The Master of the Rolls approved the Solicitors' Practice (Lender and Borrower) Amendment Rule on 29 September 1998.

It comes into effect on 1 April 1999.Practice rule 6 seeks to avoid conflicts of interest by setting out the circumstances in which a solicitor may act for more than one party in conveyancing, property selling or mortgage related services.Rule 6(3) deals with a solicitor acting for both lender and borrower.

In addition to its existing requirements it will, with effect from 1 April 1999, define the scope of a solicitor's retainer with a lender whenever the solicitor acts for the borrower as well.A number of questions and answers on the changes are set out below, followed by the text of the Solicitors' Practice (Lender and Borrower) Amendment Rule 1998.

The amendment rule shows the changes to practice rule 6(3) and the notes in bold type.Questions and answersQ Why is it necessary to change the rule by defining the scope of a solicitor's retainer with a lender when the solicitor is also acting for the borrower?A Solicitors have traditionally been able to act for both lender and borrower because their duties to the lender were restricted to matters of title where the lender's and borrower's interests coincide.

Over the last few years lenders have increasingly required solicitors to undertake tasks and give assurances on matters which go beyond the work normally required of solicitors by lenders.

This has led to an increased risk of conflict between the interests of lender and borrower.Q What about the current restrictions?A These remain unchanged:-- acting for both lender and borrower is never allowed if there is a conflict of interest - paragraph (3)(a)(i);-- acting for both lender and borrower is never allowed on the grant of a private mortgage of land at arm's length - paragraph (3)(a)(ii) and note (i);-- a solicitor must disclose to an institutional lender certain relationships with the borrower (for example, the solicitor is the borrower's sister) - paragraph (3)(b)(i) and notes (iii)-(v);-- a solicitor must notify an institutional lender if the solicitor will be acting for seller, buyer and lender - paragraph (3)(b)(ii).Q Assuming there is no conflict of interest, is it still possible to act for both the lender and the borrower in an institutional mortgage?A Yes, but the new rule 6(3) imposes certain safeguards to reduce the risk of a conflict of interest arising, such as:-- the lender's instructions must not extend beyond the limitations contained in paragraphs (3)(c) and (3)(e) - this applies to all types of transaction: residential, commercial or mixed;-- in addition, the approved certificate of title set out in the appendix to rule 6(3) must be used for exclusively residential transactions - paragraph (3)(d).Q How is a solicitor to ensure that the mortgage instructions comply with the rule?A It is envisaged that lenders will certify that their mortgage instructions do not extend beyond the limitations set out in the rule and, if that is the case, the solicitor need take no further action - note (ii).Q What if the lender's mortgage instructions are not certified?A The following steps should be taken:-- in a residential transaction, the solicitor must notify the lender on receipt of instructions that the approved certificate of title will be used, and that the solicitor's duties to the lender are limited to the matters contained in the approved certificate - paragraph (3)(d) and note (ii);-- for other types of transaction, the solicitor should notify the lender that the solicitor cannot act on any instructions which extend beyond the matters contained in the rule - note (ii).Q What if the solicitor is acting for the borrower only but the lender's solicitor requires undertakings which relate to matters outside those listed in paragraph (3)(c)?A The borrower's solicitor must decline to accept or act upon any such requirements - paragraph (3)(f).Solicitors' practice (lender and borrower) amendment rule 1998Rule date 29 September 1998 made by the Council of the Law Society with the concurrence of the Master of the Rolls under section 31 of the Solicitors Act 1974 and section 9 of the Administration of Justice Act 1985.(1) In rule 6 of the Solicitors' Practice Rules 1990 (avoiding conflicts of interest in conveyancing, property selling and mortgage related service s) as amended on 16 January 1998 by the Solicitors' Practice (Property Selling) Amendment Rule 1998, delete paragraph (3) and substitute:(3) (Solicitor acting for lender and borrower)(a) A solicitor must not act for both lender and borrower on the grant of a mortgage of land:(i) if a conflict of interest exists or arises;(ii) on the grant of a private mortgage of land at arm's length;(iii) if, in the case of an institutional mortgage of property to be used as a private residence only, the lender's mortgage instructions extend beyond the limitations contained in paragraphs (3)(c) and (3)(e), or do not permit the use of the certificate of title required by paragraph (3)(d); or(iv) if, in the case of any other institutional mortgage, the lender's mortgage instructions extend beyond the limitations contained in paragraphs (3)(c) and (3)(e).(b) A solicitor who proposes to act for both lender and borrower on the grant of an institutional mortgage of land, must first inform the lender in writing of the circumstances if:(i) the solicitor or a member of his or her immediate family is a borrower; or(ii) the solicitor proposes to act for seller, buyer, and lender in the same transaction.