Can HSBC restrict freedom of choice of solicitor?

The HSBC’s decision to make it less attractive for its mortgage customers to instruct their own solicitor has caused much anxiety within conveyancing practices , with many firms facing the loss of potential work from existing and potential clients.

The question is whether anything can be done to prevent this from happening.  Can a customer of HSBC insist on using his or her own solicitor without having to face a financial penalty?

Why freedom of choice is important?

One of the main concerns is conflict.   Solicitors have in the past acted for both buyer and lender and though the principles laid down in the recently introduced customer focused regulations ( Core Duties) would suggest ( if strictly applied ) that such a conflict should not be allowed to occur, it seems the Law Society has taken the view that its ‘business as normal’.    A decision which we as Conveyancers are of course happy to accept.

However when as in the present case HSBC has entered into a contract with one firm of solicitors and is providing its customers with a financial incentive to use those solicitors the dynamics of the relationship change and the scope for conflict is heightened.  How can the panel firm guarantee that it will not put the interests of HSBC before those of its clients? Surely it will not wish to lose what must be quite a lucrative contract with HSBC and therefore the commercial interests must clearly become influential.

What does the law say?

"It has always been the fundamental right of every citizen to be represented by solicitors of his or her choice" (Maltez v.Lewis (1999)). 

HSBC may argue that the client has a choice and is not so restricted. This may on the surface be correct, however when as is the case the client has received an offer of mortgage and is not looking to lose this, particularly in the present climate, and knows that if they decide to instruct their local solicitor they may be paying more, surely this all adds up to a rather tight and unreasonable constraint?

The Core Duties 3 & 4 of the Solicitors Practice Code 2007 say a solicitor's agreement with a third party's restriction on client choice could compromise the solicitor's independence and/or amount to a breach of Core Duty 4 where such a restriction may not be in the best interests of a client. As mentioned above one must question whether the solicitors acting under a high value commercial arrangement with the Bank is able, despite its best efforts, to provide unfettered advice to its clients.  Surely the very fact it is paid by the Bank and not the client makes this very different from the situation with other lenders where the client pays the fees.  The existence of a commercial arrangement between the bank and the solicitors must clearly compromise the solicitors in their dealing with the client.

Parallels with the insurance market

This issue is one which is often encountered in the insurance field when providers of legal indemnity insurance seek to limit the choice of solicitor, when a claim arises, to a member of the insurer’s panel of solicitors.  A conflict in these circumstances often occurs if the provider of the indemnity insurance also happens to be the insurer of the defendant against whom the claim is to be brought.  In this case the position is clear - the insurer must provide the freedom for the policyholder to choose its own lawyer.

Interestingly The Financial Ombudsman Service has confirmed the above points and also recommended that it is appropriate to use the policyholder's own solicitor in any cases where there is a suggestion of a conflict of interest, or in large and complex matters.   In this case if therefore an insurer insists on a panel lawyer, the policyholder may be able to refer the matter to the Financial Ombudsman Service.

It will be interesting to see whether clients with the help of their choice of solicitor look to what has happened in the insurance industry and begin to challenge through the Ombudsman Service the financial disincentives imposed by HSBC on freedom of choice.

Conclusion

HSBC must be taken to task on this policy decision.   The scope for conflict is wider and different from the relationship between other lenders and their panel of solicitors who are sanctioned to act on their behalf but with whom there is no commercial arrangement under which money is paid to the solicitor direct.

Solicitors affected by this decision may consider making a complaint relying on Core Duties 3 and 4. 

Clients affected may decide to refer the latter to the Ombudsman for investigation though in practice and with the fear of losing a mortgage offer this may not happen.

Alternatively clients could vote with their feet and choose mortgage products where there is no such constraint.    For those solicitors affected and who bank with HSBC may I be bold enough to suggest that it might be a time for a change!


Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

More news of housing doom and gloom

Rightmove, the property portal, reports that since the beginning of the year new homes for sale has slumped to its lowest point in more than a decade.  Only 34,433 properties have come on to the market equating to around half of pre-credit crunch levels.

This comes at a time when emerged borrowing costs have fallen to a 14-year low with the average mortgage payments for new borrowers standing at 27 per cent of disposable earnings. Good news for those with existing mortgages but still no hope for those people trapped in rental properties without the money for the deposit.

