Professional practice updates 2011
Lenders Update - December 2011
Santander
Following the letter Chief Executive's letter to Santander
protesting at the imposition of an annual compliance charge on
panel members, a meeting was arranged with Santander's Director of
Legal Services and the operational director responsible for the new
panel management system. We stressed our opposition in principle to
their decision to recoup the operational costs of the new system
from panel members and our concern at its complexity. However
Santander took the view that they are entitled to put in place as
robust a system as possible in order to deter mortgage fraudsters.
They also consider that their charging policy is transparent, as
membership of the panel is not compulsory and firms can decide
whether they are prepared to pay the fee.
They did concede that as far as they were aware none of our
members had misappropriated funds and that the new system might
therefore seem disproportionate to their exposure to risk in
Scotland. However the risk management benefits and savings in costs
in having a uniform system for the UK outweighed any
disadvantages.
They pointed out that the annual fee might be reduced once the
initial start-up costs had been recovered. They confirmed that the
system is being operated by an external provider but assured us
that firms' confidential details would be secure and that the
provider would not be allowed to make a profit at the expense of
panel members.
Lloyds Banking Group
The Society has engaged with Lloyds Banking Group regarding a
circular which the Group issued to panel members in October
highlighting their continuing concerns over delays in the
registration of securities. While the Society fully
understands the Group's concerns, we had some
reservations about the wording of the circular.
The Group accepts that delays often arise in the
registration process which are completely outwith the control of
solicitors. It also acknowledges that the existing
registration system does not provide for any flow of information
from the Registers to agents on the progress of an application for
registration. Accordingly, unless a Requisition is issued by the
Registers, it is not possible for agents to keep lenders updated in
this respect. However, if a Requisition is issued, LBG would expect
to be advised if the agent anticipates any difficulty in complying
with it.
The Group confirmed that agents should forward evidence
that an application has been submitted as soon as they have
received the relevant acknowledgement from the Registers and in any
event within 6 weeks of settlement of the transaction. They accept
that a receipted Form 4 is no longer issued.
In addition the Group confirmed that it expects
panel members of to use ARTL wherever possible in order to take
advantage of the almost immediate registration of title and
security. However it is aware of the limitations of the ARTL system
and appreciates that there may be valid reasons why it is cannot be
used for a transaction where the application would appear to be
compatible.
Regrettably the Group is unwilling to review its
policy of not releasing Discharges before receipt of redemption
funds, despite the adverse effect this has on registration of title
transfers and new securities by both the ARTL and traditional
methods. However it is committed to a policy of all Group members
using ARTL to execute Discharges, as soon as technical resources
allow this.
More generally the Group accepted that substantial
changes to its requirements should be effected through
revisals to the CML Handbook as well as being flagged up in a
circular. This would help to ensure that firms acting on its
behalf are fully familiar with its processes and
requirements.
Delay in registration of Powers of Attorney - December
2011
Having received a number of reports from members of the
profession expressing concern about the extended turnaround times
for registering Powers of Attorney the Society sought to discuss
issues relating to the current processing times with the Office of
the Public Guardian (OPG).
A full and informative response was received setting out the
"PoA Position - Nov 2011" taken from the OPG's internal drive.
Hopefully this will be placed on the OPB website and a link to the
full report will be circulated.
In summary - for some reason in March 2011, and continuing,
there has been a stepped increase in the numbers of Powers of
Attorney submitted (250 per day from an historical average of
around 200 per day). Administering this additional number has been
problematic as it coincided with a reduction in staffing
numbers.
A combination of staff over-time and the employment of some
temporary staff will hopefully see an improvement in the
registration times shortly, but restoring pre March 2011 turnaround
times will probably require the electronic solution that is
currently being developed, that is projected to be field tested
from 12 February 2012 and generally available from 12 April
2012.
In the meantime if the OPG is satisfied there is particular
urgency it offers an expedited registration service. The OPG asks
that people respect this service and only seek to use it in cases
of true urgency to avoid defeating its purpose.
