'All Monies Charges': A Threat to Law Firms

The recent news that the majority of the top ten lenders have declared they will use ‘all monies charges’ to repossess homes if borrowers struggle with non-mortgage debts should be cause for concern to conveyancing practitioners.

File Reviews for Handbook Compliance

More repossessions equals increased file reviews and inevitably the spotlight being placed on the lender handbook compliance.

John Kunzler, senior vice president in the financial and professional practice at Marsh recently pointed out in an article entitled ‘Grasping the nettle of conveyancing claims’:

‘...when the property market falls solicitors are often held to account for negligently performing conveyancing and, more recently, in particular failing to follow the instructions set out in the Council of Mortgage Lenders’ (CML) Handbook. For those who have worked in professional indemnity for decades, it may feel like solicitors are perpetually doomed to repeat this cycle’

A review of Marsh statistics on lender claims in England and Wales from 2011 to 2014 showed that around 40 per cent of the cost of conveyancing claims arises from breaching various disclosure obligations set out in the CML Handbook requirements. And this was a period when repossessions were low. Undoubtedly lenders choose the breaches that are easiest to prove, and support the lenders’ position that they would not have proceeded with the loan had they known the information that was not provided by the law firm.

Reports on Title

A further consequence of a lender repossessing a home for a non-mortgage debt is the inevitable questioning as to  whether a firm's Report on Title adequately explained the implications of an all monies charge. Although we are approaching Halloween I do not wish to take on the role of the Profit of Doom. Yet I can foresee the potential nightmare of a client looking to blame a lawyer if they have nothing in writing adequately explaining the meaning of such a charge.

Lexsure are running a specific webinar next month on the the topic of what to include in your Report on Title with an emphasis on the mortgage section of the Report. Bookings can be made here.

Lenders Who Made Changes to Their Handbook in September 2017

A number of lenders made changes to their Handbook last month. Perhaps not surprisingly some focused on changes to leasehold requirements.

Examples of lenders who made changes (England and Wales region) include:

Yorkshire Building Society (2 sections)

Scottish Widows Bank (5 sections)

Swansea Building Society (1 section)

Chelsea Building Society (2 sections)

Market Harborough Building made set an interesting new requirement relating to ground rents. Their new wording at 5.14.9 reads:

a. Any ground rent at the start of the mortgage term should not exceed annually £250 outside of London or a £1,000 inside London. If this is the case you must immediately contact the Society. We will advise you if our mortgage offer remains valid.
b. Ground rent and other event fees must be reasonable at all times during the lease term. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index and where this is the case we do not need to be advised. However, unreasonable multipliers of ground rent will not be permitted, for example, doubling every 5, 10 or 15 years. These must be referred to the Society and we will advise you if our mortgage offer remains valid. If you are unsure as to whether the terms of a lease are unreasonable, please refer the details to the Society immediately.