Conveyancing solicitors appear to have had a lucky escape over leasehold reform after the government decided not to act on MPs' concerns about their relationship with developers.
The House of Commons housing, communities and local government select committee, which conducted an extensive inquiry into leasehold reform, received 'considerable' evidence that developers were incentivising and insisting on specific solicitors being used. It urged the government to ban financial incentives.
Responding to the committee's report yesterday, the Ministry of Housing, Communities and Local Government agreed that consumers must be able to access independent and reliable legal advice, and that there was no place for coercion or deceptive practices.
The Solicitors Regulation Authority's code of conduct is 'clear' that clients' interests must be protected and that they must be informed of any financial or fee-sharing arrangements, the ministry said. The secretary of state wrote to the regulator in November 'expressing concerns about the conveyancing sector, and the SRA is taking action, as set out in its recently published residential conveyancing thematic review'. The Council for Licensed Conveyancers, a specialist regulator, also requires its members to provide detailed price information.
Responding to the committee's concern that some conveyancing solicitors have become too close to developers, the ministry said: 'The government notes the conclusions of the committee.'
Where leaseholders have been let down by their solicitor, the ministry highlighted existing routes for complaint and redress. It decided against introducing an alternative dispute resolution scheme, which 'may well cause confusion and could create problems with overlapping jurisdictions'.
Clive Betts MP, chair of the select committee, said the committee was pleased that the government had accepted many of its recommendations, such as capping ground rents at zero financial value. However, he said the government needed to do more for leaseholders already subject to onerous terms and those trapped in leasehold properties they cannot remortgage or sell.
Meanwhile, the Competition and Markets Authority will be looking at potential misselling and unfair terms as part of a leasehold market investigation.
Betts told the Gazette: 'It is vital that homebuyers are provided with clear and correct information at every stage of the process, from advertising of properties to completion. Over the course of our inquiry we saw far too many cases where people appeared to have been misled, either by failing to fully explain the terms they were accepting or withholding the information they need.
'The solicitor is there to act in the best interests of their client and this can be muddied by pre-existing relationships with developers. We are pleased that the CMA has begun action to look into where such relationships may have led to mis-selling in the past.'