Friday 17 October 2014

Lender's Certificate of Title

When a client is reliant on a mortgage to fund their purchase of a property, there are certain requirements which a Solicitor must meet before they are able to request the mortgage advance from the lender in anticipation of completion. Solicitors request mortgage monies from the lender by submitting a form known as the Certificate of Title – COT for short; this article provides a guide of the process leading up to, and including, completion.

Before your Solicitor is able to submit the Certificate of Title, the Solicitor must ensure that all outstanding matters have been resolved, as, by submitting this request, the Solicitors is providing their confirmation to the lender that they have complied with, and satisfied, their requirements as outlined in the Council of Mortgage Lenders Handbook – the CML. A Solicitor must be able confirm the property has a good marketable title.  Such matters include, but are not limited to, the following:

Ø  ID checks have been carried out
Ø  Any potential gift elements connected to the transaction have been considered and acted on appropriately
Ø  All enquiries with the seller’s solicitors have been resolved to a satisfactory standard
Ø  All search results have been returned, reviewed and are clear of issues.
Ø  The valuation report has been considered and is clear
Ø  Client’s details, the purchase price and property details concord with the mortgage offer. Also, any special conditions attached to the mortgage offer have been considered.
Ø  Any prejudicial issues affecting the valuation of the property must have also been reported to the lender during the course of the transaction and resolved.
Ø  Confirmation that there are no onerous covenants or lack of rights of access or services to the property.

Once the above conditions have been satisfied, a transaction is able to proceed to exchange and completion, for which, a Solicitor will require a signed Contract and Transfer Form (though the latter is needed for completion more than at the point of exchange), confirmation that the client has approved the completion statement, an agreed completion date, deposit funds and confirmation that buildings insurance is in place.

It is important to note that standard practice usually dictates that 10% of the purchase price of the property acts as a deposit on exchange; furthermore, a Solicitor will require buildings insurance to be in place before they are able to proceed to exchange of Contracts – your insurance cover note should have your lender noted as an interested party.

Each lender will require a period of notice from receiving the certificate of title to releasing the funds which can be up to 10 working days (although usually 5 working days). This can sometimes lead to a delay in the exchange process as if a Solicitor is giving the lender less than their required period of notice they will need to obtain written confirmation from the lender that the mortgage advance will be released on the date of completion before committing you to exchange Contracts.

It is important to note that your Solicitor is only able to release the mortgage funds on the completion date if they hold sufficient funds to complete the purchase of the property, pay all stamp duty land tax and registration fees. This will mean that although after completion your Solicitor has 30 days to submit to the Inland Revenue the duty payable they will require you prior to completion to ensure they would sufficient cleared funds to enable them to do so. 

Article written by Charlotte Ribbons Trainee Solicitor 


MJP Conveyancing are solicitors who provide residential conveyancing services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Monday 13 October 2014

The Law Society Conveyancing Portal - Destined for failure?

A new online conveyancing portal purporting to simplify and speed up the house-buying process, has entered the final stages of development and is scheduled to be launched to the conveyancing profession in Spring 2015.

The new online service, called Veyo ( named after a small town in the US?) , is a joint venture between The Law Society and Mastek UK, a global IT solutions specialist.

Its aim is to bring together all the processes from client instruction to completion, including checks and documentation prepared and undertaken by solicitors and licensed conveyancers in the sale and purchase of residential properties.

At its  recent launch there were some bold statements made  about this new system

“Veyo will shift the balance of power and give the profession greater control.” Jonathan Smithers, Vice President, The Law Society

  “Veyo will transform the way we do conveyancing.” Desmond Hudson, Chairman


   “Veyo will be secure, efficient and transparent” Elliott Vigar, CEO, Veyo

Conveyancers will be asked to pay a licence fee and a charge per transaction. The likely costing will be announced later this year, with a view to getting firms signed up from January 2015 onwards.

To justify the charge being the industry is told that Veyo will “reduce your costs of undertaking a conveyancing transaction and, fatten your margin.”

The investment?

A staggering £10million pounds has, or will have been invested in developing Veyo with the Law Society setting up a company to develop the system owning 60% of the shares and Mastek UK holding a 40% interest.

Money well spent?