Update on Keeper's Policy on RBS v Wilson - November 2011
The Keeper of the Registers of Scotland has informed the Society
that she has decided not to change her policy in relation to
repossession sales where there is more than one outstanding
security. As reported in the July e-bulletin, it is the policy of
the Keeper, when processing applications for registration of
dealings affected by the decision in RBS v Wilson, not to remove
from the relevant Title Sheet additional securities over the
property which rank pari
passu with or postponed to the security which has been called
up. Normally such securities would be removed under s.26 of the
Conveyancing and Feudal Reform (Scotland) Act 1970. However the
Registers have reaffirmed the Keeper's current policy to disclose
any remaining securities on the Title Sheet unless they have been
formally discharged and to expressly exclude indemnity in respect
of loss arising from rectification to delete those securities or
from the subjects being found not to have been disburdened of them
in terms of s.26.
As a result of this policy, Land and Charge Certificates issued
to purchasers' agents are indicating that the title is subject
to pari passu or
postponed securities granted by the defaulting borrower and that
these rank above any new security granted by the purchaser.
The Society had seen academic opinion to the effect that the
Keeper's policy is not well-founded. In terms of s.26 the subjects
are automatically disburdened of all securities on the recording of
a disposition which bears to be in implementation of a sale.
Accordingly any exclusion of indemnity relative to pari passu or postponed securities
in these circumstances would result in an inaccuracy in the Land
Register.
The Convener of the Conveyancing Committee, Ross MacKay,
comments: - "We are disappointed that the Keeper has not recognised
what appears to be a consensus of academic opinion that her current
stance is incorrect. We are aware that a number of practitioners
have been affected by this policy and as a consequence are unable
to provide mortgage lenders with a first-ranking security as
required under the CML Handbook. It would appear that they will
have no option but to submit an application for rectification of
the register under s. 9 of the Land Registration (Scotland) Act
1979 and to appeal to the Lands Tribunal if any such application is
rejected. This will inevitably involve agents and clients in
further delay, uncertainty and expense".
The Society will continue to make representations to the Keeper
on this matter.
CML Handbook Compliance Checklist
In conjunction with the Society's Master Policy brokers, Marsh,
the Society has prepared a compliance checklist to assist
practitioners when acting for a mortgage lender who subscribes to
the CML Lenders Handbook. This sets out the basic points which
should be covered when putting in place a new security for a loan
in connection with a purchase. It should be noted that it is not
designed to be an exhaustive list, nor is it a substitute for
undertaking an examination of the Handbook itself, which forms the
basis of the lender's instructions. The checklist is available to
download CML Handbook
Checklist
Civil Justice Committee - October 2011
On 30th September the Civil Justice Committee wrote to Roseanna
Cunningham in relation to jurisdiction limits for the Court of
Session. The letter can be read here.
