A SPECIALIST professional indemnity lawyer has attacked the Standard Mortgage Instructions (SMI) agreement hammered out between the Law Society and lenders, saying it is a bad deal for solicitors.
Reynolds Porter Chamberlain partner Clare Jaycock has also advised that the instructions, the product of two years of protracted negotiations, should be scrapped.
Jaycock was called in by the Solicitors Indemnity Fund to advise on the possible impact of the instructions on the fund.
She concluded in her report that the instructions were badly drafted. “Under the proposed instructions lenders effectively abdicate responsibility for checking the bona fides of the borrower, which becomes a further matter for the conveyancer to check,” she wrote.
Jaycock added that conveyancers were in effect being asked to underwrite any future default on the part of the borrower. “Lenders are targeting the solicitors profession because of their generous insurance,” she said.
Jaycock's advice was one of the factors which persuaded the Law Society council to reject the draft SMI agreement when it was put before it earlier this month.
Another obstacle to the approval of the instructions is a threat by the Office of Fair Trading to block the agreement because of fears that a fixed price element of the deal could be construed as being anti-competitive.
But despite the setback, the Law Society remains upbeat about the instructions.
Property and commercial services chairman Richard Hegarty told the council: “SMI is not dead.”
Karen Aldred, head of property and commercial services at the society, defended the agreement and said that there was substantial give and take from both sides.
She added that Jaycock had been looking at an unfinalised draft and had not been privy to the tough negotiations which preceded the final agreement.
“I would suggest that Jaycock may be looking at the document from the litigators' point of view,” said Aldred.
She said that SMI had been on the point of collapse a dozen times, but that there was still a good chance the scheme could yet be resurrected.
She added: “I think there is a lot of goodwill on both sides. We hope we will be able to fashion something that is useful.”