Row as solicitors opt for separate representation in conveyancing

House purchasers in Scotland will have to pay more for conveyancing after the Law Society said buyers and lenders can no longer use the same solicitor. The move, which could be copied in England and Wales,  means that lenders will now be appointing their own solicitor – and passing on the cost to buyers. It is likely to put around £400 on to the moving costs for buyers.

The Law Society of Scotland said it will remove any risk of conflict of interest in the house purchase process, but Austin Lafferty, president of the Law Society of Scotland, also acknowledged that the move will help solicitors in recessionary times.

Lenders and buyers have been allowed to use the same solicitor since 1986, in a move designed to help a smoother house purchase transaction.

However, lenders have increasingly been bringing claims against solicitors, and 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 it is no longer appropriate, and indeed is arguably not in the public interest, to continue.

“We are fully aware of the potential for increased costs for buyers and increased paperwork for solicitors. However, 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.”

A total of 58 solicitors backed plans to remove the current exception to conflict of interest rules, with 27 against and three abstentions at the Law Society of Scotland’s annual general meeting.

Paul Smee, director general of the Council of Mortgage Lenders, attacked the decision as protectionist.

He 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.”

But conveyancing expert Rob Hailstone, of the Bold Group, said: “Is it any wonder that solicitors are trying to protect their interests when over the last 20 years or so, conveyancing lawyers in Scotland, England and Wales have been backed into a corner.”

Hailstone, who does not rule out a similar move in the rest of the UK, claimed:

•    Solicitors are being taken off lender panels, without notice or explanation and with very limited rights of appeal.
•    They are being given more and more onerous conditions to comply with, with little or no extra reward and sometimes with even less reward.
•    They have a new regulatory environment that makes conflict of interest more and more difficult to identify and comply with.
•    They are being held legally responsible for issues that should not be laid at their door.

Hailstone went on: “With lender panel reduction taking place daily, a home buyer walking into his local conveyancers office could be told that his family conveyancer/solicitor can no longer act for him and his lender, and that he has to choose whether to instruct a conveyancer he doesn’t know or incur additional cost, delay and stress by remaining loyal to his preferred conveyancer. If he decides to stay loyal to his conveyancer, that extra cost would run to hundreds of pounds and the delays to weeks or even months.

“It is not just the small firms who are being removed from lender panels. Some large firms with every accreditation certificate available (including the new Law Society Conveyancing Quality Scheme) are also suffering the same fate.

“If and before separate representation is introduced to England and Wales, a Government committee should firstly look into the causes for the confusion that currently exists and secondly decide what is right, fair and correct for all parties – solicitors, lenders and last but not least the home buying and selling public.”