Friday 22 March 2013 by Catherine Baksi
The Council of Mortgage Lenders today accused Scottish solicitors of protectionism after they voted for separate representation for buyers and lenders in all conveyancing transactions.
CML director general Paul Smee said: 'It is disappointing that a measure which is so blatantly against consumer interests and will impose added costs and added scope for confusion and delay has been voted through, with not even the pretence of wider consultation.
'At a time when housing and mortgage markets are still recovering, this is a protectionist measure with little regard for the interests of consumers,' he said.
At the Law Society of Scotland's annual general meeting today, 58 solicitors voted to remove the current exception to the conflict-of-interest rules, which permit a single solicitor to carry out work for a client wishing to buy a property and their mortgage lender.
There were 27 votes against and three abstentions.
The Society will now bring forward new practice rules for its members to vote on at a special general meeting (SGM) in September.
If voted through at the SGM, subject to approval by the lord president, solicitors will no longer be able to act for both buyer and lender.
Law Society of Scotland president Austin Lafferty said: 'We can view today's vote as just the start of a move towards reforming and improving conveyancing practice and we intend to hold further discussions with the CML and others.'
He said the exception to the rules was introduced in 1986 to help ensure a smooth transaction, but Lafferty said 'the world is a very different place now'. 'The severe economic downturn, increasingly complex transactions, increasing risk of mortgage fraud and the additional pressures from lenders mean that it is no longer appropriate, and indeed is arguably not in the public interest to continue.'
Lafferty said the Society is aware that the change has the potential to increase costs for buyers and paperwork for solicitors.
But, he added: 'These costs are not the borrowers, they are costs associated with lenders satisfying themselves on their own lending risk - and it will be for the lenders to decide on whether they are prepared to pass on these costs to their customers.'
Lafferty said that while the recession has meant a greatly reduced property market, the risk on loans has been largely borne by solicitors as banks and building societies have increased the number of claims on the legal profession's indemnity insurance where things have gone wrong.
In addition, he argued, there have been situations where conflict of interest arises and the protection of borrower client interests as well as the lender simply do not align.
Recent changes restricting lender panels have meant that solicitors are no longer automatically permitted to act for clients who have chosen a particular mortgage product.
'It's in everyone's interests, particularly the prospective house-buyer, to provide efficient and cost effective services. Technology has improved things enormously and it's worth remembering that conveyancing fees in Scotland are moderate compared to elsewhere,' Lafferty concluded.
'Market forces will also play a role and undoubtedly determine a new fee-structure so, while the borrower and lender will each pay for the work of their own solicitor, I do not foresee any astronomical price rises.'