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Industry in depth
Role of solicitors
14 April 2007
Caroline Havers explains the role of a solicitor in the home moving process
The role that solicitors play in the mortgage market has become increasingly high profile over recent years. Conveyancing is an essential part of the house buying transaction and solicitors who can offer good use of technology and efficient processes have become a central cog in the wheel used to drive forward a faster, more efficient process.
Breaking it down to its simplest form there are many types of solicitor, so it is important to choose one that is a specialist in conveyancing. A conveyancing service is offered by the majority of solicitors but a specialist in the field is more likely to offer a quicker, technologically driven approach and have sufficient resources for good case management.
But while the progress to ever-faster mortgage decisions is frequently highlighted, often the legal conveyancing part of the process can be perceived to be a sticking point that slows everything down.
Conveyancing is also advancing rapidly. While there is a government commitment to all conveyancing being done electronically by 2010, many good conveyancers are already getting ahead of the game and carry out the majority of their work via e-mail and the internet. There is a growing belief that the role of the high street solicitor in performing a traditional conveyancing role will change quite radically over time.
It is a common myth that solicitors will slow things down and drag the process out so that they get paid more. In reality conveyancers have reduced prices over recent years and now provide a highly competitive, exceptionally good value service. It is also in the interests of the conveyancers to ensure that loans complete speedily, efficiently and with minimum fuss as solicitors get paid on completion like everybody else.
An altering job
What is happening is that the fundamental ‘job’ of conveyancing is altering. The move towards automation offers the opportunity for bigger, hi-tech firms to capitalise on scalable processing benefits which smaller firms may find hard or be unwilling to match. Although conveyancing has always – and will always – need excellent personal service, there is also a numbers game to be played which will favour some more than others. It is vital for conveyancers to seize the reins of the technology chariot that is galloping through the mortgage sales process.
The conveyancing process is in danger of being left behind, with the emergence of electronic applications, instant offers and online valuations – unless it seizes the initiative and quickly. Otherwise it risks being exposed as the Luddite of the group. If it does become the weakest link in the chain, it could have serious ramifications on an advisers’ presentation of professionalism and also the speed at which they get paid.
Relationships
Finding an excellent and reliable conveyancer in which you have the utmost confidence are key elements in the relationship for any mortgage broker or lender. Recommending a solicitor who you know can be guaranteed to work quickly, professionally and who can efficiently iron out any issues that arise, will actually enhance the house buying process for your clients and will reflect well on the service that you offer. It can also provide you with a lucrative source of passive income, as solicitors will pay a fee in the same way a lender does.
Relationships like this take time to bed in but there is little doubt that specialist conveyancing firms have looked closely at the intermediary market and developed propositions accordingly. Realising that intermediaries are not experts in this area is key to firms putting themselves in a position to add value while making this complex process simpler to understand from the adviser’s perspective and from their clients.
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A good conveyancer will take the time to explain what they are doing clearly, concisely and will look to work closely with the adviser to gain a better understanding of each client’s needs and aim to reconcile any troubles promptly before they become too problematic.
Look for a conveyancer with a good, comprehensive website. The website should be able to provide you with quotes and e-transmission systems and will enable you to track your client’s case online. This will mean you can see every step of the process and can knowledgeably keep your client informed.
It is important in every aspect of business that we continue to learn in order to move forward. While Financial Services Authority regulation has tested the industry in a number of ways, one thing that should have been learnt is that the ‘don’t put off until tomorrow what you can do today’ attitude is one that has resulted in positive results for firms that have heeded the advice.
As the market continues to move at break-neck speed, it is prudent for firms to start looking now at what they might need from a provider in the future. Early planning is key to getting and staying ahead. It is just one of the benefits of defining and developing such relationships that will stand you in good stead in an ever changing market.
The future
As I mentioned previously, keeping ahead of the game is imperative and competition in the conveyancing sector, like all others, is hotting up. Single provider relationships are being put aside and more are moving towards a more collaborative approach whereby firms establish a variety of relationships to widen exposure to expertise and spread any volume risk.
Looking to the future, e-conveyancing is taking significant strides as the Land Registry pushes ahead unabated with its implementation. The ‘matrix system’, when introduced, will offer complete transparency to every transaction in the chain. This increased transparency will enable the entire chain to see every step of the process online. It will show where any blockage occurs and who is causing it, therefore increasing the pressure on that individual or organisation to sort out their processing.
It will also show exactly how long each transaction has taken. These factors will add to creating efficiency throughout the chain and highlight firms who are inept, which could result in the loss of business for such firms, or on the other side of the coin, could prove a successful promotional tool for the most efficient firms in the chain.
HIP power
E-conveyancing could even seize power from Home Information Packs (HIPs) by achieving many of the objectives that HIPs set out to achieve, but that are now outside of the sellers pack process.
The other benefits that will impact in the HIP process are electronic communication which will mean that e-mail or messaging software is built into the system. This will be complemented by the creation of a new system to upload contracts and supporting documents, offering a viewable version of the land register to reflect proposed contractual terms.
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As is usual, projects that were simply buzzwords in the past are now becoming a commonplace practical reality. Things such as electronic funds transfers and electronic signatures are being implemented and introduce efficiencies into the process at a stroke. The move towards electronic funds transfer will facilitate and improve electronic dealing while electronic signatures will be applied to a variety of documents and contracts throughout the process and will be signed electronically by conveyancers.
The funds transfer will effectively mean that money will be ‘digitalised’ and with this facility in place it is not beyond the realms of possibility that the physical transfer of funds via the existing CHAPs system will become obsolete.
