From 1st July the Council of Mortgage Lenders is integrated into a new trade association, UK Finance. For the time being, all UKF mortgage information will continue to be published on this website, and UKF member-only mortgage information will only be available here.

UK Finance represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation takes on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association. Please go to www.ukfinance.org.uk for wider content and updates from UK Finance.

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CML releases consultation response on separate representation in Scotland

Published: 19 July 2013

In its response today to the Law Society of Scotland (LSS) consultation paper on mandatory separate representation, the Council of Mortgage Lenders (CML) has urged Scottish solicitors to reject the proposal. In the vast majority of cases, joint representation of lender and borrower is more efficient, more cost-effective, and more clearly in the consumer interest.

The LSS proposals would make it mandatory for lenders and buyers in the same property transaction to be represented by separate solicitors. Members of the LSS will be voting on a potential rule change in September that would, if passed, require this undesirable step.

The CML response reiterates members clear preference for joint representation to continue as the norm in residential conveyancing transactions. The CML argues a rule change is a disproportionate response, especially in advance of any conclusion to the separate review of conveyancing issues and practice which the LSS is currently undertaking.

Current LSS rules and the CML Lender’s Handbook (standard conveyancing instructions to solicitors) already provide for separate representation in the minority of cases where this is required, for example when a conflict of interest might exist. And the CML has repeatedly offered to take forward constructively any necessary discussion on aspects of the Handbook where refinement would resolve any concerns or issues.

Key points in the CML response are that:

  • There are clear time and cost efficiency benefits to lender and borrower sharing representation. Compulsory separate representation has the potential to cause considerable and unnecessary duplication of work (and costs) and increase the risk of delays in transactions.
  • The consultation document has not been written in a balanced way, overtly favouring the arguments for separate representation with little evidence to support the assertion of routine problems with joint representation.
  • The consultation paper misrepresents the CML’s view on separate representation. It has never been the CML's position to support this rule change.
  • The position of LSS is in direct contrast to the Law Society of England and Wales who have made it clear they favour the retention of joint representation as the norm.

If, despite these concerns, the LSS members vote through the rule change, the CML urges it to adopt a sensible implementation period of at least 12 months or more, to avoid the transition problems that hasty implementation would bring. A poorly considered rollout of the rule change could adversely impact the housing and mortgage markets in Scotland, and consequently many members of the LSS.

CML director-general Paul Smee said:

“In the vast majority of conveyancing transactions, where the interests of the borrower and the lender are very closely aligned, we fail to see how mandatory separate representation can possibly be in the consumer interest.

"Given that existing rules already provide for separate representation where conflict of interest does arise, we urge the Law Society of Scotland to think again. We continue to invite constructive engagement with the LSS to review and, if necessary, refine the Lender's Handbook to ensure that both lender and borrower clients' interests are properly protected."

 

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 95% of all residential mortgage lending in the UK. There are 11.3 million mortgages in the UK, with loans worth over £1.2 trillion.

2. The Council of Mortgage Lenders full response to the Law Society of Scotland (LSS) consultation paper on mandatory separate representation can be read on the policy responses section of the CML website.  

3. CML Scotland publishes quarterly data on the mortgage market in Scotland. Data for the second quarter of 2013 will be released on Wednesday 28 August 2013.

4. The Law Society of Scotland’s consultation on separate representation in conveyancing can be read on the The Law Society of Scotland website.

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