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Homebuyers face bowing to lender's choice of conveyancer or paying twice to use their own solicitor
As if finding a property, saving for a deposit and passing credit and salary checks weren't enough for would-be homebuyers, lenders have thrown in a new issue: your solicitor. An increasing number of borrowers are finding that their lender will not work with the law firm they have chosen to do their conveyancing – a situation that is reducing consumer choice and can add costs, hassle and delay to the homebuying process. And the problem is likely to grow.
Mortgage lenders have always had panels of law firms they are willing to work with, but in the past few months big names such as Santander, Nationwide and Lloyds Banking Group have all reviewed and reduced those lists – in some cases removing solicitors who have worked with them for more than 20 years.
Lenders blame a rise in fraud as the reason for the cull – criteria have been tightened and a smaller panel should be easier to keep an eye on. No lender will say how many solicitors have been dropped, claiming the information is commercially sensitive, but the Law Society says it is hearing daily from firms that have been removed from panels, or have other concerns about them. Some do not even realise they have been dropped until contacted by a borrower who has instructed them.
"As a client you have no sway over the decision. This means if you wanted to use your small local family solicitor's practice, which doesn't appear on your mortgage lender's panel of approved solicitors, you may end up paying twice if they continue to represent you, as the lender will also instruct their own solicitor to act for them in relation to the mortgage," says Gary Score, partner at law firm Hart Brown. "Your alternative is to go with a solicitor who is on the lender's panel. Indirectly, this gives lenders power to dictate which firms borrowers can, or cannot, use."
Borrowers may only find out their solicitor is not approved when they apply for a mortgage – by which point those who are selling as well as buying are likely to have instructed someone and incurred costs. For those who are only buying, switching may not mean a fee, but it could mean using someone unknown rather than a solicitor you have used before or have had recommended.
As Score points out, continuing to use the firm of your choice will mean paying twice.
"Using two lawyers will undoubtedly add costs, and it's going to add delay as you have another set of people involved," says Jonathan Smithers, chair of the Law Society's conveyancing and land law committee.
Most people will opt not to – a situation Smithers says is reducing consumer choice. "It's fundamental that you be able to choose your adviser and not be put to hundreds of pounds of extra expense because your solicitor is not on a lender's panel."
The Council of Mortgage Lenders is unapologetic, saying mortgage companies have been forced to act. "There has been a significant amount of fraud and loss to lenders and their clients out of conveyancing in recent years," says the CML's Sue Anderson. She says the Law Society's recent creation of a conveyancing quality scheme is "a tacit admission of this fact".
While the Law Society argues that lenders can be assured that members of its new scheme meet strict standards, Anderson describes it as "untried, unproved, untested" and says "it is reasonable for lenders to take their own steps to control their risk".
However, Smithers says the way the panels have been restructured has, in some cases, been arbitrary. Many of the firms cut are small businesses, or ones that have only done small volumes of work with lenders over the past couple of years while the mortgage market has been slow. They may be fully up to speed with issues in the local property market, but simply not have done work for a borrower using Halifax or Nationwide in recent months, or have too few partners to fit the lender's criteria.
Unfortunately for borrowers who want to choose their own lawyers, the issue looks likely to rumble on. Some lenders say their lists are closed, so those firms that have been dropped through lack of business will not be able to get back on, and the chair of the Conveyancing Association, Edward Goldsmith, says he expects panels to go on shrinking. "In two or three years those panels will be further reduced – they will be almost like super-panels," he says. He suggests that, ultimately, this will be good news for consumers. "The firms that remain on the panel will be those who do a good job."
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