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, and in particular, the Report on Mortgage adequately explain 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.
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