Only time will tell but one must question the size  and  safety of this investment when it was not too long ago that the Law Society was left with egg on its face when its joint venture with MDA Advantage  to produce a Home Information Pack offering became one of the most famous IT debacles of recent times.   The cost of that project failure has never been released but it is clear that a sum not too far off that already spent on developing Veyo was lost. 

Spending such a large amount of members money on a project which claims to be there to support the CQS Protocol also begs the question whether the money would have been far better spent on looking to reform an antiquated conveyancing process ( last reformed in 1925) and or on extra staff and other resource for a Scheme which is clearly buckling under its own success. Why run with a new project and look to advance this with haste whilst  there  remain major cracks in the infrastructure of CQS? 

It is evident from speaking to some major conveyancing IT providers that the offer of making existing and proven systems available to the Law Society when the idea was first mooted, was not well received.  In fact the feedback is that quite a number of those technology companies were given the ‘cold shoulder’ in a way which had  caused much alienation.   Its surprising  that the Law Society chose not to go to a recognised supplier but instead decided to re invent the wheel and in the process spend a large chunk of money which could have been utilised on a  far more deserving project. 

My firm decided back in 2011 to invest in our own technology and with one developer we were able to develop an online conveyancing case management system which I know performs 80% if not more of the functions which Veyo say it will be offering.  The cost of our investment  baas peanuts in comparison. I acknowledge the Law Society is looking for robustness and security and I accept this accounts for part of the cost.   However there are plenty of Technology providers out there who could have delivered at a much reduced cost. 

There must also be some concern over the commercial aspects of the ‘partnership’. Like many of these joint ventures the actual terms of the arrangement will not be made public even though a large chunk of the investment has come from the Law Society's members. One thing for sure the commercial partner will not be making a hefty investment  without assurances that the project will be providing its shareholders with a sizeable profit within a reasonable amount of time.   This means  Veyo will need to pay for itself within 12 to 18 months and much of the early revenue will be dependant on a heavy take up of the system. It will also probably mean a high license fee and transaction cost.  

The dependancy on licence and transaction fees must give rise to the fear of ‘lock in’ arrangements with the CQS sitting at the top of the tree.  How long will it take before all CQS  members will be required to renew and  or apply for panel memberships through Veyo? Making membership of Veyo as a pre - requisite for joining or continuing with CQS must also be announcement waiting to happen. 

On top of this we will soon surely see restrictions on the use of third parties through Veyo. It will clearly follow that only preferred suppliers of ID checks, Searches will be available to the users of the portal.  To make money and to ensure its longevity I fail to see how the Law Society can avoid passing down the same route as those companies which run and operate successful referral platforms.  

We should all be calling on the Law Society to disclose its future plans and details of its business plan for this project for the next 3 years.  I suspect this will fall on deaf ears. 

Take Up 

I was told not too long ago by the Project Manager that a survey had been conducted and the results of this gave a clear indication that a large number of conveyancers have already committed to subscribing to Veyo.   This may be so, but its surprising that none of the large players in the industry have following the recent launch stepped forward to record their support and commitment to the system. I also question why the survey data has never been released. If supportive of the large investment why have we not had sight of it?

The sale literature around the system boasts ‘A system made by conveyancers for conveyancers’  I am sure we would a all like to know which conveyancers were involved in the development as its clear that the Law Society is very far removed from grass root conveyancing and would not be best placed to advise on how processes work on a day to day basis. 

Integration 

There will we are told be third party integration kits. The Law Society say most of the Legal IT providers have said they will integrate with Veyo.  Surprisingly none of those suppliers have as yet come forward. I suspect they may be waiting for the commercial terms of the arrangement to be published before going public. 

There may exist conflicts between the commercial objectives of Veyo and other IT providers and going forward this may prevent the widespread use of Veyo.  Why would a large conveyancing business having already invested a large amount of time in securing and training with a current supplier wish to spend further time and money on either switching or having to change work flows etc to accommodate what in many cases would be an unnecessary ‘add on’.

Lenders

I was told that one of the aims of Veyo is to facilitate the movement of money between conveyancers on completion.   This is an ambitious step but would suggest that the Law Society has been working with Lenders.   Bearing in mind the large investment already made in this project it is again worth recording that as yet none of the major lenders have come forward and given their backing to this project. On the contrary they have instead focused their attention on establishing and promoting a different system namely the Lender Exchange. 