(c) A solicitor acting for both lender and borrower in an institutional mortgage may only accept or act upon instructions from the lender which are limited to the following matters:(i) taking reasonable steps to check the borrower's identity against a photograph and/or specimen signature supplied by the lender;(ii) making appropriate searches relating to the property in public registers (for example, local searches, commons registration searches), and reporting any results specified by the lender or which the solicitor considers may adversely affect the lender;(iii) making enquiries on legal matters relating to the property reasonably specified by the lender, and reporting the replies;(iv) reporting on how the borrower says that the purchase money (other than the mortgage advance) is to be provided;(v) reporting if the seller has not owned or been the registered owner of the property for at least six months;(vi) confirming that the buildings insurance is in place for the sum required by the lender;(vii) investigating title to the property and rights enjoyed by occupiers of it, reporting any defects revealed, advising on the need for any consequential statutory declarations or indemnity insurance, and effecting indemnity cover if required by the lender;(viii) reporting on any financial charges secured on the property which will continue to affect the property after completion of the mortgage;(ix) in the case of a leasehold property, confirming that the lease contains the terms stipulated by the lender and does not include any terms specified by the lender as unacceptable;(x) making appropriate pre-completion searches, including a bankruptcy search against the borrower and any guarantor;(xi) receiving, releasing and transmitting the mortgage advance, including dealing with any retentions;(xii) procuring execution of the lender's mortgage deed by the borrower and any guarantor, and their signatures to the lender's forms of undertaking in relation to the use, occupation or physical state of the property;(xiii) obtaining consents in the form required by the lender from existing or prospective occupiers of the property specified by the lender, and reporting to the lender any other occupiers notified to the solicitor by the borrower;(xiv) advising the borrower on the terms of any document supplied by the lender for the bor rower's signature;(xv) advising any other person required to sign any document supplied by the lender on the terms of that document or, if there is a conflict of interest between that person and the borrower, advising that person on the need for separate legal advice;(xvi) obtaining the legal transfer of the property to the borrower;(xvii) procuring the redemption of existing mortgages on property the subject of any associated sale of which the solicitor is aware;(xviii) ensuring the redemption or postponement of existing mortgages on the property, and registering the mortgage with the priority required by the lender;(xix) making administrative arrangements in relation to any collateral security, such as an endowment policy;(xx) registering the transfer and mortgage;(xxi) giving legal advice on any matters reported on under this paragraph (3)(c), and suggesting courses of action open to the lender;(xxii) disclosing any relationship specified by the lender between the solicitor and borrower;(xxiii) storing safely the title deeds and documents pending registration and delivery to the lender.(d) In addition, a solicitor acting for both lender and borrower in an institutional mortgage of property to be used as a private residence only:(i) must use the certificate of title set out in the Appendix, or as substituted from time to time by the Council with the concurrence of the Master of the Rolls, ("the approved certificate"); and(ii) unless the lender has certified that its mortgage instructions are subject to the limitations contained in paragraphs (3)(c) and (3)(e), must notify the lender on receipt of instructions that the approved certificate will be used, and that the solicitor's duties to the lender are limited to the matters contained in the approved certificate.(e) The terms of this rule will prevail in the event of any ambiguity in the lender's instructions, or discrepancy between the instructions and paragraph (3)(c) or the approved certificate.Anti-avoidance(f) A solicitor who is acting only for the borrower in an institutional mortgage of property must not accept or act upon any requirements by way of undertaking, warranty, guarantee or otherwise of the lender, the lender's solicitor or other agent which extend beyond the limitations contained in paragraph (3)(c).Notes(i) An 'institutional mortgage' is a mortgage on standard terms, provided by an institutional lender in the normal course of its activities; and-- a 'private mortgage' is any other mortgage.(ii) A solicitor will not be in breach of paragraphs (3)(a)(iii)-(iv) or (c) if the lender has certified that its mortgage instructions are subject to the limitations set out in paragraphs (3)(c) and (e), and certifies any subsequent instructions in the same way.

If there is no certification, a solicitor acting in an exclusively residential transaction must notify the lender that the approved certificate of title will be used and that the solicitor's duties to the lender will be limited accordingly (see paragraph (3)(d)(ii)).

In other types of transaction, the solicitor should draw the lender's attention to the provisions of paragraphs (3)(c) and (e) and state that he or she cannot act on any instructions which extend beyond the matters contained in paragraph (3)(c).(iii) 'Solicitor' in paragraph (3)(b)(i) means any principal in the practice (or an associated practice), and any solicitor conducting or supervising the transaction, whether or not that solicitor is a principal; and-- 'immediate family' means spouse, children, parents, broth ers and sisters.(iv) The lender must be informed of the circumstances, in accordance with paragraph (3)(b) so that the lender can decide whether or not to instruct the solicitor.(v) A lender's instructions may require a wider disclosure of a solicitor's circumstances than paragraph (3)(b) requires; and a solicitor must assess whether the circumstances give rise to a conflict.