New CML Disclosure of Incentives form for new-build purchases
from 1 October - October 2011
The Council of Mortgage Lenders (CML) Disclosure of Information
form (DIF) was introduced in September 2008, with the purpose of
drawing together all relevant information about newly built,
converted and renovated property transactions. The aim was to
improve transparency and to simplify the flow of information to all
key parties to the transaction. The CML has announced that from 1
October 2011 builders and developers will be required to fill out
an updated version of the DIF. As before the solicitor acting for a
purchaser who is obtaining a mortgage from a CML member lender
should obtain the completed DIF from the developer's agent. The
solicitor should then check with the client that the information
regarding the agreed sale price and any incentives accords with the
client's understanding of the position. The solicitor may also be
required to report the information in the DIF to the lender in line
with the lender's instructions as set out in Part 2 of the CML
Handbook. For example some lenders only require to receive
information on incentives where they represent over 5% of the
price. Further information, including the updated Form and FAQ's,
is available on the CML website:- http://www.cml.org.uk/cml/handbook/form
Changes to RBS lending policy on Home Reports - September
2011
The Royal Bank of Scotland (RBS) recently announced a revised
lending policy for RBS Group mortgage lenders relating to Home
Reports and transcription valuations in Scotland took effect from
15 August. The Group includes RBS, NatWest and The One Account.
From that date Group lenders will accept transcripts on residential
purchase mortgages prepared by the inspecting valuer who prepared
the Home Report valuation, provided that the following criteria are
met:-
- the date of the original inspection by the valuer was no more
than 3 months earlier;
- the valuer's firm is on the RBS valuers panel;
- the valuer verifies that the customer is registered with the
selling agent as a recipient of the Home Report; and
- neither the valuer nor the valuer's firm provided written or
verbal valuation advice relating to the potential sale of the
property prior to undertaking preparation of the Home Report
If any of these criteria are not met the lender will insist on
instructing its own valuation, at the expense of the
borrower. As it is common practice for selling agents to seek
valuation advice from a surveyor on behalf of prospective sellers
before commissioning a Home Report from that surveyor, the Society
believes that these criteria will significantly reduce the number
of transcripts which RBS Group lenders will obtain from the Home
Report valuer. It would be prudent for purchasers' agents to obtain
confirmation of the position before concluding missives.
HMRC concern over errors in paper-based SDLT Returns -
September 2011
HMRC has raised concerns regarding errors which are being made
by practitioners when submitting paper SDLT returns. These errors
are resulting in returns being rejected, which causes unnecessary
additional administration as well as delays in submitting
applications for registration. It should be noted that there is no
issue with returns filed electronically, as such errors cannot
arise when using that medium.
The problems are as follows:-
1) Box 49 - NINO & date of birth (DOB) of purchaser
(1)
HMRC need both
NINO and DOB for a return to validate and be processed. Agents are
supplying a NINO without a DOB, or vice versa, and such a return
will be sent back to them for correction.
2) Box 50 - VAT registration number
HMRC need a valid VAT reference number for
a return to validate and be processed. Agents are supplying
references which are not VAT reference numbers and
such a return will be sent back to them for correction. A VAT
reference number is 9 digits long, has no alpha characters and does
not start with '00'.
3) Box 51 - UK Company or partnership UTR number
HMRC need UK company or partnership Unique Tax Reference Numbers (UTRNs)
for a return to validate and be processed. Agents are supplying
references which are Company Reference Numbers [CRNs - maximum 8
digits and supplied by Companies House] and not company or partnership
Unique Taxpayer References [UTRNs - 10 digits - supplied by HMRC]
and such a return will be sent back to them for correction.
4) Combinations of boxes 49-51
HMRC need only
one data set for a return to process: only one of questions 49, 50 or
51 need be answered, as is made clear in their guidance (SDLT6 page
41)
Answering more than one data field will cause the return to
reject at the processing centre.
HMRC are currently preventing such rejections being returned to
agents by manually inputting rejected returns but will have to
reconsider taking this corrective action if the current rates of
rejection continue.
5) SDLT version 1
HMRC are still receiving SDLT1 version 1 return forms despite
giving wide publicity to the changes that took place on 4 July,
including mailing all known paper filers with a small supply of
SDLT1 versions 2s and updated guidance booklets SDLT6. Version 1
forms are simply no longer valid and will be rejected and returned
to the agent.
New members for Conveyancing Committee - September 2011
The Society is inviting applications from conveyancing
practitioners who are interested in joining the Conveyancing
Committee. The Committee's purpose is to consider matters relating
to the law and practice of conveyancing and where appropriate to
provide guidance and information to the profession. Meetings of the
Committee are held every two months, with occasional additional
meetings as required. Members are expected to have a working
knowledge of all areas of conveyancing law and practice, together
with a good knowledge of their particular specialised area of
practice, both gained through at least 5 years experience
(whether in private practice or in-house) or in academic study or
through working in a related field. They should also have a
commitment to and enthusiasm for the work of the Committee, an
understanding of conveyancing issues as they relate to both the
public and the profession, a willingness to listen and learn from
other members and the ability to think creatively and innovatively.
Members may also be required on occasion to act as a spokesperson
for the Society on conveyancing issues, to prepare articles and to
present at seminars and conferences.
The initial term of membership is 3 years with a maximum of two
repeat appointments. Members of the Committee are not remunerated
but travelling expenses are reimbursed.
