensible to launch with them all at the same time we’re now delighted to extend the use of the system wider still. This is great news for the law firms already on Lender Exchange as applying to these lenders or retaining their current panel status requires just a few mouse clicks and represents even better value for money as there are no additional charges to be paid. We will strive to bring more lenders on board to further reduce the impact on firms across the UK."

Notice for CML Handbook Changes to Insurance Requirements

The CML is introducing an amendment to the Lenders Handbooks for England and Wales, Northern Ireland and Scotland on Monday 30^th November 2015. The change will remove reference to Part 2 in the buildings insurance requirement sections of the Handbooks (clause 6.14. England and Wales, 6.13 Northern Ireland and 6.14 Scotland).  The clause will require conveyancers/solicitors to make reasonable enquiries that buildings insurance cover has been arranged for the property from no later than completion and to remind the borrower that they:

• Must have buildings insurance in accordance with the requirements of the mortgage conditions no later than completion, and
• Must maintain such buildings insurance cover throughout the mortgage term

Lenders adopting CML Handbook will no longer have an additional list of requirements relating to buildings insurance in part 2 of the Handbook. The change will relate to certificates of title lodged from 30^th November.

CML Lenders Handbook for Scotland - Changes 8 June 2015

Changes are about to be made to the CML Lenders Handbook for Scotland on Monday 8 June.   

The main changes include the following:

• The handbook is being amended to include the introduction of the Land and Buildings Transactions Tax in Scotland, replacing stamp duty.
• The handbook being brought up to date to reflect changes in Scotland due to the Land Registration (Scotland) Act 2012, which came into effect in December 2014. 
• The section on good and marketable title has been revised in Scotland to reflect changes made to the wording already amended in the Handbook for England and Wales.

If you would like to see a copy of the revised Handbook with track changes showing the updates please contact me.  

I understand that CML lenders have been asked to update their part 2 versions especially their answers that relate to clauses 14.1.4 (Application to registers) and 14.2.1 (Title deeds).

New CML Website goes-live Today

The new version of the CML website has gone live today Monday 1 June.

The format and contents of the CML Handbook has not been changed and just has a new look and feel to be consistent with the new website.

Fleet Ships New Leasehold Conveyancing Requirements

Yesterday Fleet Mortgages became the latest lender to change their minimum lease term requirements via the CML Handbook Part 2.

In a change that would be easy to miss here is the old and new wording:

Old wording : 75 years unexpired at the commencement of the mortgage term.

New wording : 75 years unexpired at the commencement of the mortgage term but the unexpired term of the lease should not be less than 40 years at the scheduled end of the mortgage period.

It is not clear how many firms that are on the Fleet Mortgages conveyancing panel but clearly this change will impact those firms on the panel conducting leasehold conveyancing for Fleet. Contrary to certain opinions I am not aware that the Fleet Mortgages conveyancing panel is restricted to conveyancing solicitors in Hampshire.

Minimum Unexpired Lease Terms : From the Fire to the Furnace

Leasehold conveyancing solicitors beware : Lenders are changing their minimum lease term requirements.

For the second time in the space of a week a CML  lender discarded  a whole slice of the leasehold market from being mortgageable for their perspective.  

Furness Building Society is the latest lender to  tighten  their minimum lease term requirements. This recent change is particularly impactful as the lenders has set a minimum lease term of 85 years. This is the first CML lender to set such a requirement. Those attending the recent LENDERmonitor webinar on ‘CML Handbook Trends and Predictions for 2015’ will not be shocked but this will come as a surprise to many conveyancing lawyers who will be hoping that other lenders do not follow suit.

Furness  used to accept leases where there was a minimum 55 years unexpired from completion, subject to not less than 30 years remaining at the end of the mortgage term. As of today they now require 85 years unexpired from completion, subject to not less than 55 years remaining at the end of the mortgage term.

Furness Building Society conveyancing panel lawyers should take note. On the upside there may be a possibility for picking up lease extension work.

Metro Bank Conveyancing Panel - New Part 2 Requirements

Conveyancing solicitors on the Metro Bank Conveyancing Panel can, as from today, carry out personal local authority searches as opposed to being required to carry out official searches.

