David Gilman, partner in charge of Blacks Connect
Choose your conveyancing partner wisely, because more firms will get dumped by lenders.
Whether you have a long-term relationship with a local conveyancer, ongoing affairs with a few different law firms, or you flit between the cheapest on the market, be careful.
As sure as night follows day, mortgage lenders will continue to cut their conveyancing panels, and if your legal partner can’t act for half of the big boys you are going to come unstuck.
Smart brokers are forging relationships now with solid firms that work closely with the major lenders, and have strong enough relationships and sufficient volumes to keep on working with them.
Why are lenders cutting panels?
The fallout from the credit crunch led to the FSA scrutinising lenders more closely and compelling them to do the same with their own business partners.
It’s difficult, expensive and time-consuming to do due diligence on hundreds of law firms, which is why it suits lenders to do business with fewer, larger businesses.
As a result many are actively managing their panels – sometimes based on volumes, so conveyancers need to put through a minimum number of cases a month for example, and sometimes through quality control, so if a firm repeatedly refers cases that are problematic for whatever reason, the lender may see fit to get rid.
HSBC may have borne the brunt of the bad publicity for its attempt to cull its conveyancing panel to 42, but the culling of conveyancers is not limited to one lender.
It’s been happening across the market for some time now with Santander, Clydesdale and Yorkshire Banks and Nationwide among the many lenders to have tightened their approach to panel management.
It’s still happening now and it certainly won’t stop any time soon, as was recently recognised by the CML.
Is it fair?
It may not seem fair on the smaller law firms who dabble in conveyancing and it may not be the direction in which many people, including The Law Society, want the industry to go. But why shouldn’t lenders cull their panels?
Fraud is an enormous problem and they have to know that they are dealing with firms that they have full confidence and trust in.
Quite apart from that, they are commercial businesses with every right to choose their business partners based on market and regulatory demands.
Not everyone agrees with me, but I think lenders are quite right to manage their panels. Either way, this is the new reality and to ignore it is not wise.
What does it mean for brokers?
Because smaller law firms, or those that only do a little conveyancing are likely to be cut from panels, you really do need to build relationships with stable business that are solid in this market.
Established conveyancing specialists have worked closely with the UK’s biggest lenders for years and provide them with both the quality and the volume they require.
If your current conveyancing partner gets struck off the Nationwide panel for example, you are going to have to find a new firm to deal with – possibly at short notice.
Frankly, there are too many conveyancing providers out there and a market correction is underway.
Make sure you choose a partner that will survive the fallout.