Metro Bank Updates CML Handbook Post 2 Instructions

Metro Bank PLC have just updated 15 sections of their CML Handbook Instructions. Some of the more notable section changes include : 

5.4.6- Does the lender accept search insurance and, if yes, what are the lender's specific requirements?

5.14.1- What minimum unexpired lease term does the lender accept?

5.20.1- 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?

7.3- Does the lender require a consent to mortgage from all occupants aged 17 or over?

Lawyers on the Metro Bank Conveyancing Panel in particular should take note. To see the changes click here. 

Skipton Update Adult Occupier Requirements

Amongst the recent changes to their CML Handbook Part 2 requirements Skipton Building Society have made a change to Section 7.3.

That section deals with the question: Does the lender require a consent to mortgage from all occupants aged 17 or over?

The old wording used to be: Yes, using our standard Form of Consent, where there is only one borrower.

That was straightforward and simple enough but the new wording reads:

Requirements apply where there is only one borrower.

See the mortgage offer for those requirements (and the documents to be used) on occupiers known to us.

You should report the existence of any other intended occupiers aged 17 or over not named in the mortgage offer to our Completions Team so that we may confirm our requirements.

What is meant by 'Requirements apply where there is only one borrower'? Is the lender here talking about both Part 1 and 2? One interpretation could be that if there is more than one borrower these requirements do not apply and one need not be concerned about adult occupiers. Can that be the intention of the lender? Perhaps my brain is numb after our Christmas party I can not fathom why Skipton would make reference to 'one borrower'

Are Authentication Badges the answer to Conveyancing Website Fraud?

Both the SRA and the Council for Licensed Conveyancers (CLC) are currently focusing their attention on cyber crime and property fraud. The CLC’s recent  fraud webinar was extremely informative. I would wholeheartedly recommend any lawyer or estate agent spending the hour watching the recording.

With property fraud avoidance in mind the CLC have recently announced an anti-fraud scheme for it’s regulated firms. This is a mandated scheme. The CLC are to provide each firm with a unique piece of code that will provide a CLC “secure badge” for the firm to display on their own website. The CLC will then monitor use of that code to ensure there is no unauthorised use of the secure badge (an assurance that I will come onto later).

The expectation is that consumers will be able to click on the badge to see information about the regulated firm on the CLC’s website.

The CLC have plans to promote the secure badge to consumers and is encouraging firms to do the same. My concern is that in promoting a secure badge, the CLC may run the risk of promoting misplaced trust. A badge image itself has no net security value - site badges are easily copied just like any other image on the internet, and anyone wanting to do something bad wouldn't hesitate to do so. And this is the crux of the issue: Even if a percentage of users click on the security badge, the majority will not read the report and any assurance benefit will be based on the the presence of the shiny and official image.

I am very surprised by the CLC’s rather bold claim that the security badge: ‘will significantly reduce the risk of impersonation online through cloned or copied websites and will stop fraudsters setting up fake firms that claim to be regulated by the CLC’. I have my doubts that a trust badge such as this is will significantly reduce the risk of impersonation. There is a counter-argument to say that that it may even increase impersonation, because, as noted above, most users won’t click and so may be fooled by a counterfeit badge. The claim ‘....and will stop fraudsters setting up fake firms that claim to be regulated by the CLC seems to be unnecessarily assured.  

If ‘secure badges’ prevented or even reduced fraud why are bank websites not festooned with them? I note that the Law Society - who have their own well documented history of software issues - have only ventured to claim the CQS badge is an indicator of quality, and not an authenticator.

