Professional practice updates 2014
Professional practice updates March 2014
The following statement was issued on 12 March 2014 to members with an interest in conveyancing. If you would like to receive updates from the Society on matters relating to residential property and conveyancing, please log in and update your details by choosing 'residential property' as an area of work. Please also ensure that your profile includes a valid email address.
I am writing to you about a serious and developing issue which is important for all firms carrying out residential property work. I have written separately to all cash room partners, asking them to pass this information to those members within their firms which work in conveyancing.
Last autumn, we were advised by the Council of Mortgage Lenders (CML) about a new conveyancing panel management solution facilitated by a company called Decision First. Decision First will provide a "gateway" between solicitors and banks involved in the scheme for the purpose of panel management. The objective is to help lenders streamline the panel management application process for the benefit of both solicitors and lenders.
Decision First has now developed a single interface called 'Lender Exchange'. This system will allow panel firms to keep lenders up to date with any changes to their practice. The scheme means that conveyancing panel members only need to provide their details and supporting documentation once to those lenders involved in the scheme. Lenders will then use information from this database to make their own decisions about membership of their conveyancing panels.
We know that Decision First will charge panel firms a single annual fee for use of the Lender Exchange system. We are deeply concerned about such a charge which we believe presents an unnecessary cost to process information. The Society already holds this kind of information about solicitors and we have openly expressed our willingness to provide this information free of charge to lenders. This would save our members from having to process this material again and prevent them from having to pay the fee to Decision First.
Lloyds Banking Group wrote to the senior partners of all firms on its conveyancing panel at the end of November 2013. They advised that all firms on their conveyancing panel would have to provide the required information via the Lender Exchange interface by the end of quarter 1 2014 if they were to remain on the panel. Santander has also written in similar terms to firms on its conveyancing panel.
I would like to make it clear that we continue to have deep concerns about this new system of panel management.
We worked with our colleagues at the Law Society of Northern Ireland and wrote a joint letter last December to all UK lenders in which we stated our serious concerns about the proposed new conveyancing panel management solution and requested that lenders who plan to implement this solution delay doing so until they can be appraised of our concerns.
We also carried out an online survey of our members in November 2013. The main issues of concern raised were the clear increased administrative burden, increased costs and no guarantee that by participating in the scheme solicitors will get onto lenders panels.
We have recently received a copy of the draft Terms and Conditions from Decision First which members would have to agree to and comply with. These were provided to us for our review on a strictly confidential basis with no promise of any views we have being taken into account. We have been pressing Decision First for permission to share them with you and our other members in the interests of transparency. However, Decision First has refused to allow this.
I have been contacted by members over recent days. It concerns me that an impression appears to have been given to suggest that the Law Society of Scotland has somehow approved or endorsed these terms and conditions. This is not the case.
Whilst we have been given the opportunity to review the Terms and Conditions on behalf of our members we cannot approve them. The Terms and Conditions represent a commercial contract between Decision First and the relevant law firm in which we would have no locus. The Society has however highlighted concerns in relation to jurisdictional and data security issues to Decision First.
We strongly advise our members to be cautious in releasing commercially sensitive and other data to Decision First without sight of the draft Terms and Conditions. Decision First has advised that the latest version of the draft Terms and Conditions will be available at the end of this week. We will publish these on our website once we are in a position to do so.
We are now issuing more regular updates on this and other conveyancing issues to those of our members who have indicated they are involved in residential property work. I would encourage those within your firms who would like to receive these updates and who do not current do so to log on to the members section of our website, tick the appropriate box and ensure they have a specific individual email address on record.
Finally, if you or colleagues have any questions about this then please contact my colleague Alison Mackay from our professional practice team by telephone 0131 476 8353 or by email firstname.lastname@example.org
With best wishes,
Law Society of Scotland
Faculty Services Limited, a service company for the Faculty of Advocates, has established the Faculty of Advocates Criminal Appeal Service. We have received a number of queries from our members about this service. We encourage members to read our responses to some of the frequently asked questions.
For those members involved with Conveyancing and Long Leases, there is a letter from The Scottish Government to the Society, dated 7 March 2014, which sets out key provisions and other important information regarding the Act. The link to the letter is:-
The Bill was introduced on 6th February 2014 and seeks to implement recommendations contained in the Report on the Scottish Civil Courts Review (2009) which was led by Lord Gill.
