NEil ROSE TRACES THE CHEQUERED HISTORY OF BIDS TO DEFINE THE SCOPE OF SOLICITORS' DUTIES TO LENDERS UNDER JOINT REPRESENTATIONConveyancers are a hard-pressed bunch.

But the physical workload, at least, will shortly be reduced.

For on 1 October 1999, conveyancers can throw out those troublesome books of instructions from this bank and that building society - which have led to so many negligence actions against solicitors during the last few years - and replace them with a single, pristine lenders' handbook and a spanking new practice rule 6 (see [1999] Gazette, 6 May, 38).

The days of searching for the right handbook for the right conveyance are, it is to be hoped, over.October will also mark a watershed in relations between lenders and solicitors with regard to the latter's joint representation of lender and borrower, arguably the single most contentious issue in the legal profession in the 1990s.

For solicitors, it seems likely to mean more work, but it should mean more simplicity and, crucially, more certainty.The pastIn the early part of the decade, it was the lenders who had the upper hand, imposing significant burdens on solicitors and complaining about growing levels of fraud and negligence.

When, in 1992, the Abbey Nation al caused uproar by imposing stringent new terms of appointment and instructions on solicitors, Duncan Finlayson, assistant chief executive of the Lawnet network, said the extra work involved took away 'the last vestige of profitability in an area of practice only marginally profitable'.

Echoing a complaint that was to be made many times against all the lenders, he accused Abbey National of protecting itself at the expense of solicitors.The following year the Law Society began a campaign against cut-price conveyancing, but calls to introduce a ban on such practices, or reintroduce scale fees - which were abolished in 1972 - were rejected.In May 1994, the courts ruled against solicitors when Mortgage Express successfully sued Oxford law firm Bowerman & Partners for its failure to pass on information that emerged in a 1990 property transaction that cast doubt on the accuracy of the valuation.

Sitting in the Queen's Bench division, Mrs Justice Arden made a key ruling that solicitors were under an obligation to 'bring to [the lender's] attention matters of which they knew, or ought as reasonably competent solicitors to have known, would be material to the plaintiff' in deciding whether to withdraw from the transaction.Nevertheless, a Law Society consultation at the same time showed strong opposition to separate representation, even though its ruling Council only voted down the idea narrowly.

But the Council passed a motion saying that 'unrestricted joint representation of borrower and lender may in some circumstances no longer be an option'.

As lenders' requirements became increasingly onerous - the Halifax, for example, was insisting that solicitors checked the appropriateness of assumptions made by a valuer - there were moves to define the limits of a solicitor's responsibility to a lender.This led to the start of an initial 18 months of negotiations between the Law Society and the Council of Mortgage Lenders (CML), regarding the creation of standard mortgage instructions (SMI).While the negotiations continued, the election of Law Society President Martin Mears and Vice-President Robert Sayer in 1995 heralded a major, but ultimately fruitless, effort to boost conveyancing fees.

The so called conveyancing fee initiative, also generated heated debate over the link between negligence claims and cut-price conveyancing.

Plans to introduce prescribed fee levels soon fell apart.

John Bridgeman, the director general of fair trading, wrote to Mr Mears, saying: 'I do not believe that setting minimum prices is a suitable way to protect consumers against negligence in the provision of conveyancing'.Standard instructionsIn October 1996, 18 months of negotiations between the Law Society and the CML culminated in agreement on the SMI, setting out the contractual relationship between conveyancer and lender.

Six lenders, accounting for more than half of the industry - the Halifax, Woolwich, Abbey National, Alliance & Leicester, Nationwide and NatWest Home Loans - signed up to the scheme.

'Instead of having to look at 40 or 50 different handbooks from different lenders, solicitors will now only need to look at one,' said Ken Byass, who led the Law Society's negotiating team.An early 1997 launch was planned for the SMI, which included provision for payment of conveyancers for acting for the lender on the basis of an indicative range of fees, although payment would not be made directly.

Instead, borrowers would be advised by lenders of the need for payment and the range of fees appropriate.

This provision was attacked by various property campaigners, who claimed it would mean that solicitors would not get paid.The SMI also included:-- information on the mortgage advice to be given to the borrower;-- a standard form report on title and the obligation undertaken by conveyancers when they signed it;-- the documents owned jointly by lender and borrower;-- how long the file was to be kept; and-- how to deal with stale searches and search insurance.In April 1997, the Office of Fair Trading (OFT) warned that unless the 'fee fixing' element of the SMI was removed, the whole agreement could be referred to the restrictive trade practices court.