The CLC Secure Badge scheme is be administered by Yoshki. Intrigued, I looked at Yoshki’s a list of customers expecting to see banks or high profile shopping sites. To be fair, I have not explored thoroughly each client, but I could not see any sites that even take credit card payments.  Do the CLC really want to use a technology addressing the threats faced by the 'The National Air Duct Cleaners Association (NADCA)' ? We are dealing here with the serious issue of major fraud rather than talking a lot of hot air (I had to get that pun in)

As mentioned above, the CLC mention that they : ‘will monitor use of that code to ensure there is no unauthorised use of the secure badge’. It may be true that a legitimate website displaying a false CLC secure badge would get complaints and be forced to take it down. But we’re not worried about legitimate sites here — we’re concerned about fly-by-night sites pushing malware and phishing scam pages. Those are the kind of websites that would most benefit from stealing this type of badge. They’re already breaking the law, so violating the badge-provider’s copyright isn’t a problem for them. It is also not a problem to create a fake CLC page mimicking the journey taken by a legitimate law firm's badge. In any event, can the CLC be certain that they can get to a fraudulent site before any damage is done?

The one thing members of the public can trust is how the firm’s site is viewed by a web browser. The web browser already has a mechanism for verifying the identity and integrity of a website in the form of TLS/SSL.  Basic TLS support is now free when using the right technology partner, and arguably regulators should focus on mandating firms being at least TLS-enabled.  The next  and preferred level of authentication and assurance is for the website operator to purchase an Extended Validation (EV) Certificate for a few hundred dollars a year.  In this case, the firm’s website displays a green name next to your address bar, that confirms the identity of the website owner. For example, in the screenshot below, my web browser has confirmed this is the real HSBC  site. It’s important to note that locks and green name indicators shown by the browser in the address bar represent verifiable security assertions that the browser companies can make about the identity of the website owner.  In contrast anything that appears in the content area of an insecure website may be manipulated of “spoofed” by an antagonist.  In the case of an ordinary http:// website, any security badges might be lies produced by the site owner themselves or interposed by a third party. It’s not just an image that can be copy-pasted all over the Internet. An image that appears on an insecure web page can’t reliably authenticate anything on its own.

Starting January 2017, Google Chrome will begin labelling HTTP (non-TLS) pages with password or credit card form fields as "not secure," given their particularly sensitive nature. From a fraud perspective this means that many firms could have their legitimate websites look less trustworthy than a cloned/illegal site. Perhaps lenders, insurers, CQS and regulators should be insisting that firms are, at the very least, SSL enabled.

The Checklist - a Crucial Tool for Risk Mitigation in Conveyancing

Human error is inevitable — particularly in stressful conditions such a conveyancing where pressure is applied by various parties who are demanding a swift conclusion at a low cost.  Add to equation the fact that conveyancing has become more complex with a significant chance that a lender client can change their instructions mid-transaction - and you have a toxic mix. Some professional indemnity insurers might even regard it as a recipe for disaster.

It is well proven that levels of cognitive function are compromised as stress and fatigue levels increase , as is often the norm in certain complex, high-intensity fields of work. This can, and often does result in increased errors in judgement, decreased compliance with a client's  expectations and failure to follow standard procedures.

Areas such as aviation, aeronautics, and product manufacturing, in which safety and precision are paramount in service delivery, have come to rely heavily on tools to aid in reducing human error. An important tool in error management across all of these fields is the checklist, a key instrument in reducing the risk of costly mistakes and improving overall outcomes.

Checklists such as COMPLETIONmonitior have multiple objectives, including memory recall, standardisation and regulation of processes or methodologies, providing a framework for evaluations or as a diagnostic tool. However, regardless of the nature of the checklist, the principal purpose of it’s implementation is risk mitigation.

Why conveyancers cant rely on referrals

Many marketing experts will tell you that as a conveyancing practice if you do great work you can build your firm based on referrals. But is that correct?

Not necessarily.

Ask yourself what motivates a client to to take the risky step of referring your firm to friends and family.

Even if you do a good job the questions that your clients will be asking themselves are as follows:

• Do I want to be responsible if my friend has a bad experience? Will I get credit if it works out, blame if it doesn't?
• Does sending more business in this direction help me, or does it ultimately make my conveyancer too busy, overwhelmed, or motivate her to raise her fees?
• Will the my conveyancer be upset with me if the person I recommend proves to be difficult, or does not pay his invoice?
• How does it make me look? Do people like me recommend conveyancing lawyers?
• Is this difficult to explain, complex to understand, fraught with danger irrespective of how good my conveyancer is?
• Does it look like I'm getting some sort of special treatment in exchange (excuse the pun) ?