For example, there will be a conflict between lender and borrower if the solicitor becomes involved in negotiations relating to the terms of the loan.

A conflict might arise from the relationship a solicitor has with the borrower - for example, if the solicitor is the borrower's creditor or debtor or the borrower's business associate or co-habitant.AppendixCertificate of titleTO: (Lender)Lender's Reference or Account No:The Borrower:Property:Title Number:Mortgage Advance:Completion Date:Conveyancer's Name & Address:Conveyancer's Reference:Conveyancer's bank, sort code and account number:WE THE CONVEYANCERS NAMED ABOVE CERTIFY as follows:(1) If you have provided any photograph(s) and/or specimen signature(s), we have checked the identity of the Borrower against them.(2) Except as otherwise disclosed to you in writing:(i) we have investigated the title to the Property and, upon completion of the mortgage, the Borrower will have a good and marketable title to the Property and to its rights free from prior mortgages or charges and from onerous encumbrances which title will be registered with absolute title;(ii) if you have provided a plan, we have compared the extent of the Property shown on your plan against relevant plans in the title deeds, and in our opinion there are no material discrepancies;(iii) if the Property is leasehold the terms of the lease accord with your instructions, including any requirements you have for covenants by the Landlord and/or a management company for the insurance, repair and maintenance of the structure, exterior and common parts of any building of which the Property forms part;(iv) the buildings insurance is in place, or will be on completion, for the sum required by you;(v) if the Property is to be purchased by the Borrower:(a) the contract for sale provides for vacant possession on completion;(b) the seller has owned or been the registered owner of the Property for not less than six months;(c) we are not acting on behalf of the seller;(vi) we have made a local search (which is not more than three months old) and such other searches as are appropriate to the Property, the Borrower and any guarantor;(vii) nothing has been revealed by our searches and enquiries which would prevent the Property being used by any occupant for residential purposes;(viii) neither any principal nor any other solicitor in the practice giving this certificate nor any spouse, child, parent, brother or sister of such a person is interested in the Property (whether alone or jointly with any other) as seller, buyer or Borrower.WE:(a) undertake, prior to use of the mortgage advance, to obtain the execution by the Borrower of a mortgage and by any guarantor of a guarantee, each in the form of the draft supplied by you, and to obtain consents in the form required by you from any existing or prospective occupier(s) of the property specified by you;(b) have made or will make such Bankruptcy, Land Registry or Land Charges Searches as may be necessary to justify certificate no.

(2)(i) above;(c) will within the period of protection afforded by the searches referred to in paragraph (b) above:(i) complete th e mortgage;(ii) arrange for stamping of the transfer if appropriate;(iii) deliver to the Land Registry the documents necessary to register the mortgage in your favour and any relevant prior dealings;(iv) effect any other registrations necessary to protect your interests as mortgagee;(d) will despatch to you the Charge Certificate and any other relevant deeds relating to the Property with a list of them in the form prescribed by you within ten working days of receipt by us from the Land Registry;(e) will not part with the mortgage advance (and will return it to you if required) if it shall come to our notice prior to completion that the Property will at completion be occupied in whole or in part otherwise than in accordance with your instructions;(f) will not accept instructions, except with your consent in writing, to prepare any lease or tenancy agreement relating to the Property or any part of it prior to despatch of the Charge Certificate to you;(g) will not use the mortgage advance until satisfied that any existing mortgage on property the subject of an associated sale of which we are aware, will be discharged prior to or contemporaneously with the transfer of the Property to the Borrower;(h) will notify you in writing if any matter comes to our attention before completion which would render the certificate given above untrue or inaccurate and, in those circumstances, will defer completion pending your authority to proceed and will return the mortgage advance to you if required.OUR duties to you are limited to the matters set out in this certificate and we accept no further liability or responsibility whatsoever.

The payment by you to us (by whatever means) of the mortgage advance or any part of it constitutes acceptance of this limitation and any assignment to you by the Borrower of any rights of action against us to which the Borrower may be entitled shall take effect subject to this limitation.Subject to the above limitation we confirm that we have complied with your instructions.Previous disclosures have been made to you under paragraph (2) above:-- Yes/NoNew disclosures under paragraph (2) above accompany this report:-- Yes/No-- Delete as appropriateSIGNED on behalf ofTHE CONVEYANCERS .

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.(2) This amendment rule comes into effect on 1 April 1999.