With transactions becoming more complex, anti-money laundering restrictions more onerous and lenders more demanding, agents know that a client’s choice of lawyer has never been more critical to the success or otherwise of a deal.
Given that frustration levels are rising among agents whose clients choose cheap legal providers with high caseloads that result in slower, more fragile transactions, any more obstacles to market growth is the last thing they need.
However, this is exactly what has been happening in recent months, with lenders taking new initiatives to control the conveyancing market.
From Nationwide’s reduction of its lawyer panel through to HSBC’s decision to dictate who can represent them, the conveyancing process is becoming increasingly challenging for clients and agents alike.
Traditionally, if a law firm was not allowed to represent a lender, the solution was to work with another firm that was approved by the lender to act for them. This process, called ‘Separate Representation’ has become increasingly common as it enabled clients to continue to use their own lawyer, even if they weren’t on the lender’s panel.
However, this solution is under threat, with lenders removing this option for clients, resulting in far-reaching effects on the market.
Indeed, when HSBC decided in January to allow only a small number of firms to represent them, they assumed clients would also use them as their legal representative.
However, it has become clear that they misjudged how many clients wanted to continue use their own lawyers, resulting in an additional party in the process, which has introduced significant delays.
With their relatively small market share, it is unlikely that HSBC were aware of the impact their decision would have on the speed of the housing market.
However, given HSBC’s focus on the first-time-buyer market, agents know that there is inevitably a first-time buyer in the chain somewhere, and if that client is getting an HSBC mortgage, there will be delays, so wherever possible agents are advising clients to avoid HSBC mortgages.
Unfortunately for clients and agents, there’s more trouble in store with the news that Barclays have now stated that they, like HSBC, will dictate which lawyers can represent them.
However, Barclays will be causing even more disruption and inconvenience to their clients than HSBC have managed, by demanding that all current separate representation cases must be started again from scratch with a new panel firm – a move that will slow transaction times even further.
These decisions by lenders to control the market means agents must resign themselves in the short term to lower transactions levels that take longer to complete, and clients should expect to pay more for conveyancing services.
However, in the longer term, as it becomes standard practice for lenders to use their own lawyers to represent them, the issue of whether a lawyer is on a panel or not will become irrelevant and clients will be able to use their own lawyers to represent them – albeit at a higher cost and with longer transaction times.
* Peter Ambrose is a director of The Partnership Property Lawyers offering a uniquely agent-centric approach to residential conveyancing
%20-%20IMAGE%20Client%20Accounting%20%E2%80%93%20what%20are%20your%20options.jpg)
%20A%20property%20tale%20for%20our%20times.png)
Comments
Peter’s blog is, perhaps unintentionally, a little misleading. It may seem that lenders are trying to control the conveyancing market but that action has, to some degree, been forced upon them. The FSA insists that lenders manage and monitor the firms on their conveyancing panels more closely in order to reduce risk and reduce mortgage fraud. However, the way some lenders have gone about this leaves a lot to be desired.
Separate Representation as a solution, is not under threat and it is likely it will always be available. What is under threat is the number of firms that can act for the lender. The problem with that is the fewer firms the less choice if some of them are inefficient (as is the case with HSBC).
This problem is not going to go away; it simply needs much better handing. The CML, BSA, all major lenders, property lawyers (perhaps represented by the Law Society, the Council for Licensed Conveyancers, the Conveyancing Association and the Bold Legal Group) and others involved in the home buying and selling process, including the consumer, need to agree a common efficient way forward that will reduce risk, stop transaction costs increasing, keep transaction speeds up and stress levels to an absolute minimum.
What we have at the moment is a hotchpotch of solutions, none of which seem to be working particularly well.