Meeting your client’s expectations should be a given - even the SRA require that. Exceeding a client’s expectation should be the first step. In order to earn word of mouth, you need to make it risk free, and worthwhile to overcome the natural reluctance outlined above.

CLC Firms Achieve Parity When it Comes to First Direct Panel

The Council for Licensed Conveyancers (CLC) has confirmed that the First Direct conveyancing panel is now open to Licensed Conveyancers on the same basis as solicitor firms that are members of CQS.

Transaction value limits are as follows:

• Sole practitioners: up to £350,000
• Two-partner firms: up to £2m
• Four-partner firms: up to £3m
• Separate legal representation is required for all cases of £3m and above.

First Direct has automatically added all CLC-regulated firms to their panel using information provided by the CLC, including the number of partners. The CLC have confirmed that they will keep First Direct informed of any change to a member firm.

Are Lenders Putting Conveyancers in a Stranglehold over Knotweed Obligations?

HSBC is the third lender in the space of a three week period to impose new requirements in relation to Japanese knotweed.

In an update to their answer to 5.4.4 of Part 2 of the CML Handbook HSBC's new requirements reads:

Japanese Knotweed - You will need to advise the Bank if you become aware that there is, may be or has previously been Japanese Knotweed identified on or near the property.

Where Japanese Knotweed has not been identified within the boundaries of the property to be mortgaged to HSBC, but is present on neighbouring land over 7 metres from the boundary, we will rely on the Valuer to advise whether the property is suitable security.

Where Japanese Knotweed has been identified within the boundaries of the property being mortgaged to HSBC or on neighbouring land within 7 metres of the boundary, but is more than 7 metres from the habitable space being used as security, we can only proceed if any damage to outbuildings, paths and fences is minor. We will rely on the Valuer to confirm whether a Japanese Knotweed Survey is required and will require the following:

• A fully paid up Treatment plan which has commenced with an appropriately qualified person or company such as an accredited member of an industry recognised trade association such as the Property Care Association and the Invasive Non-Native Specialists Association

• A minimum 10 year insurance backed guarantee can be provided on completion of the works.
Where Japanese Knotweed has been identified within 7 metres of a habitable space at the property (either within the boundary of the property being mortgaged to HSBC or on neighbouring land) and/or the Japanese Knotweed has caused serious damage to outbuildings, paths and boundary walls, a Japanese Knotweed Survey is required in addition to the following:


• A Treatment plan which has been fully completed by an appropriately qualified person or company such as an accredited member of an industry recognised trade association such as the Property Care Association and the Invasive Non-Native Specialists Association

• A Completion Certificate that confirms the weed has already been fully remediated with a minimum 10 year insurance backed guarantee in place
All documents relating to Japanese Knotweed will be provided to the Valuer for their confirmation that the property is suitable for mortgage security and whether there is any impact on the valuation of the property.

November 2016 Overview - CML Handbook and BSA Mortgage Instruction Changes

Key Statistics for November 2016 (England & Wales):

• 35 lenders made changes to their instructions
• 130 sections were changed by lenders
• 5 lenders made changes to their minimum lease term requirements
• 6 lenders made changes on more than one occasion in November
• 3 lenders set out a disclosure obligation relating to Japanese knotweed
• One lender set out new (and daunting) obligations in relation to independent advice for joint borrowers

For more information click here

HSBC Introduces Independent Advice Requirements for 'Unequal' Borrowers

In a recent change to their CML Handbook Part 2 requirements, HSBC have imposed new obligations on their conveyancing panel when it comes to advising joint borrowers.

One might expect Section 8.1 (‘Does the lender allow me to advise any of the specified third parties?’) to focus solely on 3rd parties. Not so in the case of HSBC who adjusted their requirements to read:

Yes, provided that you are satisfied that you do not have any conflict of interest which prevents you advising the third party fully. If this is not the case you must arrange for them to see an independent conveyancer.

