Small law firms at risk as Lloyds freezes them out of housing deals

SCOTS may no longer be able to choose their preferred "family solicitor" when they are buying a house, after a major banking group stopped doing business with many small law firms.

The Law Society of Scotland said yesterday that the move by Lloyds Banking Group might put at risk "the very existence" of some Scottish firms.

Lloyds Banking Group's director of retail mortgage operations, Michael J Kula, wrote to law firms across the country this week informing them that they had been "removed" from the group's conveyancing panel with immediate effect. The unilateral move means those legal firms will no longer be able to act on behalf of any members of Lloyds Banking Group "in new retail mortgages, transactions varying the security, release of part security and any other similar transactions affecting the group's security, including the redemption of its mortgages".

The group includes Bank of Scotland, Birmingham Midshires, Cheltenham & Gloucester, Halifax, Intelligent Finance, Lloyds TSB Bank plc, Lloyds TSB Scotland plc, Scottish Widows Bank and St James's Place Bank.

The letter reveals that, following a review of criteria for panel membership, a condition has been introduced that firms "must have achieved a minimum level of transactions over the course of the last 12 months".

They claim this will ensure that all firms acting on the group's behalf are "fully familiar with our processes and requirements". Those that do not fulfil the criteria have been removed from the group's conveyancing panel "with immediate effect".

The move follows similar restrictions in England, Wales and Northern Ireland. Firms have the opportunity to appeal against their removal and will be able to complete current business.

Many established legal firms insist the move will not only harm their businesses, but will prevent many clients from choosing who they want to act for them in the stressful process of purchasing or selling a home.

Some small firms have conducted millions of pounds worth of business with Lloyds Banking Group in recent years, but, because of the downturn in the property market, have failed to meet the criteria, which only takes account of the past year.

The Law Society of Scotland yesterday expressed "considerable concern at Lloyds Banking Group's decision to reduce the size of its residential conveyancing panel in Scotland".

Janette Wilson, convener of the conveyancing committee, said: "In our discussions with the group, we understood that they would not apply the same restrictions in Scotland as they had south of the Border, so this decision is extremely disappointing.

"We will continue to make representations to them as, despite assurances that smaller and rural firms will continue to be represented on the panel, this is undoubtedly going to have an adverse effect on solicitors in Scotland and those who work for them.The very existence of some firms may even be at risk."

The Scottish Law Agents Society has also condemned the announcement.