Inaccurate redemption statements provided by mortgage lenders have led to a growth in negligence claims against solicitors, a leading professional indemnity insurer has warned.


Zurich Professional said it has seen increasing numbers of solicitors in breach of undertakings - and left to pick up the shortfall - when lenders have under-calculated the amount of money necessary to discharge a mortgage.



Andrew Nickels, risk manager at Zurich Professional, said: 'Solicitors can find themselves in a hopeless situation. They have acted for the seller of a property, returning the full amount quoted by the lender and giving the balance to their client. They have then learnt, too late, that the lender had got the figures wrong and more money was required before the charge on the property could be released.



'They can't get the money back if their clients have spent it or absconded, and yet failure to discharge a mortgage on completion can amount to a breach of undertaking, leaving them open to disciplinary action by the Solicitors Regulation Authority.'

He added that if a lender made an error in the redemption statement, it should honour the figure and not expect the 'solicitor and insurer... to pick up the tab.'



Mr Nickels advised solicitors to be more cautious when accepting redemption figures from lenders, adding: 'Withdrawing the giving of undertakings is not an option. The whole conveyancing process would collapse - it would be a return to Dickensian times.'



Law Society Vice-President Paul Marsh said: 'The Society has been seeking to resolve the problem of incorrect redemption statements for some time. A recent survey of our members showed there is a growing problem. The issue is now of concern to the profession's insurers [also] - this confirms the need for lenders to address the issue as a matter of urgency.'



A spokesman for the Financial Services Authority said that it had no plans to 'tinker with' the present arrangements. The provision of inaccurate redemption statements was of no concern to consumers, he added, but was simply a problem between the two solicitors.



Jonathan Rayner