The Exchange had a shaky start but has found its feet; I suspect Veyo is likely to face a more difficult introduction and having not it seems engaged with the Exchange during development this could in due course prove to be a fatal  error of judgment. 

Viability 

Unless the Law Society and or  PII insurers decide to compel all of those undertaking conveyancing to use Veyo ( which is most unlikely) it seems that that the system like many others before it may be destined for failure.  Its no good having a hub to communicate with others , when some of the conveyancers in a chain have chosen not to use the system. 

Conclusion 

It is far too early in the day of course to pass judgment on a system which has yet to be released and which continues in the meantime to be nothing other than a concept.  

However for this to work and to be successful there needs to be complete transparency on the commercial arrangement as well as low start up fees.  There will also be a need for the Law Society  to win the hearts and minds of the conveyancing community.  This may be difficult given its appalling track record and its continuing failure to connect with those who operate at  grass root level. 

David Pett - Director and Solicitor 

MJP Conveyancing  are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Thursday 2 October 2014

The Death of Leasehold Exit and Sub-Letting Fees?

There is great speculation surrounding the future of fees charged by Freeholders and or Managing Agents on the subletting of leasehold property.

This follows news that the Law Commission is going to examine the right to charge such fees as well as leasehold exit fees charged when selling or renting out a retirement flat.

According to the Leasehold Knowledge Partnership speculation is rife that such fees will be outlawed for good. 

The Partnership reports on its website:

‘This means anyone selling or renting out a retirement or non-retirement flat should keep all documentation with a view to making a claim in two and half years time’.

It adds:

‘LKP is deluged with inquiries about subletting fees, often where freeholders and their managing agents are plucking figures from the air for a sublet consent.

The tribunals have dealt with countless cases, but there is no binding decision on what would be a fair sublet consent (most freeholders have to give consent to a sublet, usually followed by the word “such consent not to be unreasonably withheld”.

The retirement sector is further complicated because some sublet fees are contributions to the contingency fund and some are set at one per cent of market price.

One family at Gibson Court, in Hinchley Wood, Surrey had to pay a sublet fee of £2,500 into the contingency fund last January.

McCarthy and Stone this month dropped the one per cent contingency charge at all sites where it is the freeholder in favour of an £80 plus VAT fee’

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Monday 29 September 2014

A Solicitor’s Dual Duty


When instructed in a purchase transaction in which a client is seeking to rely on the aid of a mortgage, it is important to note that a Solicitor owes a duty not only to their client, but also to the client’s lender. Does a Solicitor, however, owe a general duty to report any information which may materially affect the valuation of the proposed security for the Lender? 

The answer to this question is evident in the recent High Court judgement of E.Surv Ltd v Goldsmith Williams Solicitors, published on April 10th 2014, which saw a conveyancing firm ordered to pay costs of £100,000.00 for failing to disclose information on the value of a property to their client’s lender. This article examines the decision of E. Surv Ltd v Goldsmith Williams Solicitors, which is likely to be of particular interest to lenders.

The case centres on Mr Gayler – the client – who bought a property in September 2005 at a cost of £390,000.00. The client sought to remortgage the property and consequently instructed E Surv Surveyors to value the property in November 2005, at which time he informed E Surv that he had bought the property six to twelve months earlier at a cost of £600,000.00. E Surv valued the property at £725,000.00. The client applied to a lender in December 2005 for a loan of £580,000.00 to be secured against the property, which was based on an approximate value of £725,000.00. E Surv’s valuation was not provided to the lender at the time of the application, yet the application erroneously stated that Mr Gayler had purchased the property in October 2005 for £450,000.00. During the course of their instructions, Goldsmith Williams Solicitors – who acted for client and lender alike – obtained the Land Registry’s Official Copies for the property, which disclosed that Mr Gayler had indeed purchased the property for £390,000.00 in September 2005; the Solicitors did not divulge this information to the Lender. The remortgage transaction completed on February 13th 2006 on the basis outlined above. Mr Gayler defaulted on his mortgage payments and the lender took possession of the property, selling the same at a significant loss. Consequently, the lender pursued the Surveyors and Solicitors, but only followed through their action against the Surveyors for their supposed negligent valuation. The Surveyors agreed a settlement with the Lender for £200,000.00, only to later pursue contribution proceedings against Goldsmith Williams – it is this resultant case with which this article concentrates. This case centred around two principal issues: whether the solicitors were under a duty to advise the lender as to the recent disposition of the property and correct purchase price, as well as whether the surveyors could prove that, had the solicitors done so, they would have issued a revised valuation to the lender. Whilst the solicitors argued that there was no causative effect as between any breach on their part and the lender’s decision, the Court held that the solicitors breached their duty by failing to report the purchase price, with the surveyors evidencing that, on the balance of probabilities, the bank would not have proceeded had this information been communicated. The Court ordered the solicitors to pay 50% of the surveyors’ cost to the lender - £100,000.00. The solicitors have since stated that they will be seeking to appeal.