Direct charges - We require any borrower who is a legal owner of the property but who will not personally benefit from the loan either at all or equally with the other borrowers to obtain Independent Legal Advice where either the amount or portion of the loan from which they will not benefit exceeds £5,000.

Indirect charges – Where a Mortgagor of the property is not a borrower, we require that person to obtain Independent Legal Advice.

All cases - You must strongly recommend to any person intending to execute a Letter of Consent and Postponement by Deed to the mortgage that they obtain Independent Legal Advice

I am particularly surprised with the wording ‘We require any borrower who is a legal owner of the property but who will not personally benefit from the loan either at all or equally with the other borrowers to obtain Independent Legal Advice where either the amount or portion of the loan from which they will not benefit exceeds £5,000’.

It would appear that when acting jointly for HSBC and borrowers, it is necessary for any borrower, where the inequality of contributions is £5000 or more, to seek independent legal advice.

There is nothing new about the particular issue in that lawyers encounter situations where couples buying homes are contributing in unequal shares. Lawyers often advise one of the joint owners (who may not regard the mortgage as being anything to do with them at all) of their personal liability to the lender in any event. I suspect that lawyers do not generally regard such situations as demanding independent legal advice for the party who was not benefiting from the mortgage, but would always make sure that there was careful, written advice to the effect that both parties are equally liable to the lender.

Albeit that many lawyers may recommend that one of the joint owners with differing contribution (or a non-benefiting borrower) to take independent advice, this new situation is distinct for the following reasons :

• Although it is best practice to recommend that borrower with unequal contributions take independent advice, in this HSBC situation the firm's liability in this area extends to the lender rather than being limited to the borrower clients
• Outside of the HSBC situation one might recommend that one of borrowers take independent advice (and you may have something countersigned by the client acknowledging that advice). I suspect that many firms would feel as long as they recommended that  independent advice be taken that would suffice. In this situation HSBC require independent advice be obtained.
• I have my doubts whether lawyers concern oneself with unequal contributions on a remortgage but this clause obliges the firm to go back to the original contributions.

Without wishing to overplay the impact of the change, I am concerned that the conveyancing lawyer acting is now be placed under an obligation to make even more detailed enquiries as to the relative contributions of joint owners. Hitherto, the very good lawyers would be careful in their advice about the ways in which property can be jointly owned, but have put the onus on the borrower clients to inform them if they feel that their relative contributions to the purchase price warrant something like a tenancy in common in unequal shares. I suspect that many lawyers had not considered it to be their duty to carry out a detailed investigation as to the contributions, but rather to alert joint owners to the options.

To see the latest CML Handbook Part 2 changes please click here

CML Handbook Changes: Tis the Season for Melancholy

If a conveyancing lawyer were to identify the period where they were under the most pressure it would be the last quarter of the year,being the lead-up to the seasonal holidays.

Buyers and sellers agreeing a house sale or purchase almost invariably focus on completing the deal ahead of the Christmas break. Home movers, estate agents and brokers will be emailing and calling more than any other time of the year to ensure that deadlines are met. Many lawyers have a voice in their head saying ‘if only I could be left alone to get on with the work....’

The last thing a lawyer needs is a client changing their instructions frequently during this frenetic period. As my mum used to say ‘ I need that like a hole in the head’. Yet for the last few years lenders - the most common client for many a property lawyer - pick this time of year to make their most frequent changes.

The proof is in the Christmas pudding … take a look at these charts.

Japanese Knotweed : Knot Disclosing to Lenders

This week three lenders followed HSBC's lead* in using the CML Handbook Part 2 to set out their conveyancing instructions relating to Japanese Knotweed.

What should otherwise be a simple ”yes-or no” to question 5.4.4  instead stands as just the latest example of how lenders can utilise Part 2 of the CML Handbook to heap more complex and onerous disclosure obligations on their conveyancing panel lawyers.

