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18 | Conveyancing
A free lunch?
There’s no such thing according to Harpal
Singh, managing director of Conveyancing
Alliance Ltd
T
here’s an age old saying that noth- Could these be some of the reasons why this for any capital being raised which could have
ing in this world comes for free. service comes ‘free’? knock-on implications. Or the client ends up
Of course this isn’t always strictly The lender is prepared to pay a solicitor to on a high rate with the previous mortgage
the case; I’ve managed to boost protect its own legal interests, but they are not
my DVD collection quite nicely required to pay for the borrower’s, so many circle6
lender.
Not adding or removing the correct person
from the Sunday papers. However, simply leave it out. The implications of this from the property title – we live in a society
in order to class these additions as course of action are frightening. So with this in where couples separate and find new part-
being free, they have been ‘extras’ from my mind it poses the ultimate question - if the
paper of choice – the one I have been buying solicitor makes a mistake who does the client circle6
ners.
for years – and not through an impulse buy complain to? circle6
Failure to repay secured loans.
Failure to pay the broker his arrangement fee.
because of the said ‘extras’ on offer. The solicitor?
When it comes to freebies in financial servic- They have no right of redress……….the solici- Invariably when it comes to offers of free
es, offers should be viewed with a far shrewder tor is not liable. legals brokers are generally kept out of the loop
commercial brain rather than a loose change The lender? in terms of updates and this lack of information
impulse purchase as greater sums of money are The lender will argue that the service was free will reflect poorly on the broker and result in
involved especially in the mortgage world. Take and comes with no protection. client dissatisfaction. We all know the value of
lenders offering free legals, for example. Now The broker? word of mouth referrals from clients and we
this is a common practice that has been taking Well the broker gave them the advice and sold also know the damage that can be done by one
place since I was a broker – more years ago than them the product. At the very least the broker dissatisfied client especially in such a tough
I care to reflect upon. Mortgage deals often will have to try and sort out the mess. marketplace.
come with a free valuation, this is basically a The network? So what can be done to ensure clients are
way of packaging a remortgage product to make ARs are simply following procedures set out by receiving the level of service they expect whilst
it appear more attractive and hence become their network. still receiving a good deal? Clients can get good
easier to sell. Generally speaking, the legals are It is surprisingly common for borrowers to legal representation for around £300. In return
paid for by increasing the product’s interest rate be left out of pocket because they had no legal the client gets full legal representation and a
or arrangement fee, so in truth it’s not really representation. This can leave the broker in a quality service from well-known, good quality
free. It’s like a magazine offering a DVD but fragile position as the question they have to ask solicitors. What’s more the broker, as the intro-
putting their price up by a £1 to cover the costs themselves is did they tell the client that the ducer, can communicate directly with the solici-
of DVD in question. solicitor did not act for them and they had no tor giving complete control.
However, if you do the maths and work out legal representation when arranging the largest Ironically many lenders give an option of
the fixed disbursement costs involved, you can loan a client will probably ever take out? taking cashback of £200-£300 instead of free
quickly ascertain that the solicitors must be If not, the client relationship could well legals. This is an offer that should be seized at
earning under £50 a case, and relying on some become fractured because of this representation all costs to protect both the client and the
overnight interest (not much anymore) to make that ultimately the broker is accountable for. broker’s reputation. This money can be used
ends meet. But even then, how can they do it This may seem a little harsh but brokers need to to obtain genuine legal representation that
for so little? be fully aware of the implications of free legal looks after the client’s interest instead of
I wonder how many brokers actually realise offerings as a number of potential errors are re- leaving it in the hands of glorified administra-
the solicitors on such cases only act for the o
lender? It is important to emphasis that they do circle6
ccurring ones, such as: tion warehouses. At the very least the client
Completion too early – This could happen deserves to be warned of the dangers of free
not represent or act for the borrower who before the end of the ERC period on the pre- legals and given a choice. This will not only
therefore has no protection or right to recourse vious mortgage – this may result in costing help justify any advice given but also ensure
via the Law Society. This means that the solici-
tors have no legal responsibility to the client. circle6
the client as much as 6% of the overall loan. that the client can be serviced in the best
Completion too late – The client has to wait possible way.
September 2009 Mortgage Introducer
www.mortgageintroducer.com
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