Since 1 January 2009, over 60 of the UK’s mortgage lenders have tightened their legal requirements for conveyancing lawyers . The various changes are published by The Council of Mortgage Lenders (“CML”) via their website from which the CML Lenders’ Handbook can be viewed.
The Lenders' Handbook provides comprehensive instructions for conveyancers (for example, solicitors and licensed conveyancers) acting on behalf of lenders in residential conveyancing transactions. There is a Lenders' Handbook for each legal jurisdiction in the UK.
Part One of the Handbook sets out the main instructions and Part Two gives details of each lender’s specific requirements relating to the main instructions.
A review of the Part Two changes as well as communications directly with lenders reveals that a new risk adverse attitude is emerging. Approximately six lenders over the course of the last few months have changed their requirements for leasehold properties and the term of years which they are prepared to lend on.
All six have increased the number of years they require remaining before they are prepared to lend. Many lenders have also indicated that they are no longer prepared to accept indemnity insurance for various defects.
We have had a number of conversations with lenders where we have pointed out that planning permission or Building Regulations do not exist for alteration to the property but have confirmed indemnity insurance is available. Historically, 99 times out of 100, lenders would accept indemnity insurance for lack of planning permissions but currently we are finding that lenders often will not lend.
This attitude change does beg the question as to whether or not the lenders are looking for excuses not to lend. Logic dictates that as the lenders start becoming risk adverse then so do conveyancing lawyers. In such an environment sellers need to be educated that, now more than ever, they need to ensure that their conveyancing paperwork is in order prior to finding a buyer.
With this in mind it makes sense to instruct a conveyancing lawyer to prepare the Home Information Pack (HIP) and review it’s contents during the time that the property is marketed. The introduction of the Property Information Questionnaire (PIQ ) affords the seller’s lawyer with a greater window of opportunity to identify potential problems.
One has to bear in mind market forces. In the past, a seller was able to adopt a rather arrogant approach and insist that the buyer either accept the defects and remedy them by way of indemnity insurance or alternatively look for another property.
The economic winds have changed to the extent that a seller is no longer likely to call a buyers bluff. If a seller loses one buyer not only are they exposed to wasted conveyancing costs - they are unlikely to find another waiting in the wings.