The case that separate representation in mortgage transactions is the wrong decision for the wrong reasons at the wrong time

After some 30 years as a partner, specialising in residential property with a firm which (according to the Keeper) registers more deeds in Scotland than any other firm, and having personally concluded in excess of 600 missives per annum for each of the last 10 years and most of the 20 preceding that, I feel both utter dismay at the current separate representation proposals, and sufficiently qualified to hold that view.

Cutting through the various arguments, most of which hold some validity, this must surely be the most blatant example of conveyancing protectionism at the expense of, first, the consumer and secondly, the opportunity to improve, rather than ruin, a system long regarded as one of the best in the western world. This is simply the wrong decision for the wrong reasons at the wrong time.

Wrong decision

It is the wrong decision because 99% of residential property transactions don’t require separate representation but rather have a commonality of interest between the solicitor, lender and client. Of course there will be cases of conflict of interest, and indeed from the academic’s point of view and the various examples given in the article at Journal, March, 12, the issue provides a real source of theoretical problems; but in reality the position is as stated by Kennedy Foster, namely that there is “a common interest in achieving a good and marketable title to the property” – to which I would add, as quickly and efficiently as possible.

Conflicts of interest will arise; they do in every avenue of a solicitor’s business dealings. One simply needs to recognise when it is necessary to resign. Better education and training, such as an accreditation scheme, would resolve this, and a simple amendment to the normal terms and conditions issued to clients could specify the need to share confidential information with the lender.
I would estimate that virtually 99% of cases could be handled in this manner, which begs the question – do you change a system to correct the 1% of problem cases, or do you look to the consumer’s interests and correct the practical problems in an otherwise excellent system?

Wrong reasons

It is for the wrong reasons because it promotes mediocrity in place of excellence and consumer interest. Even those arguing in favour of separate representation agree that it will cost the consumer more and create longer delays, but seem happy to accept this as a necessary evil. Only Graham Matthews appears to have the common sense and practical experience to realise, “That way lies absolute chaos”.

I now spend an inordinate amount of time explaining to bemused clients why their contract for sale has not been concluded by the purchaser, and why they are therefore at risk in concluding their purchase. I see at first hand daily the ongoing and increasing frustration, uncertainty and anguish which this causes, and the realisation that they perceive the legal profession to be providing a poor standard of service. Perhaps most worryingly of all, my many conversations with lawyers on the opposite side of these transactions leads me to believe that there is little empathy for such clients’ concerns, and a very, very poor level of consumer service.

I am told in the various arguments for sep rep that transactions are now “more complex” – yet we have standard missives, we have instantaneous online availability of land certificates and similar access to property enquiry certificates, to say nothing of the ability to communicate by fax and email. Of late we have also had a vast reduction in the number of lenders, and accordingly in the variety of loan offers. This progress has resulted in an increase in the average timespan for conclusion of missives, during my career from approximately three days to approximately three weeks.

I read further that “nobody at the moment is able to conclude a contact because they are waiting for loan instructions”. Obviously true in some cases where the risk in concluding is too great due to the purchaser’s financial position, but in many others, as Graham Matthews alludes to, there is a real risk that the “deal” will be lost for the purchaser. In Aberdeen several firms now adopt a standard practice of not concluding missives until loan papers are physically received. Surely this should be a risk assessment for both solicitor and client, and not a given. Presumably a more active market, as we are beginning to see in Aberdeen, will test this “standard” procedure, but surely the way forward is for a dialogue with the Council of Mortgage Lenders to ensure that an agreement in principle is once more sufficiently reliable to warrant concluding missives.

For the profession’s part, we too need to put our house in order. The CML clearly wants to restrict panels in order to reduce risk. At present it can be statistically shown that the majority of fraud and incompetence leading to claims is carried out by one or two partner firms. Yet in my experience some of the best and most prudent conveyancers are from such firms. Surely an accreditation scheme of the type suggested by Kennedy Foster is also the way forward, so that the profession can be seen to be striving for excellence, and claims against the Master Policy are reduced as a result of an increase in competence rather than having one solicitor police another at the consumer’s cost. The CML is also uncomfortable with having firms who deal in very low volumes of conveyancing on their panels, for obvious reasons, and again an accreditation scheme would remove any concerns in this regard.

Wrong time

It is the wrong time because it follows massive claims on the Master Policy as a result of major fraud and incompetence by certain solicitors, huge volumes of work and, it has to be said, very unsound lending criteria, creating a perfect storm which is unlikely to be repeated in the future.

Lenders have clearly made many errors in lending policy over the last decade and recent circumstances have resulted in major corrections, perhaps over-corrections on their part. The problems of “back to back” transactions have largely been removed by the lenders’ refusal to lend on properties owned for less than six months; and the need for larger deposits and more rigorous credit checking will surely reduce the level of repossessions and consequent future claims from an already low figure which I understand to be historically only 0.3% of properties in Scotland.

We do not have to accept Anglicisation. We already have an excellent system which has the capability to provide a consumer service second to none.

The Author
Robert M Fraser, partner, Aberdein Considine, Aberdeen  
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