The Law Society immediately delayed the SMI launch.Two months later, the Society's Council decided to consult once again on the issue of separate representation.

In a paper circulated beforehand, the policy committee said joint representation was not 'sustainable, particularly bearing in mind the cost to the profession of claims from lenders under the present arrangements'.At the same meeting, Mr Byass warned that if the SMI were not approved soon, the mortgage lenders might 'go it alone'.

His view was backed up by Fiona Hoyle, the CML's senior legal adviser.

As these disputes continued, the lenders continued to sue solicitors.But June 1997 saw the tide of successful lenders' claims reversed by the Court of Appeal in National Home Loans v Giffen Couch & Archer [1997] 3 ER All 808 (Court of Appeal).

The case was hailed as going a long way to bringing a degree of certainty to the lender/solicitor relationship by, first, highlighting the need for lenders to be more prudent, and secondly, requiring lenders to provide clear instructions.

Writing in the Gazette (see [1997] Gazette, 2 July, 31) professional indemnity specialist Wanda Barry of Mills & Reeve in Cambridge said the judgment showed that 'on matters going beyond title, lenders now need to be clear about what they require from their solicitors.

In the absence of clear instructions to the contrary, it places the burden of investigating the borrower's financial position back where it belongs - with the lender'.

Ms Barry said the decision confined Mortgage Express v Bowerman [1996] 2 All ER 836 (Court of Appeal) to its facts.

In February 1998, the House of Lords refused National Home Loans leave to appeal.The results of the consultation were announced in late 1997, with 79% of the 2,015 respondents supporting a change to rule 6.

Allowing solicitors to act for lender and borrower under instructions approved by the Law Society was the most popular option for change, with support from 47% of respondents, while 25% favoured letting solicitors act for both only when the retainer was limited to matters of title.

Almost one in five wanted joint representation banned altogether.

As a result, the Society began work on a standard form of instructions which would be the only form under which solicitors could act for both lender and borrower.The Society, in part, made this move as a tactical gambit to resolve the impasse over the SMI.

The paper presented to the Society's Council said: 'The lenders presumably wish to preserve joint representation as far as possible.

Accordingly, they can perhaps be expected to reach a conclusion to the discussions on the SMI quite quickly, if the Council indicates that it proposes to limit joint representation to circumstances where the lender's instructions have been approved.' The OFT told the Law Society that it opposed making separate representation mandatory and expressed some reservations about permitting joint representation only on the basis of approved instructions.Unsurprisingly, the Law Society Council decision to investigate standard instructions was strongly criticised by the lenders.

Fiona Hoyle said the CML would lobby the Master of the Rolls, Lord Woolf, to reject any rule change.

'Lenders as clients should have the right to instruct solicitors on their own terms,' she said.In April 1998, Mr Byass, then chairman of the Society's property and commercial services committee, warned that if the SMI were not agreed within three months, they would never happen.

He said the extent of the duty owed by solicitors to lenders was proving the main sticking point in negotiations with the lenders.

'We believe that all we are required to do is give property a clean bill of health.

Increasingly we are being asked to do things that lenders should do themselves...

If there is no agreement in three months, we clearly have not got any commonality of interest,' he said.However, Ms Hoyle was more upbeat, saying she thought agreement could be reached within 'a couple of months'.

She said the lenders had recognised that they were putting 'fairly onerous obligations' on lawyers and had agreed to amend the SMI to moderate them.Nevertheless, in September, to the fury of the lenders, the Society's Council voted for a new rule 6 which limited joint representation to circumstances where the lender did not impose unreasonable standards.

Although the Society then sought to reopen discussions about the SMI, by December Mr Byass had declared the four years of negotiations over and the SMI dead.

In response, the CML said it might work on its own standard instructions and also began discussions with the government to introduce the dormant authorised conveyancing practitioners scheme contained in the Courts and Legal Services Act 1990, which would allow institutional conveyancing.The futureHowever, from this low point a new impetus suddenly emerged and agreement on the handbook drafted by the lenders and a revised rule 6 was achieved remarkably quickly.

By last month both sides were declaring the project a success.

Many said the two documents amounted to the SMI by another name.Speaking at last month's Law Society Council meeting, Vice-President Robert Sayer, who led the rule 6 task force, said he was happy with the handbook which, after 15 drafts, 'does not put unreasonable requirements on practitioners'.

For example, on the vexed question of the borrower's identity, Mr Sayer said solicitors no longer had to take responsibility for forgeries.

