A flawed system that just gets worse
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20 June 2013
6 December 2013
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24 May 2013
FCA review of Client Assets Regime: radical proposals for the speedy return of cash and assets on insolvency
19 August 2013
Who loves the Law Society? asks Brian Marson. First it exposes panel solicitors to negligence claims, now a rule change may bring back separate representation
About six years ago, panel solicitors found themselves receiving more and more additional mortgage instructions from lenders. They had become the target of professional negligence claims, a fact accepted in the discussion paper recently before the Law Society Council that supported a proposal to introduce a revised rule 6 (3).
Last month's paper says a proposal for separate representation put in a 1994 report on the future of conveyancing, Adapting for the Future, was met with significant opposition from the profession. As far as I remember, only 200 or so firms bothered to respond, of which 70 per cent were against separate representation. It was a sorry turnout on such an important issue, but it certainly was not significant opposition.
Steps should have been introduced at the time to deal with the problem of professional negligence claims. They weren't and instead discussions for the introduction of standard mortgage instructions opened with members of the lending institutions, representing about two thirds of the industry. It was believed a successful outcome would stop cases being handled in a way that left the profession open to a claim on the Solicitors' Indemnity Fund.
Over the last three years, I have passed to the society council many examples of ridiculous additional instructions attached to mortgage offers that have been sent by lenders. Solicitors were asked to comment on structural alterations or to confirm the position of the roots of trees on adjoining properties. They were asked to confirm a property was in a nuclear-free zone or confirm that all credit card repayments had been secured. And latterly some had been asked to confirm that any other lending had been discharged.
A good business mind was behind the imposition of these additional instructions. It was considered, quite correctly in my opinion, that a lot of solicitors either don't read their mortgage instructions or choose to ignore them on the basis that, for a few hundred pounds of extra fees, they have neither the time nor inclination to bother with tree roots on adjoining properties.
However, if the mortgage goes sour in such a case, there is bound to be something the panel solicitor failed to do and so another action on SIF begins. No one can blame the lenders for trying it on if our professionals are silly enough to accept the instructions they are given.
The negotiations on standard mortgage instructions (SMIs) failed this summer. They were bound to - the Law Society had no bargaining chip. What could we give the lenders that they didn't already have? So after two years of deliberation, SMIs have fallen by the wayside.
It seems that, as a result, the Law Society has reacted like a spoilt child. In its decision to revise rule 6 (3), it has proposed a rule change which the director general of the Council of Mortgage Lenders has made clear the lending industry will not accept. In his letter to the Law Society president before last month's meeting, he pointed out that the lending industry has alternatives to a solicitor's report on title. One of these is title insurance. This is growing in stature by the month, as lenders examine the advantages of processing title insurance.
If it was going to bother taking the steps it now has, the Law Society should have taken them four years ago. It didn't then and it shouldn't have done now. What it should be tackling is the way conveyancing is carried out. I am not talking about allowing solicitors to become estate agents but more fundamental change so that we are no longer tarred with the brush of the slowest conveyancing process in the western world.
The Law Society should be pioneering ways to remove stress. It should be leading the way, not waiting for the Government's report, due in autumn, on how to abolish gazumping and which is likely to focus on systems for a speedy exchange of contracts. At about the same time as this report will be released, the Law Society will introduce a rule change that seems likely to create separate representation again. And our current unacceptable slow process becomes even slower.