In anaylsing the impact of the judgement made, it is important to examine a solicitors’ duties to a lender during the course of a transaction. The Council of Mortgage Lender’s Handbook (CML), which was introduced in 1999, provides comprehensive instructions to solicitors when acting on behalf of lenders in residential conveyancing transactions; in addition to this, there is also the Building Societies Association Handbook (BSA Handbook), which was brought into force in 2010. Prior to the introduction of the CML handbook, a solicitor’s duty to report matters relevant to the lender’s valuation was derived from common law and had been held to be a part of his duty of care and skill. This ‘Bowerman Duty’ was outlined in Mortgage Express v Bowerman [1996] PNLR 62, which held that ‘if, in the course of investigating title, a solicitor discovers facts which a reasonably competent solicitor would realise might have a material bearing on the valuation of the lender's security or some other ingredient of the lending decision, then it is his duty to point this out”. Nevertheless, the case of E Surv v Goldsmith Williams focused on provisions 4.1.1.1 and 5.1.1 of the CML Handbook, which respectively note the following: 

4.1.1.1: You must take reasonable steps to verify that there are no discrepancies between the description of the property as valued and the title and other documents which a reasonably competent conveyancer should obtain, and, if there are, you must tell us immediately

5.1.1: Please report to us immediately if the owner or registered proprietor has been registered for less than six months.

It is important to note that selling or remortgaging a property so soon after a disposition of the same does not fit within the usual pattern of residential home ownership;  you would need to question why the proprietor is looking to dispose of the property so quickly after its purchase. There are, of course, certain situations which have been excluded from provisions 4.1.1.1 and 5.1.1, which include, but are not limited to, a sale of a property by way of a personal representative of the proprietor, or a receiver or trustee-in-bankruptcy. As aforementioned, one of the key issues in this case was whether the Solicitors were obliged to inform the lender of the fact that Mr Gayler had purchased the property within the last 6 months for £390,000.00. Clearly, under the CML, there is no obligation on the Solicitor within provisions 4.1.1.1 and 5.1.1 to report to the lender the purchase price of the property. Therefore, a crucial question of the case was whether the ‘Bowerman Duty’ survived despite the introduction of the CML, or whether the obligations listed therein are exhaustive, leaving no scope for any further duties. However, the Court held the following:

‘…in my judgment what the Lenders Handbook, read with the Practice Rules and certificate of title, is intended to do is to identify and delimit the precise scope of the specific activities which the solicitor is being retained to do, in circumstances where the solicitor is faced with the difficult position of acting for two parties with potentially conflicting interests. It is not intended to exclude the general obligation to exercise reasonable care and skill in the performance of such activities…’

What can we draw from the judgement of this case? It is clear that from this case that the CML handbook does not negate solicitors’ wider duties of reasonable care and still owed to the lender, or indeed the client; the ‘Bowerman Duty’ should thus be read in conjunction with the CML guidelines. E Surv Ltd v Goldsmith Williams serves to find a happy medium between meeting the client’s and lender’s expectations with the responsibility in acting as a solicitor, as the solicitor has not been placed under an extended burden to obtain further information. What the case does underscore to a Solicitor, however, is the importance of reading and reviewing the information obtained carefully, so that any potentially prejudicial matters affecting the valuation of a property are brought to the attention of the lender.   

A big thank you to Bethany Slaughter a Trainee Solicitor with MJP Conveyancing for this insightful contribution 

Monday 15 September 2014

Mortgage Valuation Report

Your solicitor may ask to have sight of the valuation report used by your lender to assess your eligibility for a mortgage. In this article I look to explain why your solicitor needs to see a copy of the valuation. 