Prospective applicants should contact the Secretary to the
Conveyancing Committee, John Scott (johnscott@lawscot.org.uk)
by 30 September 2011.
Technology Sub-Committee looking for feedback on ARTL - August
2011
In conjunction with the Conveyancing Committee, the Society's
Technology Subcommittee has set up a project group to investigate
technical issues relating to the Automated Transfer of Title to
Land (ARTL) system. The project group would like to hear from
practitioners who have experienced practical problems with ARTL,
particularly those who have used the system extensively. Feedback
should be sent to the Secretary to the Conveyancing Committee, John
Scott (johnscott@lawscot.org.uk)
Duty of Care in HSBC transactions - July 2011
Practitioners should be aware that HSBC Bank, which does not
subscribe to the CML Lenders Handbook, has been issuing loan
instructions which seek to impose an enhanced duty of care. The
relevant Report on Title contains an undertaking that the firm has
investigated the title to the property in question "in accordance
with current best conveyancing practice". The Society has raised
this with HSBC, who agreed that the required standard is in fact
"current conveyancing practice". However despite assurances that
their documents would be amended accordingly, HSBC is continuing to
issue loan instructions which contain the incorrect wording. If
necessary, practitioners should qualify any Reports on Title
submitted to HSBC, to ensure that they are not offering a duty of
care above the level covered by the Master Policy.
Changes to the role of auditors of court is assessing fees and
taxing solicitor/client accounts - June 2011
A delegation from the Society met with civil servants in the
Justice Directorate on 20 May to discuss aspects of the work
currently done by Sheriff Court auditors.
We were advised that from 30 April 2012 those Sheriff Court
auditors who are employed by Scottish Court Service will be barred
from undertaking private work either in relation to assessing fees
at the request of solicitors or extra-judicial taxations on a joint
remit from solicitor and client. Auditors who are not employed by
Scottish Court Service, including those in Edinburgh and Glasgow,
will continue to be able to offer such services.
All Sheriff Court auditors will continue to tax judicial
accounts.
In regard to extra-judicial taxation of accounts which have been
challenged by the client or where there is a joint remit it was
made clear that this will not be done through Scottish Court
Service, but it was suggested that it be done by the Society
through its Regulatory Committee which in terms of S133 of the
Legal Services (Scotland) Act 2010 is responsible from 1 June 2011
for all the Regulatory functions of the Society. The committee has
fifty percent solicitor and fifty percent lay membership and is
chaired by someone who is not a solicitor. It will be able to set
up Sub-Committees which will also require to be 50/50 solicitor/non
solicitor in membership. One of these could be a Sub-Committee
responsible for supervising taxation of accounts.
This will require to be discussed more fully, and the policy
would have to be agreed by Council as well as the Regulatory
Committee. However it should be possible to draw up a list of
persons (including Law Accountants and the Auditors of Edinburgh
and Glasgow Sheriff Courts) who will be available to tax accounts
on written representations. Their fees for doing so would be paid
by the solicitor or client depending on the outcome of the
taxation, just as at present. The Society's guidance on terms of
business letters could be extended to include a reference to such
an arrangement. The people carrying out the taxation would need to
be conflicted from taxing an account of a firm from whom they
receive private fee paying work.
The government are looking for a solution to be in place by
April 2012.
Update on Lloyds Banking Group - Feb 2011
Almost 50 firms have now informed the Society of their removal
from Lloyds Banking Group's (LBG) Scottish Conveyancing Panel at
the beginning of November 2010 because they had not carried out
sufficient new security business in the previous year. Of
these, six have successfully appealed against their removal.
However the majority of appeals have been rejected, on the basis of
a strict application of the low volume threshold by LBG.
Discussions are continuing with LBG both at operational and
board level and the Society is due to meet the Executive Director
for Scotland early in March. The Society is also looking
clarification from the FSA on the requirements it has imposed on
lenders in relation to panel management, and is continuing to lobby
MPs and MSPs on the effect of the panel cuts on client choice and
our members.
The Society is also seeking Counsel's Opinion as to whether
LBG's decision is open to challenge on the basis of a possible
breach of competition law.