Lender Exchange Update
Briefing Note on the Terms and Conditions of the Lender Exchange website (the "Ts&Cs")
IMPORTANT NOTICE. This note is provided by the Law Society of Scotland to assist its members. However, it does not constitute legal advice from the Society nor is it a substitute for members' own detailed review of the Ts&Cs. This note is based on a version of the Ts&Cs provided to the Society by Decision First Limited (DFL) and dated 10th April 2014. However DFL has not granted the Society permission to publish these Ts&Cs themselves.
The Society has not endorsed or approved the Ts&Cs, or indeed the Lender Exchange website itself. The Society cannot approve the Ts&Cs as they represent a commercial contract between Decision First Limited and the relevant firm, in which the Society has no locus.
As explained below, it is possible the Ts&Cs will vary over time. We therefore recommend that members and firms considering registering to use the Lender Exchange service carefully review the then-current version of the Ts&Cs before registering, and seek their own advice if in any doubt as to the effect of the Ts&Cs.
1. As might be expected for a set of standard trading conditions drafted by a service provider, the Ts&Cs are generally favourable to DFL as the operators of the Lender Exchange website. Their exposure to liability is limited and in most instances the balance of risk struck by the Ts&Cs is in their favour at the expense of the subscribing law firm.
2. Firms should be aware that in addition to the Ts&Cs, specific additional conditions may be imposed in relation to particular lenders and DFL has the ability to modify the Ts&Cs from time to time. Whilst DFL must post the modified Ts&Cs on the Lender Exchange website, they are not obliged to bring changes to the specific attention of individual subscribers so it will be incumbent on firms to monitor the website regularly.
In addition, subscribers must adhere to the User Guide, which is a separate document under DFL's control and which DFL may change. The Society has not seen the User Guide, and firms should carefully review it alongside the Ts&Cs. Should firms not be happy with the modified Ts&Cs or User Guide (for example if the modifications introduce new onerous requirements on the firm) their only option is to terminate their subscription to the site under the termination provisions mentioned in paragraph 4 below. This cannot be done in the first year of subscription however.
3. The Ts&Cs are clear that the Lender Exchange system and its associated software remain at all times the property of DFL. It is a web-based system and the firm does not obtain any proprietary rights in the system or software itself. DFL also reserve the right to modify the system and software, and their functionality, at any time.
4. Subscription is for an initial 12 month period, and then automatically renews for successive 12 month periods thereafter. The subscription may be terminated by the firm at the end of the first year provided it gives 3 months' prior notice to DFL.
After the first year, subscription may be terminated on only 14 days' notice although firms should note (a) there is to be no pro rata refund of fees if subscription is terminated part-way through a year and (b) termination of subscription to the site may affect the firm's membership of a lender's panel.
5. The subscription fees are described simply as being those notified by Decision First from time to time, so may change. Subscribing firms are undertaking to pay those fees in accordance with a direct debit mandate provided by Decision First.
6. The Ts&Cs provide for each firm to have only 2 members of staff authorised to use the Lender Exchange system: an "Authorising User" who is authorised by the firm to approve its use of the system, and an "Approving User" who is the person permitted access to input and maintain the data submitted to the system. There is no provision for alternates or substitutes, so firms need to be aware of the risk of these individuals being ill or absent, or leaving the firm at short notice as this may affect a firm's ability to use the system.
Firms are responsible for the actions of their nominated users. Each user will have a secure password which must be kept secret, and the firm is obliged to ensure unauthorised persons do not use or gain access to the Lender Exchange system.
7. Firms should be aware that they are responsible for ensuring viruses are not transmitted to the Lender Exchange system, and to that end must use industry-standard anti-virus software and firewalls.
8. The scope of data which is to be uploaded to the system is open-ended and its description should be read closely before registering. The Ts&Cs do not themselves define in detail what the data will comprise, and there could well be "mission creep" as over time DFL, or lenders through DFL, could require additional information to be provided.
Firms have to keep the data updated regularly (whenever it changes and at least once every 90 days) and also agree to a general "catch-all" obligation to comply with reasonable requests made by DFL or any lender.
