The Law Society is set to clash with powerful mortgage lenders in the new year after backing plans to impose restrictions on when solicitors can act for both borrower and lender.
Last week, the Law Society Council approved in principle plans to stop solicitors representing both lender and borrower in conveyancing trans- actions unless the instructions were approved by the society.
The Council of Mortgage Lenders (CML) is deeply unhappy about the decision and will ask the Master of the Rolls, Lord Woolf, to block any separate representation rule if it gets final approval from the Law Society next year.
Ken Byass, chair of the Law Society's property and commercial services committee, told the council that lenders were increasingly demanding that solicitors investigate not just the title but also their clients' financial and personal background.
“There is no end to the list of information lenders are asking us to supply,” said Byass.
“The lenders impose their terms of business [on solicitors], they impose them solely in their own interests.”
Byass said solicitors were being left to carry the can when things went wrong, with lenders behaving like “ravenous wolves” when pursuing a negligence claim through the courts.
A society consultation paper on the issue received replies from more than 2,000 firms and organisations.
Just over half the respondents – 57 per cent – were in favour of only allowing joint representation with Law Society approval.
CML legal advisory panel chair Chris Jowett said he was disappointed by the society's decision, and renewed warnings that lenders would consider using “mortgage factories” or develop their own conveyancing services in response to the change.
Jowett denied Byass's claims that lenders were making unreasonable requests of solicitors.
He added that lenders did not expect solicitors to dig into their clients' background, but they did expect them to pass on any relevant financial information.
However, CML senior legal advisor Fiona Hoyle said lenders were still committed to the ongoing negotiations with Chancery Lane over developing a set of Standard Mortgage Instructions.
So far the two sides have been in discussions for two years – and even if a breakthrough is achieved, only 65 per cent of lenders have committed themselves to following the new standard rules.