Minimum Lease Term Increase

On the 6th August 2009, hundreds of thousands of leasehold properties became unmortgagable overnight as Lloyds Bank changed their minimum lease term requirement in 5.10.1 of Part II of the Lender's handbook.

As a conveyancer, even if you were acting on a transaction with a Lloyds mortgage at this time, you would not have received notification of this change from Lloyds. If you were about to exchange or send your COT on the 5th August 2009 where the lease term had 65 years remaining you would have been fine. However on the 6th August the bank’s minimum term requirement became 70 years and therefore you should not have exchanged or submitted your COT, at the very least, without alerting the bank of the issue.

This is not an isolated example. A significant number of banks have changed their minimum term requirements in the last 18 months. Can you be sure that you captured them all? Whilst it is too early to see cliams brought by Banks against the conveyancers who have missed these requirements, in order to prevent future claims you should carry out an insurance-backed LM04 search on every transaction. At the current introductory rate of only £3.00 per transaction, this is a small price to pay to protect your firm.

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What If The Balance of Monies Is Not From The Borrower?

The CML estimates that 80% of fist time buyers receive financial assistance on their purchase from their parents. Lenders are increasingly using Part II of the CML Lenders Handbook to impose specific requirements where the borrower is not providing the balance of the purchase price.

One such example took place April 2010 when Leeds Building Society made a change to section 5.9 requiring that “…you must provide us with a declaration of this amount, that such amount is not be repayable and that the party providing this amount will not acquire an interest in the property. You must also ensure that clear bankruptcy searches are carried out against the borrower and all parties contributing to the balance of the purchase price.”

In light of the pending Bradford and Bingley case against solicitors can you afford to have missed this requirement?

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New Post-Completion Requirements

You have probably noticed that Part 2 requirements are changing with increasing frequency. One area of increasing change relates to the required documents that Conveyancers submit following completion. This trend was epitomized by the changes Northern Rock made in October 2010 under section 5.11.2 of their Part 2 requirements. This change requires that following completion, lawyers must send the bank an original share certificate in a management company (where applicable) as well as a blank stock transfer form, signed by the borrower.

There are many recent examples that could be given for banks changing their requirements for documents to be sent post completion. These might include, Planning Documents, Indemnity Insurances, Searches. The nature and number of documents are on the increase.

Whilst failure to send such documents in and of itself may not result in a claim for substantial losses, the absence of documents could be used as part of a lender’s panel management strategy. If a share certificate in the management company is sent but without the accompanying blank stock transfer form, that may be evidence enough to the bank to note that you are not complying with their requirements.

The CML have recently acknowledged that the age of open panels is effectively dead. Lenders are looking for solicitors to embrace best practice without exception. New services have been introduced to support Conveyancers manage this increasing burden. The LM04 Lender Policy Search is one such service which makes it quick and simple for Conveyancers to keep abreast of all of the Lender's individual requirements and protect their position.

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