Scottish Sep Rep decision: what will it mean?

Kyle Peddie of Your Conveyancer one of the largest conveyancers in Scotland explains the sep rep vote last week. 

On Friday, the Law Society of Scotland AGM voted in favour of introducing mandatory separate representation for borrower and lender. Kyle Peddie, chief executive of Your Conveyancer explains what the decision is likely to mean for conveyancers in Scotland.

Draft practice rules will now be drafted and voted on at an SGM of the Law Soc in September and will then become ‘law’ subject to approval by The Lord President.

Last Friday’s vote could potentially herald the biggest shake up in the conveyancing market in Scotland for generations.

We were told that the Law Society views the vote as “just the start of a move towards reforming and improving conveyancing practice” in Scotland. Taken in conjunction with the introduction of the fairly major reforms to be brought in by The Land Registration etc. (Scotland) Act 2012, probably in late 2014, conveyancers in Scotland will have to get to grips with what is effectively a “new” conveyancing process in pretty short order.

In reaching their decision, solicitors chose to ignore the arguments that the introduction of separate representation would likely lead to increased costs and potential transaction delay for consumers. They also ignored the objections of the Council of Mortgage Lenders. It’s going to be very interesting to see how the CML and various consumer groups will react to this over the next few months.

Until relatively recently although solicitors have, notionally at least, acted for both borrower and lender, they have in general paid lip service to the requirements of the lender in particular the requirements of the CML Handbook.

If a situation arose where there was a potential conflict between the interests of the borrower and the lender then, almost without exception, they would favour the interests of the borrower. In over 30 years of practice I have yet to come across a situation where a solicitor has withdrawn from acting for either party in a conflict of interest situation between borrower and lender which probably says it all. If nothing else this decision will enable the solicitors acting on behalf of the borrower and the lender to focus solely on the interests of their own respective clients.

I, for one, am not sure that solicitors in Scotland really have a proper grasp of what they might have let themselves in for by voting for the introduction of mandatory separate representation. There may be an element of “turkeys voting for Christmas” in this decision. Solicitors generally appear to be of the opinion that, even though they will only be acting for the borrower, the borrower will still be prepared to pay them the same amount for their conveyancing as they did when their solicitor was acting for them and for the lender.

Consumers are far more aware now than they have ever been and, if they are going to have to pay for the services of the lender’s solicitor, you can be sure that they will expect the fees of their own solicitor to be reduced accordingly. In these circumstances solicitors may take the view that a reduced fee is counterbalanced by the reduction in their compliance obligations to lenders and reduced risk of potential PI claims but the fact is that, by having to deal with the solicitors acting for the lender, they will in reality be doing a lot more work for potentially a lot less money.

Anyway, subject to the rule change being voted through at September’s SGM and the approval of the Lord President, we will enter a brave new world of conveyancing in Scotland next year. Clear lines will be drawn which will certainly provide significant opportunities for firms such as mine with a dedicated separate representation department. What is not so easy to predict is how this will impact on the High Street solicitor and of course the consumer. For the former it has to be hoped that it will bring a new beginning and not the beginning of the end.

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