The Legal Problem
future.” McColl says Goldsmith has hit it bang on the head. “More lenders should offer joint representation,” he says. “But it’s a historical industry thing, it’s done separately because ‘that’s the way it is’.” Fahim Antoniades, group director at London-based Mortgage Centre IFA, agrees. “I should hope we see more lenders start to offer this and I see no reason why they couldn’t,” he says. “The biggest advantage in doing so is that it helps speed up the process as well as reduces the cost for the client.” Other lenders are less sure.
Christian Faes, director of Montello, says he’s looked at it “quite closely”. “In many respects we are quite surprised that some law firms are happy to do this,” he says. “It may go some way to speed things up, but it is definitely taking things up the risk curve, which at this stage we aren’t keen on. If things go wrong can the lender’s solicitor act for the lender or does each party have to go and get separate legal representation? Would a borrower be left going to try and find another solicitor to help them? Most likely. It’s not an ideal situation for a lender nor a borrower.” Mark Posniak, head of marketing and operations at Dragonfly Property Finance, is on the same page as Faes. “In our opinion, joint legal representation brings
“Despite the seeming move towards a more open and transparent process there still lurk some more dubious practices around the edges of the industry”
an enhanced level of risk to a transaction. We’re not comfortable with that but if others are then good luck to them. Given the increased risks involved not many will follow Precise but who knows? We’ll have to wait and see.”
FEES Despite the seeming move towards a more open and transparent process there still lurk some more dubious practices around the edges of the industry. Legal fees are one of the things Precise Mortgages has been trying to lay bare. Although no-one is prepared to put their head above the parapet and admit they know it goes on, several people in the industry suggest that there remain lenders and legal firms who have financial “arrangements” that could be construed as a kickback. Legal fees range from as low as
£500 + VAT for a straightforward and probably lower value deal up to £5,000 + VAT for something more “complex”. McColl is of the view that Masthaven’s quoted legal fees are “bang on the money” for normal
CHOOSING THE RIGHT CONVEYANCER:
„ Membership of The Conveyancing Association or Conveyancing Quality Scheme or both
„ ISO9001 or other quality mark „ Personal responsibility – reports are signed by the person handling the transaction
„ Lender’s panel membership „ Willingness to discuss transactions before and after doing the work „ Competitive fees that are clearly set out before the work begins „ Professional indemnity insurance – ask to see the cover they hold „ Regular updates or access to the case history of the transaction to monitor progress yourself
„ Ask for a copy of their Client Care literature and their Terms of Business letter. Make sure they keep to the standards they set
14 BRIDGING INTRODUCER MARCH 2012
bridging legals at £500 to £1000 + VAT for a standard deal up to £1m. “Some lenders use solicitors that
go way over the top and charge up to £5,000 + VAT for a standard £1m loan,” he reveals. “That is what I call the tail wagging the dog. In theory the legal diligence is more thorough to make sure the security is good. Or is it a case of over-egging the golden goose?”
FREEDOM TO CHOOSE Despite being the most vociferous in the industry on the subject of lawyers, Laurence Goodman is also one of the few lenders proposing an alternative. “Maybe there is an argument that the bridging industry should try to establish an approved list of quality solicitors who give representation for clients nationwide and only act for borrowers and never for lenders,” he says. “If, for example, five solicitor firms per local region could be recommended and promoted to borrowers this could improve matters somewhat; but at the end of the day borrowers have the freedom of choice to instruct whoever they want.” McColl to suggests the industry could do with raising the profile of those solicitors who specialise in bridging from the client side as it helps dramatically from the borrower’s side if they have a specialist solicitor. Goodman may just have struck on something though. Choice is always the thing that makes markets free. And if the past is any map of the future, it may well be that clients choose value for money, however inconvenient that may be for lenders.
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