But, since nothing is ever simple when it comes to CML Handbook Part 2 compliance, the question “Does the lender want to receive environmental or contaminated land reports?” is the jumping off point for lenders to shoehorn in obligations that encroach upon what would normally expect of a surveyor.

In-fact up until recently the answer that Coventry Building Society, Godiva Mortgages and ITL gave to the aforementioned question about sending reports to a lander was a simple 'No'

These lenders have now changed their answer to :

Generally no.

In relation to Japanese Knotweed:

You do not need to make the society aware of Japanese Knotweed in the following categories

1. Japanese Knotweed was not seen on this property, but it can be seen on a neighbouring property or land where it was more than 7 metres away from the boundary.
2. Japanese Knotweed was not seen within the boundaries of this property, but it was seen on a neighbouring property or land. Here, it was within 7 metres of the boundary, but more than 7 metres away from habitable spaces, conservatory and/or garage of the subject property.

You will need to advise the society if you become aware of Japanese Knotweed in the following categories, you will need to provide specific details of which category the Japanese Knotweed falls into, the examples listed below are likely to be unacceptable to us

3. Although Japanese Knotweed is present within the boundaries of the property, it is more than 7 metres from a habitable space, conservatory, and/or garage. If there is damage to outbuildings, associated structures, paths and boundary walls and fences, it is minor.
4. Japanese Knotweed is within 7 metres of a habitable space, conservatory and/or garage, either within the boundaries of this property or in a neighbouring property or space and /or Japanese Knotweed is causing serious damage to outbuildings, associated structures, drains, paths, boundary walls and fences and so on.

Confused by the said wording? I too was tied up in knots.

*March 2004

Finally...good news for conveyancing lawyers

I can understand why a conveyancing lawyer might have a persecution complex. During the last twenty years the industry has been subjected to ever more risks at a time when fees are being driven down. As if to add salt into the wound, it is often to lawyers who are the first port of all when it come to claiming compensation when things go wrong.

In the last couple of years there has been a dramatic increase in occurrences of online fraud cases affecting conveyancing – sometimes resulting in house buyers losing hundreds of thousands of pounds.

Whether you call it ‘cyber crime’ or ‘Friday afternoon fraud’ this is where fraudsters hack into the email accounts of either the client or solicitor, recognising the fact that many solicitors now use email as the preferred method of communication with clients. The most common scam sees fake emails sent to either party – the client or solicitor – instructing them to divert large payments to the hacker’s bank account, often during the final stages of a property purchase.

The good news?

A few weeks ago  an important ruling ruling took place which should have positive ramifications for  the conveyancing industry. The financial ombudsman, which settles disputes between customers and financial services firms has told Lloyds Bank to repay £47,508 plus interest to to Mr and Mrs Kelly, a couple who got caught out by a fraud during a conveyancing transaction. Its decision was based on what Lloyds should have known about the fraudsters.

Like many victims before them, the Kellys received, what appeared to be a legitimate email from a hacker who pretended to be their solicitor and requested payment into an alternative account. The Kellys believed they were paying a deposit of £47,508 to their solicitor handling their conveyancing. You guessed it...the money disappeared.

The couple complained to the Lloyd's with whom the fraudsters had set up an account and subsequently took their case to the ombudsman.

In an email to the Kellys with her findings, Sandra Quinn, the ombudsman for banking and credit, said: “As you know this account was newly opened. I can review whether the payment coming into the account was consistent with what [Lloyds] knew and whether it could have done anything. “I believe [Lloyds] had time to be alerted and take some action and there’s no evidence it did.”

Whist it must be recognised that an ombudsman’s ruling does not establish a formal precedent it nevertheless suggest that should have a duty of care in ensuring that a fraudulent’ account is not opened. This decision may well result in PI Insurers facing claims arising from similar fraud to look to the bank where the fraudulent monies was established.

Sting in the tail?

Assuming the courts and the ombudsman adopt the same approach one can be sure that lender’s will not take this lying down.