Technology means that no firm can afford to stay still, it is important to keep abreast of all innovation available in order to provide the best service for your client. While brokers, generally speaking, will have extensive knowledge of lenders’ products and offerings, service by these providers is also a factor that should incorporate best advice. Clients in turn are also looking for good service levels from intermediaries and therefore it is equally important for advisers to be in a position to recommend legal firms.
Robust relationships are vital in order to move forward and providing the best offering possible. Technology is one thing, but without trust or confidence in your chosen conveyancer it means little. So picking the right partner with all the necessary benefits available to you and your client will put you in a better position to secure your clients quicker and more efficient completions with fewer complications.
Simon Biddle, Infinity
It goes almost without saying, that the legal process driven by the solicitor and the acting solicitor is pivotal to the mortgage process. It is also a fact that the solicitors’ role can be one of the most overlooked parts of the mortgage transaction.
There is almost an element of ‘out of sight out of mind’; which does not really do the solicitors’ role any justice. Without the expert guiding hand of the solicitor the mortgage transaction simply does not happen, so this is clearly an essential ingredient for all parties involved the, customer, mortgage intermediary and mortgage lender. The solicitor is part of the complex chain that goes to make up the remortgage or a purchase transaction.
For many of a certain age, the very word solicitor conjures up Dickensian images of dusty offices piled high with files. This is most certainly not the case now. Online conveyancing, e-mail and web updates as to the status of the legal process being provided to those in the transaction is now the norm.
So what is actually going on in the legal process? The vital fist step is the instructions given to the solicitor at the time of the mortgage offer. The lender’s instructions set out clearly what is expected to ensure the proper protection of the lender’s legal position. In 1999 the Law Society streamlined the role of the solicitor. The result was a clear hand book with the individual lenders requirements set out in what became known as the Lender Hand Book Part 2.
The lender has many requirements, from what do with flying freeholds to where to send the title deeds package. Obviously the most essential requirement of the lender will be a first charge on the property offered as security. Secondly lenders have a set of rules or conditions that the applicant and on funds release the borrower will be bound by. These need adequate explanation as to the legal powers that the mortgage lenders have in relation to the property and the actions of the borrower. Never underestimate what is required of the solicitor; their list of requirements is both lengthy and complex.
The solicitor will be carrying out many other actions such as lend registry, local authority and bankruptcy searches. Many of these are now accessible online, which will be a great help in speeding up the transaction. One area that has gained increasing importance is that of title insurance. Some offer lender protection and other lender and borrower protection. In simple terms, title insurance protects lenders or borrowers against losses arising from problems or defects with the ownership or legal title of a property. The process is speeded and made simpler as carry out various aspects of the house-buying or remortgage process. Some of the more common issues that title insurance covers are a lack of evidence of planning permission, breaches of restrictive covenants, a boundary dispute and disputed ownership.
It is not uncommon for lenders to provide in house conveyacing options and is further evidence of added flexibility in the legal process. With the changes in technology offering greater speed coupled with the use of title insurance, the legal process has never been in better shape. It has to be, as it is central to the successful conclusion of the mortgage transaction.
Eddie Goldsmith is senior partner at Goldsmith Williams
As one of the most essential elements in the housebuying process, conveyancing can be key to a broker’s offering and choosing the right industry partners can make a real difference to how smoothly a case progresses.
The following overview of the solicitor’s role is a handy reference tool which can be particularly helpful when explaining the process to clients.
Choosing a solicitor
Most solicitors offer conveyancing services but not all offer resources that are modern, efficient and reliable. This is essential in order to assure good case-management that responds to clients’ needs. Direct conveyancers, who work mainly with brokers, carry out residential conveyancing in volume, do not require the client to visit them and are the most likely to be open 7 days a week.
Appointing a solicitor
The solicitor should be appointed at the point when a mortgage offer has been received. Once the case has been opened, the solicitor should also receive a copy of the offer. The lender will require the solicitor to undertake certain checks and ensure that any conditions of the offer have been satisfied.
Conducting searches
Conducting Local Authority Searches is one of the solicitor’s key roles. Although referred to as a ‘Local Search’, it is not, in fact, a search of the locality and will therefore not show any matters, planning applications or decisions outside the boundaries of the property. Instead, the Searches focus on issues such as whether roads are adopted (maintained) by the local council, whether there have been any planning decisions made on the property and any specific issues relating to the particular location, such as the presence of mines or radon gas in the area, that might affect the building in question.
Getting contracts in place
When the solicitor has all the information required, they report to the buyer on the contract and other matters either in person or by post. At this stage, the buyer should ask the solicitor about anything they are unsure of as, after this point, it is much more difficult to rectify problems.
Setting a completion date
The solicitor will usually advise leaving at least seven to 10 days between exchange and completion to avoid any last minute hitches. The completion date cannot be agreed until the buyer’s solicitor has all the documents that are required.
Progressing towards the e-future
Many conveyancing firms have invested significant sums into live case management systems, which are not only a step closer towards e-conveyancing, but also provide the broker with more knowledge and, therefore, more control over the process. Brokers who embrace industry partners at the forefront of such initiatives are certainly ahead of the game when it comes to their client offering.
Quality pays
The majority of transactions proceed smoothly but it is always worth having the comfort of knowing that your chosen conveyancing partner offers high quality service and an excellent track record – particularly if the already complex process is hampered by unforeseen complications. By building long-term relationships with reputable conveyancers, brokers can relax in the knowledge that this part of the process, at least, is in safe hands.