The Legal Problem
OPINION: GOOD SOLICITORS ARE OUT THERE
John Jones, director for
development and learning, Goldsmith Williams Solicitors
I did not know whether to smile or frown when I read Steve McColl’s article in the January 2012 issue of Bridging Introducer especially when he wrote: “My view is solicitors should get their heads down and get on with the task that they are being paid to do. In other words complete the documentary requirements and get the funds drawn down for their client, and keep ill-thought-through comments to themselves.” It comes with the territory that at times the conveyancer is blamed
twofold: first the elimination of a borrower’s separate solicitor slices a considerable chunk off processing time and second, the borrower benefits because they have only one set of legal fees to pay instead of two. It also increases the likelihood of the lawyer involved in the transaction understanding bridging properly and sticking to their legal remit to explain the terms of a deal to their client. Another thing that saves time.
Precise also claims the move will cut legal fees for the borrower from a market average of £1,500 to just £599 +VAT on a typical £250,000 property.
“Legal fees are variable on the size of the loan and the complexity of the case,” Alan Cleary, managing director of Precise Mortgages says. “As of yet nobody has commoditised legal fees in the bridging market. There is no reason why fees should not be drastically reduced from where they are now and be more in
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for transactions taking longer than expected. This is often because others involved in the transaction perceive that the conveyancer is deliberately being difficult over certain issues or “sticking his oar in” in areas outside his retainer. Good conveyancing solicitors are generally pro-broker, pro-lender and pro-packager, working hard to ensure that bridging loan transactions complete as quickly as possible. However, doing so involves more than just completing “the documentary requirements” as Steve suggests. I agree with him that solicitors should not comment on whether or not a particular loan product is suitable for a client – the client has already had that advice from their IFA – but the solicitor has a duty of care to the client to ensure that he or she fully understands the legal implications of the mortgage they are entering into, that their title is “good and marketable” and that
line with the mainstream market. Joint representation by my calculation cuts fees by between 50-60% but it does vary deal to deal.” Cleary has taken what many in the bridging sector believe is a controversial step. While many brokers are open to the idea of joint representation in this way, Dragonfly, Montello, Tiuta and various other lenders say it won’t become mainstream because it doesn’t account for risk. “This is how legals work in the mainstream market because it’s in the interest of the borrower,” says Cleary while he notes that his competitors are dragging their heels. “The lender’s lawyer in effect oversees the activities of the borrower’s lawyer which leads to delays and I have yet to meet a lawyer that relishes being overseen by another lawyer. Many bridging lenders have in-house legal teams but not all do. To my knowledge
any concerns or doubts they may have are addressed. Remember it is the solicitor who is certifying that the title is good security for the loan. This carries important responsibilities for the solicitor as well as the liability if something goes wrong; a situation that others in the transaction do not face. Steve’s solution is to have “brokers, packagers and lenders comparing notes and being aware of practices the market over”. I concur with him but why not include solicitors in that process? If the various parties involved in the bridging market could come to a general consensus about what is required in terms of documentation, compliance and advice, there would be fewer incidents like those he describes and fewer margins for delay. All parties would benefit from such a consensus but in particular the client. Good bridging solicitors are out there and we are not that difficult to find!
we’re the only lender offering joint representation in the sector. “Bridging isn’t the same market that it has been even just three years ago. It’s changing, the market is changing and responsible lenders should be thinking about how they serve the borrower fairly and best. It’s far cheaper for them to have joint representation than to pay the lenders’ legal fees as well as instructing their own solicitor.” Cleary is also clear that borrowers are protected from any conflict of interest because the solicitor is an independent firm rather than in- house.
And Goldsmith backs him up. “I think historically bridging has been a small and predominantly unregulated market but that is changing, especially with lenders like Precise which is regulated coming into the sector. They’re questioning why the legal bit has worked like it has in the past and wondering whether it has to in the
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