Those who do have the cash to put down on a deposit have their own problems given the shortage of new homes. This has in turn created in certain areas a high demand for property and perhaps explains why property prices have remained more or less unchanged.

It has also led to those looking to buy to be more selective in their hunt for a suitable property and one that fits their budgetary constraints.  

The situation is likely to get worse when the stamp duty holiday for first-time buyers ends this spring.

So why is there a shortage?  We seem to building less new homes than before and this combined with the economic uncertainty and owners worried about  replacing their existing mortgage, there appears little hope for any immediate change.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

New Survey shows withdrawal of HIPs has led to a return of problems with aborted property transactions

Home Information Packs were introduced by the Labour Government in response to a high volume of feedback from the public about concern over property transactions falling through and consequential losses.

The Coalition Government decided in May 2010 to abolish Home Information packs claiming that this would instantly lead to an increase in property activity and put more money back in the hands of the homeowners.  

The likes of Kirstie Allsopp, Grant Shapps and Eric Pickles lead what became a very personal and high profile campaign to bring Home Information Packs to an end, and were often photographed unwrapping ‘red tape’ wrapped around houses.

Twenty months on the question is what has this decision achieved – are homeowners any better off and has it led to any change in the very situation that led to the introduction of HIPs?

Recent research suggests it has not. A new survey has shown that over 500,000 house sales fell through at the end of 2011, a jump of 33% from the beginning of the year.

The study also showed that property deals in the second half of 2011 were less likely to succeed than they were to collapse.

This led to homeowners incurring unrecoverable costs, running into thousands in most cases and averaging well over £5,000.

So rather than saving money as we were all told it would, this data shows that what most conveyancers knew, that without the financial commitment shown by those selling in purchasing a HIP, together with buyers not knowing anything about the legal aspects of the property before instructing a solicitor, transactions remain at a higher risk of collapsing than they did at the time Home Information Packs were in place. 

The absence of the HIP or a suitable replacement for it ,has also slowed down the sale and purchase process, which in turn has increased scope for sellers and buyers to change their mind and pull out.

HIPs may not have been the ideal answer but at least the reform was one step in the right direction and had at its time of demise begun to make an impact on resolving the problem for which it was designed.

It’s a shame that senseless political football got in the way. Equally it’s a travesty that the main proponents of its withdrawal have just left homeowners far worse off than they have ever been without not even a hint of finding a different solution to what is proving to be a major problem. Grant, Kirstie and Eric we need answers please. 

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Beat the 24th March Deadline for Stamp Duty

The time to act is now if you are thinking of buying a new home as the concession on Stamp Duty for first time buyers ends on 24^th March. 

Until that date first time buyers do not have to pay Stamp Duty on property purchased for £250,000 and under.

Instruct us now to make sure you exchange and complete before this deadline and save up to £2500 – our prices start at £240 Plus VAT.  We offer a fast and professional service and are open Monday to Thursday 9 am to 8 pm, Friday 9 am to 5 pm, Saturday 10 am to 1 pm.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Building Regulations and moving home

Do I have supply evidence of Building Regulation Approval in respect of works carried out to my property when I look to sell my property?

If you have the approval then of course supply it – it will help to ensure your sale moves quickly.

If you have carried out works and approval was required and sought and you no longer have a certificate then call the issuing council and ask for a duplicate.

If you have carried out work, and the work required building regulation approval, but this was not sought then you need to consider with your solicitor when the work was carried out and what to do in response to your buyer’s request for sight of the approval.

The following may help.

Check that work carried out actually required building regulation approval as not all work attracts the requirement.

If the building work was carried out before November 1985 it would not require building regulation approval. There is no need therefore to supply it or offer indemnity insurance.

If work was carried out after November 1985 you can apply to the council for a regularisation certificate. A fee will be payable.  Remember however that once you apply the option of offering indemnity insurance for the defect will be removed.

Depending on when the work was carried out you may also be asked for a completion certificate.

The Building Regulations 2000 provide for the issue, by local authorities, of completion certificates where work has been carried out and completed under the building regulations, and the local authority are satisfied, after taking all reasonable steps, that the relevant requirements of the building regulations have been complied with.

