New criteria adopted by mortgage lenders to control the membership of their conveyancing panels have piled further pressure on smaller firms struggling to stay in the market.
The Gazette has learned that Metro Bank and Newcastle Building Society are among the institutions that have introduced new restrictions. They now require firms to have at least 120 purchase completions registered with Land Registry over the past 12 months.
The change follows a linkup between several lenders and the conveyancing outsourcer Legal Marketing Services (LMS), which claims to promote a ‘more responsible’ approach to panel selections. Some solicitors fear that the requirement for a defined number of transactions will prevent many smaller conveyancing firms from joining or remaining on panels.
Jonathan Smithers, president of the Law Society, said: ‘The number of transactions a firm has completed, particularly for smaller firms, does not necessarily indicate the quality of that firm’s work. We would urge lenders to look at qualitative indicators such as membership of the Conveyancing Quality Scheme when selecting firms.’
A partner at a conveyancing firm told the Gazette that her firm was recently ejected from a number of lender panels, including Metro Bank, and Melton Mowbray and Monmouthshire building societies, because it did not have the required 120 purchase completions.
Metro is a particular concern because, as a so-called ‘challenger bank’, it is aggressively seeking to compete with the established big lenders.
‘This seems to be a major shift and a worrying trend,’ she said. ‘I can see they might want to cut out firms that “dabbled”, but this is well beyond that.’
She added that her firm has a healthy conveyancing section and that the 120 purchase requirement sets the bar too high.
Andrew Knee, chief executive of LMS, told the Gazette that although his firm advises lenders selecting panels to take into account factors such as the number of cases a conveyancer undertakes each year, it is ultimately the lenders who make the final decision.
He said: ‘It is difficult, because if a firm falls below the cut-off point they think it should be lowered. But if lenders don’t have some sort of method, then they will go back towards having 5,000 firms on their panels.
‘A number of the lenders we work for, although by no means all, have decided that an average of 10 cases per month for a firm will give [the lender] the optimum result in terms of having a sufficient number of experienced firms within a manageable panel.’
Charles Morley, head of mortgage distribution at Metro Bank, confirmed that the bank uses LMS-recommended criteria to determine which firms to include on its panel.
‘The criteria are designed to ensure we work with experienced conveyancing specialists. As a bank, we pride ourselves on offering excellent levels of customer service so it is important that this experience is continued with our suppliers and partners,’ he said.
The bank said that 120 completions is only a guide. Other criteria it uses include requiring firms to have two partners or more, an A-rated insurer and membership of CQS.