Lloyds public reaction to the Ombudsman decision was graceful “We would like to apologise for the inconvenience caused to Prof Kelly. We will accept the decision from the ombudsman once it is received and will offer him compensation in line with the ombudsman’s findings.” Chances are that this comment was made through the proverbial ‘gritted teeth’.

The backlash may come swiftly. Lenders could use this as an excuse to further reduce their conveyancing panel. It is almost six years ago to the day since 2500 firms have been axed from Lloyds Banking Group's panel.

The best case scenario is that lenders require law firms to adopt new procedures to reduce the chances of these frauds occurring. For example it might be that the COT will require the lawyer to tick a box acknowledging that they have confirmed their bank account details to the borrower over the phone as well as in writing. The CML Handbook P2 may well be changed to introduce certain protective measures.

Lawyers should expect some some reaction.

Kensington Opens Doors to HMOs..But...

Kensington Mortgages have changed their attitude and CML Handbook instructions relating to houses in multiple occupation. Up until yesterday the lender specified via Part 2 Section 6.6.4 that  it would not lend where the property came within the definition of a house in multiple occupation? 

The new answer to Section 6.6.4 reads:

Yes, on the basis that the property is let on an Assured Shorthold Tenancy and any required local authority licence is in place. Please provide confirmation prior to Completion if the property falls within the definition of a house in multiple occupancy as this facility is only available on specific Buy to Let schemes.

Lawyers on the Kensington Mortgages conveyancing  panel should pay particular attention to the caveat and disclosure obligations. 

Busy October for CML Handbook Changes

October 2016 proved to be a busy October when it came to changes to lenders' Part 2 sections of the CML Handbook. 31 lenders made changes. This compares to 10  lenders in the same month 2015, 17 in 2014 and 24 in 2013.

159 sections were changed with the most top ten most changed sections being :

Times changed	Section	Question
13	6.7.1	What new home warranty schemes are acceptable to the lender?
10	5.1.1	If different from 1.11, the contact point if the seller has owned the property for less than 6 months:
4	5.14.1	What minimum unexpired lease term does the lender accept?
3	6.6.4	Does the lender lend where the property comes within the definition of a house in multiple occupation?  If yes, what are your requirements?
2	5.4.4	Does the lender want to receive environmental or contaminated land reports?
2	14.2.1	Where should the title deeds and documents be sent?
2	14.2.2	Which documents must I send after completion?
2	14.1.5	Does the lender need to be sent the original mortgage deed and/or any other original title documents?
2	6.6.1	If different from 1.11, contact point if property is let/to be let and to check you lend on buy-to-let:
2	5.8.5	Does the lender accept security which comprises one of two leasehold flats in a building where the borrower also owns the freehold reversion of the other flat and the other leaseholder owns the freehold reversion in the borrower's flat? If so, are there any specific requirements?

The more notable changes in October were (in no particular order):

Lender	ID	Date
Birmingham Midshires	v.2016 No.518	24-Oct
Halifax	v.2016 No.521	24-Oct
Allied Irish Bank (GB), a trading name of AIB Group (UK)	v.2016 No.510	20-Oct
The Mortgage Works	v.2016 No.509	18-Oct
Coventry Building Society	v.2016 No.492	7-Oct

Other lenders who made changes in October include :

Adam & Company

Bank of Cyprus UK

Bank of Ireland (UK) plc

Bank of Ireland as Bank of Ireland Mortgages

Bank of Scotland Beginning A

Bank of Scotland Beginning O

Coutts

Coutts Finance Co

Darlington Building Society

Godiva Mortgages Ltd

Hampden & Co plc

HSBC Bank plc

Intelligent Finance

ITL Mortgages

Leeds Building Society

Lloyds Bank plc pre fixed 20/40

Lloyds Bank plc pre fixed 50/30/77

Lloyds TSB Scotland plc

Loughborough Building Society

Monmouthshire Building Society

Nationwide Building Society

Precise Mortgages (Charter Court Financial Services Ltd)

The Mortgage Business

Tipton & Coseley Building Society

TSB Bank plc

Vida Homeloans