Concerns over mortgage requirement change
26 Aug 08
Society says revised new-build instructions to solicitors not appropriate for Scots market
The Council of Mortgage Lenders (CML) is to introduce a significant change to the standard instructions to solicitors contained in its Lenders’ Handbook for Scotland - one over which the Law Society of Scotland has concerns as to the practicality.
The change, which comes into effect on 1 September, is aimed at discouraging fraud by requiring solicitors to confirm that they have received a new disclosure of incentives form from the builder/developer of any new-build, converted or renovated property before submitting their certificate of title.
While supporting the aim of combating mortgage fraud, the Society has "grave concerns" over the practicalities and potential difficulties for solicitors that the new procedures will cause.
Paul Carnan of the Society’s Conveyancing Committee said: “In our view, the new process fails to take adequate account of the way the Scottish market operates. We have voiced our concerns to CML, and we are disappointed that our concerns have not been taken on board. We will continue to work with CML to seek to secure a solution that addresses all concerns.”
The present CML rules require solicitors to disclose any incentives provided for in the missives. The new disclosure requirements will seek information regarding such things as the density of units on the site; the number of bulk purchasers; access to non-standard shared amenities; and payment of introductory or finders’ fees. None of these items would ordinarily be within the purchaser’s solicitor’s knowledge, and are therefore incapable of verification by the purchaser’s solicitor.
Approval before missives
The Society's advice is that a copy of the disclosure of incentives form should be sent to the lender as soon as received and specific approval sought before missives are concluded. Failure to do so could leave the solicitor exposed to a claim in the event that the loan instructions, when issued, do not take into account the terms of the form as delivered to the solicitor.
This will mean that prospective purchasers will have to arrange their finance in advance of concluding missives.
The Society recognises that this will inevitably result in significant delays in the process of purchasing a new-build property, but hopes that builders will extend their usual reservation periods to allow for this.
The CML has said that it will review how the new procedures are working in the first half of 2009. If any member of the Society experiences any difficulty with the new arrangements, the Society asks that they get in touch with James Ness, deputy director of professional practice.
A copy of the disclosure of incentives form and a frequently asked questions document can be found at www.cml.org.uk/handbook/frontpage.aspx. The Society’s advice to the profession relating to the change is at www.lawscot.org.uk/Members_Information/convey_essens/news.aspx.