Conveyancing: Legal representation for lenders
Last updated: 10 August 2017
At a glance
- When completing a mortgage transaction for a lender, a conveyancer has control of the mortgage funds. The conveyancer is also responsible for ensuring that the lender’s mortgage is properly secured through registration at the Land Registry. Lenders therefore need confidence in the professional skills and probity of their conveyancers.
- Where conveyancer negligence does occur it is important for lenders to know suitable professional indemnity insurance (PII) is in place.
- Mortgage lenders use panels of law firms who they approve for conveyancing work. This aims to reduce lenders’ exposure to financial loss caused by conveyancer fraud, professional negligence and poor professional practice.
- At present most residential conveyancing transactions in the UK are carried out on a joint representation basis. This means that a lender’s conveyancer acts for both that lender and their mortgage customer.
- In Scotland, members of the Law Society of Scotland voted against a move to separate representation in September 2013.
Panel management helps limit conveyancer fraud and negligence, which is a priority for lenders and the Financial Conduct Authority.
Professional indemnity insurance
PII is fundamental to lenders’ relationships with their conveyancers in response to proposed reductions in protection for lender clients by the Solicitors Regulation Authority (SRA) the CML continues to argue that no reductions in PII cover should be introduced. We urge the SRA and other regulators to focus instead on effective regulation to improve professional standards.
In Scotland solicitors do not arrange their own professional Indemnity insurance but subscribe to a Master Policy which is arranged by the Law Society of Scotland. This is a compulsory professional indemnity insurance arrangement which covers all Scottish solicitors working in private practice.
Similarly, in Northern Ireland, there is a master policy in place which is arranged by the Law Society of Northern Ireland.
The SRA are proposing to amend their Professional Indemnity Insurance requirements to remove a significant barrier to firms who wish to leave SRA regulation to be regulated by another Approved Regulator. We have responded to this consultation and await further developments.
We support joint representation as we believe that it assists both lenders and their customers in many residential mortgage transactions by saving costs and reducing delays.
We also recognise that there are situations where separate representation is more appropriate, for example high value properties, and introduced Part 3 of the England and Wales Handbook to assist with this.
Why this is important for lenders
As a consequence of lenders facing considerable financial loss as a result of fraud, professional negligence and poor professional practice on the part of some conveyancers/ conveyancing firms, the Financial Conduct Authority (FCA) now requires lenders to exercise greater control over the conveyancers they instruct. Lenders have therefore undertaken in-depth reviews of their conveyancing panels and panel requirements.