Mr Sayer pointed to clause 1.4 of the handbook as the underlying principle, which says: 'The standard of care which we expect of you is that of a reasonably competent solicitor or licensed conveyancer acting on behalf of a mortgagee'.The handbook has been accepted by Abbey National, the Halifax, Nationwide, the Woolwich, Alliance & Leicester, NatWest Home Loans and Cheltenham & Gloucester, which between them have the major share of the mortgage market, while an additional 60 lenders have expressed interest in it.

The lenders are to start printing and distributing the handbook, while the Society is to begin a nationwide education programme, which is likely to include a series of roadshows and seminars, together with printed materials, to help solicitors get to grips with the newly amended rule 6.

Having originally been scheduled for implementation on 1 June, and then 1 September, the final version of rule 6 will now take effect on 1 October 1999 to give both sides time to prepare.Mr Byass, who was a member of the taskforce, said it was 'as satisfactory a conclusion as is reasonably possible' and gave the profession 'an opportunity to remind itself of its duty to lenders'.

The Council's decision to tighten up rule 6 last year 'has been very beneficial' in the Society's negotiations with the CML, he added.

Ed Nally, chairman of the Society's conveyancing and land law committee and another member of the taskforce, said the CML had 'shifted its position in a tremendously helpful way'.

Despite a few Council members expressing concerns on specific clauses, the handbook was seen as a reasonable compromise which was not ideal, but was workable.The CML's Fiona Hoyle hailed the initiatives as 'one of the most significant developments in conveyancing practice for a very long time'.

She said rule 6 was now 'in a format that is able to be more readily understood by lenders and the profession'.

Both the CML and the Law Society had taken each other's points and were working together.

She said the handbook was a 'more streamlined version' of the SMI, and that they had 'recognised that lessons had to be learnt from the negotiations' regarding the SMI.The implicationsRichard Hegarty, a former chairman of the property and commercial services committee, has found that between the new, expanded rule 6 and the handbook, which runs to 30 pages of A4, conveyancers now have to check 125 different matters to ensure that they have not been negligent.

While this number includes many that are not necessarily relevant to all conveyances, such as questions relating to leasehold properties, Mr Hegarty says there are a core 70 to 80 points that need to be checked every time.It is, he says, a 'comprehensive' list, rather than an excessive one, that represents 'the job we've go to do'.

It will mean that conveyancers 'have to take more care once the lenders' handbook comes out than they do now', but also clarifies the extent of their obligation to lenders.

As the paper that went to Council last month put it: 'Whilst the legal effect of rule 6(3) is ultimately a matter for the courts, solicitors will be able to use the lenders' handbook in the knowledge that it contains a certificate of compliance with the rule and an acknowledgement that the limitations set out in the rule apply to its instructions (and any separate instructions issued)'.Ed Nally says the idea of a checklist could be very useful and that the working party looking at educating solicitors about rule 6 will use Mr Hegarty's list at least as a starting point.

While keen to stress that the new regime will not be a 'soft option' or a return to the good old days 'when we just had to certify a good and marketable title, and then close the file', Mr Nally welcomes it.

It will mean more work for solicitors, he concedes, and says there are 'lots of traps' of varying degrees of seriousness within the handbook.

But the fact that lenders cannot keep on adding new obligations, as was the case, is a major development, he argues.

Once conveyancers become familiar with rule 6 and the handbook, they should know where the traps are, Mr Nally says.The Law Society has, for many years, pleaded with conveyancers to charge proper fees for their work, and Mr Nally stresses that 'the lenders recognise that solicitors should charge properly' for the extra work they will have to do under the new rules.

'This is the big issue the profession has to understand,' he says.

'It may well be that the publicity surrounding this will awaken solicitors to the reality of charging proper fees.'As part of its preparations for 1 October, the Society is to pro vide guidance on the amount of time and work that will be required to implement the instructions to give solicitors a good guide to the level of fees they should be charging.Charles Wilson, chief solicitor to the Nationwide, welcomes the fact that 'common sense has prevailed' and that solicitors and lenders have been able to work together for the benefit of their customers.However, Mr Wilson said he would be 'very surprised' if solicitors were being asked to do more under the new provisions than before.

While he concedes that some law firms may charge too little, equally some may charge too much.

'The lenders do not seek to direct charges,' he explained, suggesting that a 'market equilibrium' would prevail.Mr Nally says this new rapprochement with the lenders is not exactly 'kiss and make up time', but does 'potentially build bridges back up'.

The entrenched 'them and us' positions taken up by both sides in previous years are, he hopes, in the past.

Mr Nally praises the attitude of both sides in the negotiations during the last few months and says there is a stronger recognition of common interests and that each side has a 'perfectly rational and proper point of view to express'.FOR FIVE YEARS DEBATE HAS RAGED OVER HOW TO MAKE CONVEYANCING WITH JOINT REPRESENTATION WORK BEST.