9. The firm is wholly responsible for obtaining all necessary consents for the data to be uploaded and used. For example, where the data comprises personal data of partners or staff (as it inevitably will in relation to matters such as compliance for anti money-laundering purposes) then consent should be obtained from those individuals, particularly if sensitive personal data is involved. Consents should include specific consent for the data to be used for the purposes of credit checking. DFL does not within the Ts&Cs offer guidance or assistance to firms in relation to the obtaining of consent. In order to be effective, such consent must be informed, and individuals should be told (prior to granting consent) who will have access to their data, how long for, and for what purposes.
Reference should be made to the Data Protection Act 1998 and the Information Commissioner's website for guidance, as the onus is on firms to procure the appropriate consents.
Firms are also responsible for the legality, reliability, accuracy, completeness and quality of the data they upload.
10. DFL agrees to comply with the requirements of the Data Protection Act when it comes to personal data, which would include an obligation to adopt appropriate measures to prevent loss or damage to personal data, or unauthorised access to it. It also grants an indemnity to the law firm in relation to losses which the firm suffers arising from a breach by DFL of its data protection obligations.
However, that aside, DFL is obliged only to follow its own standard archiving procedures when it comes to the data, and in the event of loss of or damage to the data, DFL's obligation is only to use reasonable endeavours to recover data from its archive.
11. Although the contracting party under the Ts&Cs is DFL, data may in fact be shared with a range of other companies. Further the data will presumably also be shared with the Lenders although this is not explicitly stated in the list of other companies provided.
12. The Ts&Cs contain a very wide-ranging set of exclusions and limitations of liability on the part of DFL. The financial cap on liability to a subscribing firm is set at subscription fees paid in the preceding 12 months.
13. The Ts&Cs contain an unlimited indemnity by the firm in favour of DFL in respect of a range of risks including:
a. use of or access to the Lender Exchange system or software by unauthorised persons;
b. failure to obtain necessary consents (whether under data protection legislation or otherwise) to upload data;
c. failure to ensure the accuracy etc of the data uploaded;
d. failure to adhere to the User Guide;
e. uploading of defamatory or other unlawful material (whether by the firm, any user, any member of the public or any third party user); and
f. any fees due to the firm from Lenders or third parties.
14. In addition to the usual provisions allowing either party to terminate for material breach or insolvency on the part of the other, DFL may terminate the agreement in the following circumstances:
a. If its relationship with "the Lender" is terminated. Note it is not clear whether termination of the relationship with one Lender is sufficient to trigger this right, where DFL might still have continuing relationships with other Lenders.
b. If instructed to do so by the Lender where the firm is no longer on the Lender's panel. Similarly, it is unclear how this would work if the firm ceased to be on one Lender's panel but remained on those of others.
c. If the firm undergoes a change of control. As defined, this could be triggered by changes in the composition of a practice as partners, members or shareholders leave or join it.
Members with observations or questions for the Society arising from this note should in the first instance contact Alison Mackay of the Society's professional practice team by telephone 0131 476 8353 or by email firstname.lastname@example.org
21 May 2014
Consultation on the Home Report
Home Reports have now been in operation for over 5 years and on 5 December 2013 a Consultation document was issued by Scottish Government as the first stage of a policy review of the Home Report. The second stage of the five year review will involve a research study due to begin late Spring/early Summer 2014 which will consider and build on the Interim Review and the findings from the consultation to evaluate how the Home Report has performed over its five years of operation. It will also contain a market analysis to provide a comprehensive review of Home Reports.
The Society has prepared a Response.
The Response has provoked some press interest in relation to the Society's view on the cost of Home Reports and the effects of this upon the seller and Ross Mackay, convener of the Law Society of Scotland's Property Law Committee has said:-
"Since the introduction of Home Reports we have received clear anecdotal evidence from our members that there have been numerous examples of sellers being unable to place their property on the market, as the upfront costs have simply been too high. For people who have to sell their property for financial reasons and who simply can no longer afford their mortgage payments, it is exceptionally difficult for them to meet the cost of a Home Report in addition to essential advertising and marketing costs. The combination of a difficult selling market with this rise in selling costs has in our view contributed to the rise in both repossessions and sales by distressed sellers."