Tuesday, August 20, 2019

Conveyancing Update

The conveyancing world has been abuzz with activity on several fronts of late. Here is our roundup of recent developments.

CQS accredited firms

The Law Society’s Core Practice Management Standards took effect from 1st May 2019 and heralded the need for new policies, procedures and practices on SDLT, leasehold purchases and acting for the lender. Please contact us if you require any further information on the template policies we have put together.

On 18th July, The Law Society announced the release of the 2019 edition of its Conveyancing Protocol, which details best practice in residential conveyancing transactions of freehold and leasehold property (NB this does not include new build properties) and takes effect from 19th August 2019. The new protocol replaces the previous 2011 version and must be followed by members accredited under CQS. Given the number of recent issues relating to leasehold freehold purchases and the complexity of dealing with the Help to Buy scheme and ISA, there is arguably scope for a protocol which specifically focuses on this area.

The updated protocol includes the new Law Society Code for Completion which was prepared following the CA decision in the Dreamvar case and takes into account the updated SDLT requirements which have come into force since the last Protocol was published.

We recently collaborated with our colleagues at Socrates, who are also now part of the Access Group, on updating our CQS training courses, which includes updates to the Core Training – Protocol in Practice and Financial Crime courses (released in 2018) and 2 new 2019 update courses on Risk, Compliance and Client Care and Conveyancing Practice. The new courses are now available in our CQS training libraries. Please contact us if you require further information.

Leasehold reforms

The Competition and Markets Authority is investigating potential breaches of consumer protection law in the leasehold housing market – the focus is on the potential mis-selling of leaseholds to homeowners who do not fully understand the obligations they are taking on and whether the terms of the lease are onerous and unfair, for example in increasing ground rent charges, permission to make changes to the property and other charges. The investigation launched on 11th June 2019 and initial responses were requested by 12th July 2019.

At the same time, the Leasehold Reform Bill 2017-19 is slowly making its way through Parliament. The Bill has several aims, which include: making provision about the regulation of the purchase of freehold by leaseholders, introducing a system for establishing the maximum charge for freehold, making provision about the award of legal costs in leasehold tribunal cases and establishing a compensation scheme for cases where misleading particulars have led to certain leasehold agreements.

The first reading was in the House of Commons on 7th November 2017, however the date for the second reading is still to be announced. We are aware that a number of firms have seen an increase in professional negligence claims against them for failing to advise sufficiently on the purchase of leasehold properties and would welcome some progress with this Bill which should bring some much-needed clarity into this area. As we have reported previously, the message is to be aware of these issues and ensure you are acting in your clients’ best interests and going far enough to advise on what is being purchased, the implications of this and that the client fully understands what they are getting themselves into.

Best practice would be to follow the new CQS requirements on purchase of a leasehold property. It may also be worthwhile directing clients to the government’s “How to Buy” guide which sets out key points relating to leasehold and freehold properties or consider creating your own summary to provide to and run through with clients.

Linked to the above, the Government recently published its response to the Select Committee’s report on leasehold reform and confirmed it is embarking on a significant reform programme so that home ownership is fairer and more transparent for both leasehold and freehold homeowners. This is to include promoting greater use of commonhold as a viable alternative to leasehold. At the same time, the Government is currently working with the Law Commission on issues relating to existing leaseholders and is considering banning the sale of new leasehold titles and restricting ground rents.