HSBC criticised by solicitors over paperwork based on English law

Mortgage lender HSBC has come under fire from the Law Society of Scotland after it emerged paperwork issued to lawyers acting on behalf of clients who have taken out property loans with the bank was based on the English legal system.

The body, which represents the legal profession north of the Border, has warned that confusion surrounding the documents issued by the London-headquartered bank could jeopardise home sales and leave some buyers without a place to live.

Property lawyers have complained to the Law Society of Scotland that the paperwork uses English legal jargon and demands documents that are not relevant to Scottish property law. Some law firms have refused to complete transactions until the documentation has been altered.

New recommendations from the Financial Services Authority last year to stamp out mortgage fraud required lenders to set up a “panel” of solicitors who could act on their behalf – as well as that of the buyer – during mortgage transactions.

Previous rules allowed the buyer’s solicitor to also carry out transactions on behalf of the lender, but officials deemed that left the process open to fraud as individual lenders could not carry out due diligence on every law firm in the UK.

“We pointed out that this new system was wrong in principle and a month on, it is becoming clear that it is also wrong in practice,” said Ross MacKay, convener of the Society’s Property Law Committee. “It is failing homebuyers who have chosen an HSBC mortgage. There is a risk that house sales will fall through and buyers will be left homeless and sellers without payment.”

A spokesman for HSBC said: “HSBC strongly believes that its conveyancing documentation is fit for purpose and has been drafted for use in Scotland.”