If the work was carried out within the last two years (time limits vary but in the main proceedings must be brought within 2 years of the completion of the offending works) before the sale you will most certainly be asked for the approval, completion certificate or a regularisation certificate if these are not available.  This is because the time for taking enforcement action exists during this period.

However by reason of a decision in the case Cottingham v Attey Bower & Jones it seems an enforcing council may be able to enforce a breach outside this time limit. Due to this when selling solicitors for the buyers normally seek confirmation of compliance of building regulations since the property was built.

The problem is that most council offices don’t keep records of building regulations more than four or five years back. They will often conduct searches of their archived records for £150 or so but what if they don’t turn up an approval? The chance to get an indemnity policy for lack of building regulations has passed so your only option is to pay for the council to come out and inspect the works and issue a regularisation certificate.

Is it always necessary to offer indemnity or a regularisation certificate? 

It is most unlikely that a council will be concerned about a wall being knocked through some 20 years ago particularly given budgetary constraints.  It would only take action if it considered the works were dangerous.  The fact is if they were dangerous this would be revealed in the buyer’s survey.  So if not revealed as dangerous I question whether the risk of injunction proceedings is as high as some buyer’s solicitors would have us believe.

The use of indemnity policy by the seller to address this defect if you are the buyer is one which should be avoided as the policy offered will not provide protection if the work was carried out and structural alterations arise by reason of it.  For this reason a full survey should always be commissioned.

If commissioned and you are the buyer then providing all is well the need for chasing the seller for building regulation approval on works carried out in the deep past must be questionable.

A lack of building regulations indemnity policy could be useful in the case of recent works where a survey reveals no defects and the buyer is in a hurry.

Remember any window or door installation since the 1^st April 2002 (contract for work was entered into after this date) requires a certificate issued by the Local Authority Building Control of FENSA.  

As for certain building work involving electrical work or electrical work to existing installations all such work requires Building Regulation Consent if carried out after 1^st January 2005.

A Building Regulation Compliance Certificate is also required for the installation of central heating systems after 1^st April 2005. Since the 1^st April 2009 the scheme changed from CORGI to Gas Safety Register.

Before accepting advice to take our indemnity insurance please read this article by the same author : Overuse of Indemnity Insurance  

.Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Breast Implant Rupture

Around 40,000 women in the UK have had breast implants produced by Poly Implant Prostheses (PIP).  

The announcement from the French authorities calling for the implants to be removed has caused an international health scare.  The French authorities believe there is an increased chance of the implants rupturing and leading to complications.

On the 23rd December 2011 the French authorities advised all its citizens who have had PIP implant to have them removed and the French Government would pay for the full cost of the procedure. 

ABOUT PIP BREAST IMPLANTS

The supplier of the implant, Poly Implant Prostheses is based in the south of France, and had been using to secure financial saving, industrial grade silicone, normally used for filling mattresses and computer parts, instead of medical grade silicone. 

The cheap implants rupture rate runs at 5%, although it is estimated that this could rise to as high as 10%. This is much higher than other implant rupture figures.

The company went into administration in 2010 and the use of its products has since been banned.  

THE SITUATION IN THE UK

In the UK it was announced yesterday that those who have had the implants through the NHS would be permitted to return and to the NHS for removal.  The Government has called on private providers to do likewise.

HOW DO YOU KNOW IF THE IMPLANT HAS RUPTURED

Often you may notice deflation of the implant by a change in the shape or size of the breast. This can happen slowly over a few days, but can often happen very suddenly.

In many cases a rupture may not be noticed without the need of an MRI scan, as many silicone based implants will not leak in the same way as saline based implants, due mainly to the gel inside the implant.

WHAT SHOULD YOU DO?

If you have had these implants you should consult with your GP immediately.

HOW CAN OUR TEAM OF EXPERTS HELP?

The MJP Clinical Negligence Team has many years' experience of successfully winning harmful product claims.

Our expert advice has helped us our team to be mentioned in The Legal 500.

Our lawyers have successfully recovered compensation for victims of other pharmaceutical products and medical devices.

For a FREE private consultation call Sara Westwood on 01603877000 or email sarawestwood@m-j-p.co.uk