For at least the past two years, the Law Society has been working hard to respond to a series of unwelcome and often confusing changes to lender panel membership.
While the Society has recognised the imperatives driving some of this work by the lenders - mainly the intervention by the Financial Services Authority, which called upon lenders to manage their panels intensively, and the need to react to the threat of fraud in the mortgage process - we consider that many of the changes lacked coherence, were based upon a questionable rationale and impacted on the profession and public in a damaging way.
We have talked to lenders, policymakers and politicians and sought to offer practical solutions for the benefit of housebuyers, lenders and our profession. We are confident that by supporting, even spearheading, initiatives that are in the best interests of the public we will also be able to bring great benefits to solicitors.
Central to all our work have been a number of key objectives:
- To preserve the dominant and central role played by solicitors in the home-buying process
- To maintain lender panels that are as open as possible
- To preserve client choice in their selection of a conveyancing solicitor
- To set the highest standards of competence, probity and customer service for solicitors undertaking conveyancing.
In 2011, the Society also launched the Conveyancing Quality Scheme (CQS) of accreditation with three objectives in mind.
First, to build, over time, a consumer brand that would educate housebuyers to seek out law firms that are accredited under the scheme and make these firms the natural choice of conveyancer at a time when regulatory changes are leading to a plethora of new entrants to the market. Membership of the scheme is open to any entity which satisfies the entry standards and is regulated by the Solicitors Regulation Authority.
Second, to establish a trusted community of conveyancers that would be the lenders’ natural choice. Third, to recognise minimum standards of practice. Through the use of agreed documentation, common procedures and education, CQS facilitates improvements in the process for lenders, borrowers and solicitors.
Like it or not, lenders now believe that the old days of allowing any firm of solicitors to act for them simply because they were solicitors are over. Of those who criticise CQS, few offer any practical or workable alternatives, save in one case the idea that we all resit our Law Society final exam every two years!
All of these troubling issues came to a head with the recent decision of HSBC to reduce its UK-wide panel to 43 firms. An immense amount of time and energy was put in by the Law Society and its members to solve the issue. Just as things were returning to normal, along came Santander with its unilateral and questionable decision to remove panel firms. Its reasoning is based on levels of activity for Santander, irrespective of other activity with other lenders in the market. Removals occurred despite firms having paid fees to the bank to gain membership of the panel.
Nationwide did a similar thing on a smaller scale some time ago, though at least in that case Nationwide looked at all transactions conducted by solicitors, not just those for Nationwide. We argued then and now that this approach shows no understanding of the impact those decisions have on the sustainability of small firms, the impact this could have on access to legal services and the questionable reasoning behind the process.
Commendably, Santander has now set up an appeals process which actively seeks information about activity levels with other lenders - something they might better have done before the appeal stage.
We have set up a team in our Practice Advice Service, available on 0870 606 2522, to help members deal with panel removals. We know that Santander has reinstated some firms precisely because they can demonstrate that they were active apart from Santander mortgages. If you have been removed by Santander, we urge you to speak with our team and consider an appeal.
Following representations made by the Society, Santander has commenced urgent talks with the Society to discuss the matter further. We are both working towards a mutually agreeable solution. We will report to the profession shortly on those talks. In response to these recent developments, a small but vocal group has called, once again, for a return to separate representation.
A key factor, which seems to go unmentioned but cannot be ignored, is that if the SRA (and it would be the regulator that would be required to make the changes) were to make separate representation compulsory, that rule would not apply to other, non-SRA regulated conveyancers, namely licensed conveyancers.
Would their regulatory body adopt the same position, requiring separate representation? We believe not.
This would give licensed conveyancers an immediate commercial advantage over our profession. They would be permitted to act for both parties and the lenders would be in a position to say that in the interests of the consumers, who are paying their fees, they could not justify appointing separate representatives and so would recommend licensed conveyancers to act.
Some lenders might sell their referrals to licensed conveyancers or establish their own alternative business structures. If you were the bonus-fuelled sales director of a lender, given that choice, what would you do?
The consequences of moving to separate representation would potentially reduce solicitors’ share of the market and tilt the already uneven playing field in favour of licensed conveyancers. The likely impact therefore, far from securing work for smaller firms, would be to produce quite the opposite effect.
Our concerns about this proposal go wider than that. Separate representation inevitably increases costs for the consumers, who have to bear the lender’s fees. It also introduces delays as two sets of legal advisers peruse and approve the same documents. This is a detriment to the consumer and proved a powerful argument in our recent discussions with HSBC.
That said, the Society is acutely aware of the unrelenting pressure on the profession from panel management changes. We are confident that the time to consider the separate representation rule is not upon us and there are, instead, alternative ideas and ways of improving the conveyancing process.
Make no mistake; if the current panel management process goes on with ever-shrinking panel sizes, the banks will take to themselves yet more market power, erect significant barriers to entry, create markets that rather than being open and transparent are closed and opaque. This will not help the public, access to justice or reforms (if that be the right word) of the legal services markets; the driving philosophy behind the Legal Services Act.
In this challenging situation, we are keen to welcome debate and discussion of informed and intelligent ideas about how to better secure the future role of solicitors in the residential conveyancing market. With this in mind, we propose to arrange a series of meetings across the country to explain the decisions the Society has taken and its current plans, to debate separate representation but, most of all, to seek the views of our members.
If you would like to attend such a meeting please email firstname.lastname@example.org indicating the most convenient town or city for you to participate in a meeting. Once we have a sense of numbers we can, if interest justifies it, arrange locations and dates for the meetings.
Desmond Hudson is chief executive of The Law Society. Jonathan Smithers is chair of the Society's Conveyancing and Land Law Committee