While it is dangerous to make generalisations and certain localities may remain unaffected by the economic downturn, it does seem that the residential conveyancing market has never been more competitive and conveyancing solicitors’ fees have to be kept low to attract clients.
At the same time, there appears to be a move by some mortgage lenders to tighten up on their requirements of solicitors. This is most clearly evidenced by HSBC’s recent decision to slash its panel membership and the endorsement of the Law Society’s Conveyancing Quality Scheme (CQS) by lenders.
The Law Society has said of HSBC’s decision: “We are considering all possible options following HSBC’s decision to appoint only 43 firms to its mortgage lending panel for the whole of the UK. Although solicitors on the panel are Conveyancing Quality Scheme members, the small panel size risks limiting consumer choice.”
From a conveyancing solicitor’s perspective, HSBC’s decision is not good news for solicitors who are not appointed to HSBC’s panel: clients may well prefer to use solicitors appointed to the panel rather than face possible extra costs and delays in the buying process caused by their solicitors reporting to HSBC’s solicitors.
The actions of mortgage lenders like HSBC give the clear impression that lenders have concerns that solicitors are not meeting their expectations.
It is worth considering how many times during a standard purchase a conveyancer who is acting for both the borrower and the lender will be in contact with the borrower compared to the lender. Invariably, the borrower will receive far more correspondence. This may well be because the lender does not require a litany of separate communications, but it is a well-worn mantra that solicitors should be striving to exceed clients’ expectations, rather than simply be working to meet them. There is no reason why this mantra should not apply to the conveyancing solicitor when they act for the lender.
The Council of Mortgage Lenders’ handbook provides conveyancers with a standard set of instructions for the majority of lenders who are members of the council. However, conveyancing solicitors will be acutely aware that part 2 of the handbook regularly changes.
The Council of Mortgage Lenders states: “You have probably noticed that part 2 requirements are changing with increasing frequency. One area of increasing change relates to the required documents that conveyancers submit following completion.
“While failure to send such documents in and of itself may not result in a claim for substantial losses, the absence of documents could be used as part of a lender’s panel management strategy. If a share certificate in the management company is sent but without the accompanying blank stock transfer form, that may be evidence enough to the bank to note that you are not complying with their requirements.
“The CML have recently acknowledged that the age of open panels is effectively dead. Lenders are looking for solicitors to embrace best practice without exception.”
The danger to conveyancing solicitors is clear: fail to comply with the mortgage lender’s requirements and risk losing panel membership; lose panel membership and lose business.
Staying in line
What steps can conveyancing solicitors then take to avoid falling foul of lender’s requirements? First, as should be current standard practice, they should always check the mortgage lenders’ requirements when they first receive the lenders’ instructions. Second, they should consider using the CML’s lender monitor.
The lender monitor service enables conveyancers to carry out an LM04 search before submitting their certificate of title to the lender and ensure that there are no changes to the lenders’ requirements that may leave them exposed. The current cost is £3 plus VAT. The LM04 search result will identify whether the lender has made any changes to their part 2 requirements over a selected date range. Where changes have been made, the result will show the section(s) changed, the original text and the revised text. Where there have not been any changes this will also be reported.
There is an argument that greater standardisation of lenders’ requirements than that existing now under the CML handbook would actually enable solicitors to provide a better standard of service to lenders. For example, if mortgage lenders belonging to the CML could come to a general consensus as to what documents they require to be sent to them after completion, there would be fewer margins for error by conveyancers. The conveyancers would benefit as they would not have to spend valuable time checking in each case the lender’s requirements and the lenders would benefit as they would always receive the correct documents.
Unfortunately, it remains a moot point as to whether greater standardisation of requirements is practically achievable for mortgage lenders. Until it is achieved, conveyancing solicitors will have to remain vigilant for lenders’ changes to their requirements.
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