By way of a change to the banks's CML Handbook Part Two requirements the answer to section 5.4.5 (Does the lender accept personal searches and, if yes,what are the lender's requirements?) now reads :

'Yes- We recommend that any firm carrying out a personal search is registered under The Search Code monitored by the Property Codes Compliance Board..'

Other lenders have made a similar recent changes to the CML Handbook Part 2 section.

The Search Code provides protection for homebuyers, sellers, estate agents, conveyancers and mortgage lenders who rely on the information included in property search reports undertaken by subscribers on residential and commercial property within the United Kingdom. The Code is now recognised by many mortgage lenders that make specific reference to it in their Part 2s of the CML Handbook.

Lexsure data reveals that the conveyancing solicitors in London are more likely to carry out personal searches.

Platform Home Loans Conveyancing Panel Alert - Minimum Lease Term

Mortgage companies continued the trend to shy away from properties with short leases with Platform Home Loans yesterday tightening their minimum lease term requirements.

The lender used to accept leases where there were 50 years unexpired at application and 25 years at the end of the mortgage term.. As of today they now require a minimum unexpired lease term of  70 years at application with 30 years remaining at the end of the mortgage term.

Platform Home Loans conveyancing panel lawyers should take note. On the upside there may be a possibility for picking up lease extension work.  The change brings the lender in line with Britannia and the Co-operative Bank.  

Kensington Mortgage Conveyancing Panel Witness P2 Changes to Insurance Requirements

Kensington Mortgages have changed their policy when it comes to building insurance checks to be conducted via lawyers acting on their behalf on conveyancing matters. 

Via changes to their CML Handbook provisions Kensington Mortgages now require that he maximum excesses on building insurance for a property that they are lending on do not exceed £1000 for subsidence and £500 for all other risks.

Birmingham Midshires Conveyancing - Panel Requirements Removed

Just in case your were wondering about whether BM have changed their solicitor panel requirements, the title here is referring to solar panel requirements.

In a somewhat surprising move lenders such as Birmingham Midshires, Bank of Scotland and Halifax removed their previous answers to the question 5.14.1 ('Does the lender require me to report to them where the lease does not meet the CML minimum requirements for leases of roof space for solar PV panels?')

So what do you do if you are buying a property where there is a lease of the roof space for solar PV panels where the lender does not answer this section of the CML handbook. My suggestion is that you make the disclosure in any event.

Changes to Northern Ireland Lenders’ CML Handbook Part 1 and Part 2

The CML have completed their work undertaken in the second half of 2014 to develop guidance for the installation of solar PV panels on roof space in Northern Ireland . The change will take place tomorrow.

The guidance, broadly, follows the same template as the existing guidance already in place for England and Wales.  To reflect the guidance the CML will be inserting the following wording into the Lenders’ Handbook Northern Ireland – Part 1 and asking lenders to update the new part 2 questions if they choose to maintain additional requirements:

5.14 Energy Technologies Installed on Residential Properties

5.14.1 Where a property is subject to legal documentation relating to roof space for solar PV panels we require you to check that the documentation meets the CML minimum requirements (Northern Ireland). The minimum requirements include a requirement that the legal documentation is a Lease of Rights and not a lease. Where you consider the minimum requirements are not met, check part 2 to see whether you must report this to us and for details of any additional requirements.

NEW Part 2 QN: 5.14.1 Does the lender require me to report to them where the lease does not meet the CML minimum requirements for leases of roof space for solar PV panels?
 
5.14.2 If, after completion, the borrower informs you of an intention to enter into legal documentation relating to roof space you should advise the borrower that they, or the energy technology provider on their behalf, will need to seek consent from us.
 
5.14.3 The CML has issued a set of minimum requirements where a provider/homeowner is seeking lender consent to enter in to legal documentation relating to roof space for solar PV panels. See part 2 for our additional requirements.

NEW Part QN: 5.14.3 Does the lender have additional requirements relating to leases of roof space for solar PV panels, and if so, what are they