FIONA HOYLE ASSESSES THE NEW PRACTICE RULE 6The lending industry has made no secret of its strong opposition to the original changes to Law Society practice rule 6.

The past five years have witnessed a plethora of consultation papers and initiatives aimed at improving conveyancing practice.

'The Cost of Default', 'Adapting for the Future', 'A Question of Title?' and the drafting of standard mortgage instructions have all played a role in influencing the debate.The two issues which have received constant support throughout are the continuation of joint representation and the development of standardised instructions for solicitors.

Indeed, both these points received additional coverage as part of the government's recent review of the homebuying process.During the past four months, the Council of Mortgage Lenders (CML) and the Law Society have worked together closely to ensure that the revised rule 6 is in a format which could be readily understood by both lenders and conveyancing solicitors.

Lenders were concerned that the rule, passed by the Law Society Council last September, was ambiguous and failed to recognise recent developments in both lending and conveyancing practice.Examples of initial problem areas included a requirement to check identification against either a signature or photograph of the borrower.

Identity checks are now commonplace under the money laundering regulations and are flexible enough to incorporate a variety of documentation, without requiring the lender to send the conveyancer either a photograph or a copy of the borrower's signature with each set of instructions.The standard certificate of title created another stumbling block.

In recent years some lenders have moved towards computer-generated, single page certificates of title.

Requiring lenders then to reproduce a standard four-page certificate could only be viewed as a retrograde step.

The initial rule also failed to recognise the increased use made of search insurance, the work being undertaken by some lenders towards the dematerialisation of charge certificates and how transitional cases would be treated once the rule had been implemented.

All these points have now been addressed in the revised rule 6.As the discussions on rule 6 progressed, one of the key issues was the implementation date.

In December 1998, the Law Society Council agreed that the date should be extended from 1 April 1999 to 1 June 1999.

However, it soon became apparent that if the revised rule was only to be agreed by Council at the end of April, an implementation date of 1 June would be unworkable for both lenders and conveyancers.

The changes to rule 6 have generated considerable systems implications for lenders in the run up to the year 2000.In line with the rest of the financial services sector, many lenders have introduced embargoes on additional systems work beyond September this year.

In undertaking the work to introduce rule 6, lenders required sufficient time to revise their instructions and procedures once the rule had been finalised, but within a time frame which saw implementation before the self-imposed embargoes became effective.Against this backdrop, the Law Society was persuaded that the implementation period should be extended to 1 October 1999.

In parallel to the work on revising rule 6, the CML, in conjunction with representatives from the Halifax, Abbey National, Nationwide, Woolwich, Alliance & Leicester, Cheltenham & Gloucester and NatWest Mortgages, has drawn up standardised mortgage instructions (the CML Lenders' Handbook) which comply with rule 6.The handbook will be introduced on a voluntary basis to tie in with the implementation of rule 6.

Approximately 60 lenders have indicated an initial interest in adopting the handbook.

The seven lenders involved in drafting the handbook will alone ensure that it is adopted by more than 60% of the residential lending sector from implementation.The Law Society has been closely consulted on the content of the handbook and the work undertaken on fine-tuning rule 6 and drafting the handbook was in the end inextricably linked.The CML and The Law Society agree that there are benefits for both lenders and conveyancers in having standardised instructions.

The changes to rule 6 left lenders with no alternative but to review their instructions if joint representation was to continue.The introduction of the handbook means that a significant duplication of effort will be avoided for not only lenders but also conveyancers, who would have otherwise been faced with a plethora of new instructions.The lending industry is currently finalising arrangements for printing and distributing the handbook to conveyancing solicitors and licensed conveyancers.

One option being considered would involve distributing the handbook with the Gazette.Where conveyancers have the necessary IT, they will be encouraged to access the handbook via the Web sites of the CML and the lenders.

For those lenders who operate throughout the UK and want uniform conveyancing instructions, separate versions of the handbook are being prepared for use in Scotland, Northern Ireland and the Isle of Man, and initial contact has already been made with the respective law societies.During the past 12 months there has been much debate on what impact the rule 6 changes will have on the provision of conveyancing services.

While rule 6 has prompted some lenders to review their current arrangements, many of the structural changes to the market were already in train.Options including direct conveyancing operations practised by legal firms, more extensive use of title insurance and lenders exploring authorised practitioner status, are all gathering some steam.

In the interim, it is clear that the panel arrangements currently operated by lenders and including high street practitioners will continue to play an important role.