The CML handbook ( which governs your solicitors relationship with your lender )  requires  your solicitor to check the property valuation report. 

Your lender may not have  provided your solicitor with a copy of this document and because of this your solicitor will seek from you a copy of the valuation report which should have been sent to you direct.

Why does  your solicitor need to see this particular document?

Your solicitor must check that the correct property has been valued (by checking the address on the valuation against that on the contract or title) and that any assumptions made by the valuer, such as tenure, restrictions on use, availability of parking etc are correct.

Your solicitor must report any errors or omissions to the lender so that they can ask the valuer whether the valuation needs to be revised as a result of them. 

Even if you have provided your solicitor with a survey/homebuyers report  your solicitor will not be able to discharge his duty to the lender without sight of the valuation report. 

MJP Conveyancing  are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Gifts and buying a home

More and more property transactions are being funded in part by gifts from parents and other members of the family.  The involvement of a gift has implications which your solicitor is obliged to address and which will normally involve additional work.  

In this article I examine the obligations on your solicitor when you are purchasing a property with a mortgage and where you are receiving a gift to assist in the purchase of your home. 

The CML handbook ( which governs your solicitors relationship with your lender )  requires your solicitor to enquire of you as to how you intend to fund the balance monies - that is to say the difference between the purchase price and the amount borrowed under the mortgage. If your solicitor becomes aware that the balance is coming from somewhere other than your own savings or the sale of an asset (such as another property), for example a loan, or gift or second charge, then this must be reported to your lender.  

Your solicitor  will require your consent to make the report to your lender, and in the event that consent is not given your solicitor must return the lender's instructions (the mortgage offer) and explain that he can no longer act for you as a conflict of interest has arisen.  

If it is a gift of money your solicitor will need to obtain from the donor of the gift a letter to confirm that the monies to be advanced are a gift ( and will not be repayable) and that the donor will not by making the gift be looking to acquire an interest in the property. 

In addition, when acting in the purchase of a property at undervalue, or the purchase of a property by way of gift, your solicitor is required to obtain a clear bankruptcy search against the donor of the gift or seller  ( where there is a sale at undervalue ) and also obtain indemnity insurance. The reason for this is that if the donor of the gift or seller should become bankrupt within 2 years of the making of the gift/selling the property, the Official Receiver has the power to recall the gift.  Your lender therefore requires insurance to cover this eventuality. 

MJP Conveyancing  are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877067 or via email at davidpett@m-j-p.co.uk

Tuesday 12 August 2014

Your Guide to the Digital Property World

With more and more of us having access to the internet through tablets and smart phones, it should be of no surprise that there are an increasing number of websites available to satisfy the digital appetite of the property seller/purchaser.  

At one time the focus of these website was the professional, however the emphasis has clearly changed with more and more online portals popping up to provide the consumer with direct access to information.

The increasing number of house price indices will soon be challenging the number of coffee outlets! The better of the bunch include http://www.zoopla.co.uk/  and http://www.rightmove.co.uk/ these website offer the consumer not only access to the national property market but also offer information on latest UK house prices.  They also offer a range of sold price information databases, meaning that consumers have a much more accurate view on how much a property might be worth.

You can also take a look at the crime rate for the postcode by visiting www.crimerates.co.uk/
If the standard of local schools is of importance you can find the latest Ofsted inspection report rating here: www.locrating.com/

If public transport is important check the location of the local bus/train station and timings of buses/trains by visiting: www.transportdirect.info

Check your mobile phone reception and broadband speeds within the home. The following website shows some of slowest areas in the country: http://on-msn.com/VwkVWd

As for the conveyancing process is concerned, the bad news is that there is still a lack of products on offer which enable a consumer to access information and documents during the course of a transaction.  

Www.quickcoveyance.com offers some relief by providing the consumer with 24/7 access to post, conveyancing documents, solicitor updates and legal reports generated during the course of the transaction.   These are all presented in an online and client specific property log book which can be accessed even after the transaction completes.

My firm makes use of this portal and since it was made live in 2011 it has helped handle 29,000 transactions.  It clearly used by our clients having recorded in July of this year over 16,500 views.

The Law Society Portal which will be launched soon promises more of this type of portal – only time will tell if it the Law Society can for the very first time deliver a product which will be adopted and preferred by professionals and consumers alike.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

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