Developing a method to cut delays

Conveyancers must be aware of the devil in the detail of the amended version of the CML handbook, warns Tim Higham

As conveyancers are now aware, amendments were made to the Council of Mortgage Lenders' (CML) handbook on 1 October 2002 in the form of the handbook's second edition.

Unfortunately, it is only available on-line from www.cml.org.uk - the idea being to continue progress towards the 'future' of e-conveyancing.

Conveyancers are reminded to consult only this edition for mortgage instructions dated after 1 October 2002.

Searches and disclosure

Of the changes contained in the second edition, the more notable include the abandonment of the two-stage age test for non-priority period search results.

They should now be no more than six months as at completion (the local authority search being the prime example) rather than three months at exchange and six months on completion.

However, linked to this is a reminder that the handbook does not lessen conveyancers' duties to their clients.

It might be arguable that to protect the client perhaps a six-month-old search should be repeated.

However, this change is perhaps welcome assistance to the conveyancer.

A further change is in respect of the issue of disclosure to the lender where the handbook does not adequately cover the point of concern.

Conveyancers are now required to tread a fine line and summarise the issue to the lender, and then recommend how the lender might protect their interest.

Turning to Cottingham v Attey Bower & Jones (a firm) [2000] EGCS 48, no clarity has been attempted; quite the opposite.

Conveyancers must ensure that no matter is revealed from searches and enquiries that show the property may be the subject of enforcement action.

This duty is not strictly limited to planning matters.

It is at best vague and at worse an open-ended duty more appropriate for the lender's surveyor to ensure certainly in the case of planning matters.

If only lenders' surveyors would raise those planning matters with which they require satisfaction or the CML would state time limits after which it does not have concerns.

Then the client could take a view.

Too many conveyancers have misinterpreted the ratio of the Cottingham case, so that the whole area continues to be in a terrible muddle and a missed opportunity.

In relation to insurance, what at first glance might appear as an aid to conveyancers is on closer examination a heightened duty.

Conveyancers are referred to part 2 of the handbook to see whether they must verify that the borrower's insurance policy is CML-friendly.

We continue to need to be insurance experts.

A solution might be to identify certain companies that are CML compliant.

Following a letter from John Burman (see [2002] Gazette, 24 October, 18), conveyancers might have expected some changes, clarity or reliefs from the surmounting obstacles the handbook now contains.

No such luck for the moment.

Unfortunately, or maybe not, conveyancers should now be aware of even more amendments from 1 April 2003 to the new CML handbook second edition.

The main change proposed (but let us hope some of the above matters might be clarified) concerns the new home warranties.

Conveyancers already know how inflexible developers can be over the terms and form of their contracts.

Road and sewer retentions, build duties, completion arrangements and plan/boundary changes post-completion are common battles and yet even sometimes forgotten from contracts by either or both legal representatives.

What is true is that in the absence of a fixed date for completion, almost invariably developers require legal completion to take place within days after service of their notice that they consider the property is practically complete.

In both cases, this can be despite outstanding works, which the developer may or may not be prepared to remedy by some sort of post-completion undertaking - albeit within a 'reasonable' time frame.

The result can be months of misery for homebuyers as they endeavour to negotiate with developers to correct the (sometimes dangerous) defects.

New builds

As a result of the problems arising from this, the CML in consultation with the Law Society, House Builders Federation (HBF) and the Home Warranty Providers is seeking to ensure that borrowers do not move into newly built homes which are dangerously incomplete (see [2003], Gazette, 30 January, 35).

Examples sited include missing doors, lifts not installed and skips left on site.

Undoubtedly, we can all add our own client tales to this.

Attempts by conveyancers to delay completion pending approval of the construction by their own clients' surveyors or indeed the lenders' surveyors are almost invariably refused by developers.

However, the forthcoming amendments to the second edition of the handbook will require conveyancers to ensure that when acting for buyers purchasing with a mortgage, for exchange of contracts post-1 April 2003 that all homes (no change to self-build schemes) have passed their final home warranty inspection before completion.

Even worse, before submitting a certificate of title, it is proposed that a conveyancer must have confirmation that the full new home warranty will be in place on or before completion.

Such confirmation might include a copy of the cover note or insurance certificate in the prescribed form.

As a result, developers' contracts will need to be revised.

Apparently the HBF is looking into standard clauses that can be incorporated into developers' contracts to reflect this change of approach.

However, to accommodate the CML, the contract will need to provide that a cover note or insurance certificate is supplied to the buyer either before a notice to complete is served or completion is to take place.

Interestingly, the National House Building Council (NHBC) already appears obliged by its own Buildmark policy to issue its ten-year guarantee on 'legal completion', irrespective of the fact that it may not have made a final inspection of the very property it is then obliged to guarantee.

This will need to be clarified and made conditional on a final inspection.

Consequently, from 1 April 2003 conveyancers will have a further duty to ensure that they not only take into account the numerous pitfalls inherent with a new build, but are mindful of the need to ensure that contractual changes are made to developers' contracts, so as to avoid problems over the release of the mortgage advance post-exchange.

Conveyancers are again reminded that this is in addition to conveyancers already obtaining from the NHBC a six working day priority period within which safely to exchange (see [2001] Gazette, 9 August, 45).

Tim Higham is an assistant solicitor at Wiltshire-based Awdry Bailey & Douglas