Planned changes to the home-buying and selling process in Scotland will result in delays and increased costs for borrowers, critics have warned.
The Law Society of Scotland has confirmed that it is to review the conveyancing system in Scotland following proposals to introduce separate representation for lenders and borrowers. It claims the change, which would bar solicitors from acting for both the lender and borrower in a conveyancing transaction, would prevent conflicts of interest.
As it stands, a solicitor can act for both the buyer and the lender in a transaction, though borrowers can choose to use their own solicitor. However, the Law Society of Scotland wants separate representation to be mandatory (having previously voted against it), which would leave borrowers north of the Border with no choice but to use an additional solicitor.
Lenders and estate agents this week hit out at the plans, warning that they were counterproductive and could hinder the housing market recovery in Scotland.
The Law Society of Scotland, which voted in favour of a move to separate representation at its annual general meeting in March, said members have now agreed to convene a working party to review wider conveyancing practices and procedures.
Ross MacKay, convener of the society’s property law committee, said: “The background to this is the discussion on separate representation in conveyancing transactions as we believe the current situation needs to change.”
Solicitors say demand for separate representation is driven by lenders increasingly claiming negligence against them in cases of mortgage fraud, or where borrowers have defaulted on their repayments.
However, the Council of Mortgage Lenders (CML) has raised concerns over the proposals for separate representation.
Paul Smee, director-general of the CML, said: “We did not ask the Law Society of Scotland to change its rules and I can think of many reasons why this is the wrong way forward. I do not understand why mandatory separation is in consumers’ interests.”
Smee questioned why separate representation was being considered before the consultation was completed. “Surely so fundamental a shift as the move to separate representation should not be contemplated in advance of this review,” he said.
Some lenders already insist on separate legal representation, including HSBC. It was accused by the Law Society of Scotland of imposing “unwelcome” costs on borrowers last year when it said customers wanting to use their own solicitor would have to pay an extra fee of £192 (including VAT).
Mark Dyason, director at Edinburgh Mortgage Advice, said borrowers would face higher legal costs under separate representation.
“This move adds extra paperwork, communication and time to a process that is already cumbersome and all of those cost money,” said Dyason. “I see this as adding to the customer’s stress, cost and time taken without adding much value. Putting another solicitor into the equation is not needed south of the Border, so why is it needed up here?”
He believes that the change could add at least a week to the home-buying and selling process.