Beware CML Lenders' Handbook sprung on conveyancers
Happy Christmas to all conveyancers. Lenders have sent you a gift effective today, the CML Lenders Handbook has changed with little notice, at an incredibly busy time and without addressing some of the issues that cause chaos in the home buying process.
With only three weeks left to get home movers into their new homes by Christmas it is one of the busiest times of the year for conveyancers. Offices are bustling with staff under pressure to complete expectant chains. So it is a surprise that the CML chose to launch its latest handbook changes today with comparatively little notice to conveyancers.
Many of the changes appear to be relatively trivial but there are a considerable number and wary conveyancers should be aware of them. Not only are there many changes this review appears to have wasted an opportunity to tidy up areas of conveyancing practice that are unclear or leave conveyancers with considerable risk, for example, there is no new guidance on how far to go in relation to source of funds.
So from today the new rules apply whether you have had the opportunity to read them or train your staff, your certificates on title will be bound by the changes leaving borrowers vulnerable to conveyancers who have been given insufficient time to implement the changes. This hardly feels as if it meets the conduct risk principles that the Financial Conduct Authority requires of lenders.
Not only are there significant changes to part 1 of the Handbook, Simon Seaton of Lexsure one of the businesses that helps conveyancers monitor these changes, predicts that most lenders will make changes to their Part 2 documentation as well.
The changes include a number of changes that some conveyancers will welcome. These types of changes will allow conveyancers to exercise discretion relating to indemnity insurance, so for example relating to planning and building regulations situations where "in your professional judgement there is no reasonable prospect of enforcement action and following reasonable enquiries…..we will not insist on indemnity insurance and you may proceed.". That said if you get it wrong was your professional judgement competent if enforcement action ever occurs? There is also going to be a cost to clients of conveyancers arguing about whether title insurance is needed and who will pay for it.
There is also a change to buy to let fraud so where you have knowledge that the borrower wishes to let the property before completion but the mortgage is not a buy to let mortgage the obligation on the conveyancer to inform the lender is reemphasised.
Insurance requirements are moved from the long list in Part 1 of what insurance is required to a part 2 requirement but the need for conveyancers to satisfy themselves that insurance is on risk at completion and obligations on wording you must provide to borrowers in respect of insurance have changed. So for certificates on title you are sending today have you checked the part 2 and have you "reminded" clients of what lenders want you to say?
Also it is now your responsibility to ensure that witness is independent and their name and address is clear and legible. The definition of independence is sadly missing.
This article does not attempt to provide a comprehensive detailed review of these changes but at Today’s Conveyancer we are depressed that these changes seems to have been imposed without a public consultation with conveyancers, and if there was any input from representative bodies those bodies do not appear to have performed their duties in explaining that January rather than December 1st would be a much better time for these changes.
What are your thoughts? Do you agree or are we wrong? Please comment below.