Preparing for changes in regulation of mortgage lending in Scotland

The Council of Mortgage Lenders (CML) has called on lawyers in Scotland to reject a proposal requiring lenders to have and buyers of real estate in the UK, separate legal representation at the time of purchase. The law society of Scotland (LSS) has asked to vote in favour of the proposal in September but the CML believes in the vast majority of cases the General representation of lenders and borrowers is cost-effective and more focused on the consumer interest.

CML insists on establishing a joint mission and considers it a promising solution to the issue of transfer of rights of residential property Scotland. In this regard, CML does not consider the proposal LSS is correct. Current LSS rules and the CML loan management already provide for separate representation in cases where it is required, for example when there is a conflict of interest. And the CML has repeatedly offered to consider and discuss aspects related to this kind of questions.

The CML States that the total representation profitable from economic aspect and from the point of view of time reduction. Thus, the creation of separate offices could lead to double work and as a consequence, to an increase in cost, which leads to delay in operations. It should be noted that the documents were written one sided in favor of only the individual representation, not reflecting all the disadvantages, and not pointing to the benefits of joint missions. CML reminds us that the position of LSS is in direct contradiction with the law Society of England and Wales who are in favour of maintaining a joint office.

If, despite these problems, the LSS members vote for the rule change, the CML urged the adoption of a reasonable implementation period, which shall not be less than 12 months to avoid problems that can bring hasty changes. Ill-considered actions can have a negative impact on the housing sector and mortgage market in Scotland. Director General of the CML believes that in the vast majority of transactions on the transfer of ownership, where the interests of the borrower and the lender are very closely related, a separate representation does not represent the consumer interest.

Given that existing rules already provide for separate representation in cases where there may be a conflict of interest, the CML urges the law Society of Scotland to think again. Besides, the CML is ready for constructive interaction with the LSS and are ready to cooperate and, if necessary, to discuss changes in Reference Lender (Lender”s Handbook), so that the interests of both the lender and the borrower have been properly protected.

® Maxim Savitsky 04.08.2013