The Scottish Government Justice Committee expects to consider written submissions and to take evidence during March and April, before reporting on the Bill's general principles towards the end of May.
The Society's Civil Justice Committee is working with the Society's Criminal Law Committee and Acces to Justice Committee to provide both written and oral evidence on the Bill.
The Bill proposes-
- an increase in the privativative jurisdiction of the sheriff court from £5,000 to £150,000
- creation of a new office of "summary sheriff"
- establishment of a specialist personal injury court
- creation of a Sheriff Appeal Court and
- changes to the way to raise a judicial review
If you would like to send comments to the Society, in relation to the Bill, please contact Fiona Robb.
The "no" vote at the SGM in September 2013, against the separate representation of borrowers and lenders in conveyancing/security transactions, has not diminished the desire of lenders to actively manage panel membership.
Notwithstanding the establishment of a Law Society Working Party, the purpose of which is to negotiate fairer and more relevant rules in the CML Handbook for Scotland, lenders and lender groups continue to approach panel members on an individual basis with revised Terms of Membership.
A recent example brought to the attention of the Society's Property Law Committee was attached to a two page letter from Lloyds Banking Group. (Both a copy of the letter and the Terms of Membership can be made available on request: email@example.com)
Of the closely typed two page A4 letter all but three short paragraphs related to the proposed Lender Exchange Scheme.
The attached Terms of Membership were first mentioned in the penultimate paragraph of the letter. Significantly the Conveyancing Panel Manager was not looking for a signed acceptance of these, stating there would be an assumed acceptance of them if the panel member continues to accept instructions to act for any mortgage lender in Lloyds Banking Group. Only non acceptance required to be communicated along with return of any instructions.
In turn the Professional Practice Committee was asked to consider the confidentiality issues raised by the revised Terms of Membership.
One term provides a right to Lloyds Banking Group to inspect all documents and files relating to transactions carried out on behalf of any lender within the group. It was viewed that this wording may set up a contractual obligation that might not otherwise apply. If a solicitor was to refuse access to all files where this term has been accepted there might be a difficulty in defending an action for access to the files either on a contractual basis or in terms of Section 1 of the Administration of Justice (Scotland) Act 1972 even although separate files had been established as to what belongs to the borrower/purchaser client as opposed to the lender client.
In addition this term, and provisions that might be adopted to manage its effect, brings into sharp focus the tensions between duties of confidentiality and disclosure that may require a solicitor to cease acting. To compound the complexity such duties are probably both contractual and ethical.
It has to be remembered that where two or more clients are instructing the same solicitor in relation to the same matter neither of them is entitled to plead confidentiality in relation to joint business.
Other terms, that specify for the provision of information about the firm and its employees as may reasonably be required by Lloyds Banking Group, could prove problematic in relation to credit checks and searches against current employees.
Finally the terms may be changed by Lloyds Banking Group from time to time subject to at least 14 days' notice.
The Professional Practice Committee is keen that these points be highlighted to the profession, particularly for the benefit of those who may not yet have seen the Lloyds Banking Group's revised Terms of Membership, but also as a reminder to all solicitors of the need to consider carefully the implications of such terms of membership, particularly where there is an assumption of tacit acceptance.
Professional Practice Committee
It has come to the attention of the Society that Lloyds Banking Group are offering (on qualifying mortgage applications made between 4 March and 6 May 2014 inclusive) an incentive relative to first time buyers. Lloyds will pay a sum equal to the Stamp Duty Land Tax where the purchase is in the 1% SDLT Band (over £125,000 - £250,000) and a £250 cashback where the purchase price is below the 1% threshold (0 - £125,000). There is no incentive being offered for purchase prices exceeding the 1% band.
Lloyds have stated that the SDLT incentive payment will be made via CHAPS within 7 -10 days of the completion date. If the solicitor is relying upon the incentive payment to pay the Stamp Duty then that could result in the Stamp Duty not being paid until 10 days after settlement which would cause major difficulties.
The matter has been considered by representatives of the Property Law Committee who have considered that the appropriate way to proceed is for the solicitor to insist on receiving the SDLT payment upfront from the client/purchaser (to enable the Stamp Duty to be paid immediately after settlement) and thereafter to refund it to the client/purchaser only once it has been remitted to the solicitor by Lloyds.
The Committee reminds members that the primary obligation is to ensure prompt registration of documentation and anything else will be contrary to the interests of the purchaser and the lender.
24 February 2014