Carol Nuttall, solicitor and director at Adlington Law expands on some of the themes in her recent presentation at the Adviser Summit.
Having been invited to the first Equity Release Council Advisor Summit in Manchester and having the pleasure of talking to those who attended, I was met with many questions from advisors following on from my presentation. Whilst it would take far more time than an article to cover everything, this piece highlights some of the main topics those questions centred around.
Contrary to what many advisors, and possibly clients, may think, solicitors acting on behalf of the borrower are not there to try to increase the time it takes to complete an equity release or to ‘bump’ up their fixed fee by finding additional problems that need to be dealt with.
Consumer Duty has recently been introduced to the financial services industry but this has always been at the heart of everything Solicitors do. We are taught from the beginning of our career, that we must get to know our client, be open, be transparent, consider all aspects of a transaction, ask questions, many questions, as many questions as are necessary to enable you to provide the correct and clear advice to your client so that they are fully informed and able to make their informed decision and provide instructions.
The role of the solicitor acting for the borrower is often a very varied one, with very few files being the same and different titles and different instructions throwing up new challenges all the time.
Whilst any solicitor with a valid practicing certificate can act for a borrower, it is so important to stress the difference between general conveyancing and conveyancing in the later life industry where indemnity policies to cover a problem are in the minority and not the norm, and where the additional requirements of lenders solicitors will not be understood and may cause friction between the solicitors and subsequent delays in transactions, potentially impacting the reputation of the industry. Our job is to advise and protect our client, but also to ensure that we do what is necessary to meet the requirements of the lender’s solicitor, which are frequently more stringent than the lenders underwriters have conveyed. The reason for this is that, just as we are protecting our client, the lenders solicitors must protect their client against future risk, insofar as it is possible to do so.
This protection normally comes in the form of special conditions or additional requirements which the borrowers solicitors must work to and satisfy, to enable a transaction to complete.
The best advice we could give to financial advisors is to work with your client’s specialist solicitor. Communicate with them. If you are telling the Lender something, please tell the solicitor on instruction and vice versa. The solicitor is under a duty to provide any additional information they may be told to the lender solicitors, if this affects the transaction, either negatively or positively. Therefore, transparency across the sector is really important as is communication. The more you communicate, and the more information you can provide, the better. This allows a Solicitor to be forewarned when they deal with the lenders solicitors requirements.
For example, if your client is divorced or separated, tell the Solicitor as soon as possible. Find out whether there was legal representation during the separation. Were both legally represented? Did they do everything themselves? Was there any financial settlement? When did they separate? Has the property which is the subject of the equity release, ever been the marital home or has it always been in the ownership of the applicant? The list is endless but the instructed Solicitor will be able to ask the appropriate questions based upon the information they are provided with.
In a standard transaction, where a property is being sold jointly but only one party purchasing a new property, there would be only a few questions raised. In an equity release transaction, it would be essential for the party who is coming off the title to have independent legal advice to ensure that they are fully advised as to their legal entitlement which would prevent any future claims upon the estate. This is particularly important to lenders who want to secure their first legal charge over the property and do not want to be faced with any unwelcomed claims against the property at a future date, from a party who has received retrospective legal advice.
Problems such as this can add weeks onto the life of a transaction as we have to ensure that third parties are seeking legal advice, if they have not done so previously. This is not always an easy task with third parties commonly not wanting to take legal advice, which is going to cost them money and delays. It is essential in these circumstances that Solicitors are able to explain exactly why this legal advice is required as many clients who are able to divorce or separate on amicable terms, deal with all legal matters themselves to avoid what they consider to be the unnecessary cost of employing solicitors. This can happen where parties have separated years earlier but the requirements will still need to be met.
Equally, where a divorce has taken place and there was separate legal representation but the terms of the order have not been adhered to and one of the parties remains on the title because the legal interest has not been transferred, problems may be caused if the party who needs to be removed from the title for the equity release to proceed, has lost all contact with the client. In a scenario such as this, or where the client quite simply does not want any contact to be made, for whatever reason, this will cause substantial delays whilst we try to remedy the situation. Sometimes we can ask for family members to help us but, in the most extreme cases, an application would need to be made to the court where the order was granted, to apply for the order to be varied and for the court to sign the transfer on behalf of the other party. This would only happen where any settlement had been paid and there was proof of that, but the transfer had still not been signed.
If you know there is likely to be involvement of a third party or you have carried out a title check and know or suspect, that there are likely to be issues which may cause delay, speak to the solicitors first. Specialist solicitors will be happy to discuss issues with you, to give you an indication of what is likely to be required to satisfy the requirements of different lenders. They will be able to direct you on what you and your client can be doing whilst you are waiting for a valuation or for an offer to be issued because once that offer is issued, any work which is then needed is going to eat into the time we have to deal with that offer. That, in itself, can cause additional stress to a client, who will be very focused on that expiry date in case it is not extended or in case there is a rate increase.
The specialist solicitor knows the importance of communication and handling expectations. They will be happy to speak to both financial advisors and clients, as we are aware that there will usually be a relationship of trust between those parties and the client may feel more comfortable discussing with their financial advisor or, may simply, want to clarify the advice from the Solicitor with the financial advisor, so it is important that financial advisors know why we are asking for things.
The fact is that specialist solicitors will ask questions. We will ask for numerous documents, we will ask questions off the back of answers to questions we have already asked. We know that these questions can be irritating. We know that we may be asking clients to provide us with information or documentation in relation to aspects of a client’s life that they may feel is very private but we will only ask these questions or request these documents if it is necessary to ensure that we can achieve completion.
Financial advisors can help us. In situations where you have identified that there is going to be a shortfall situation, please tell the instructed solicitors and please make your client aware that they are going to be asked to produce a history of bank statements to enable the solicitor to comply with AML regulations. In addition, make your client aware that if family members are gifting money to the client to help them discharge a shortfall, or if funds are being moved around from various bank accounts, the solicitor is going to also need to see a history of those bank statements too. The solicitor may also have to ask questions to explain any large or unusual transactions, so your client should be prepared for this. This one point can lead to many delays or even complaints to solicitors because clients feel that solicitors are asking questions which are far too personal and are judging them incorrectly. Solicitors will go to great lengths to explain that we are bound to carry out these checks by regulation but many clients will find this difficult to accept.
Another issue that can cause delays is the Lasting Power of Attorney.
When an attorney is involved in a case because a client has lost capacity, it is essential that you make this clear to both the Lender and the solicitor. This is something both parties need to be aware of at the outset. In addition, you will need to make it clear to the client that the instructed solicitor will be asking for the original Lasting Power of Attorney and not a certified copy. The reason for this is that solicitors will be required, by the lenders solicitors, to sign a declaration to confirm that we hold the original Lasting Power of Attorney and will continue to do so until the lenders charge has been successfully registered at Land Registry.
Many clients, or their attorneys, do not like releasing the original document, which is understandable. However, they must know that unless they do this, their transaction will not complete.
In addition, if they are relying upon the Lasting Power of Attorney then we must also be provided with a letter from a suitably qualified medical practitioner, which confirms that the client has lost the capacity required to enable them to make decisions on their own. This can often be difficult to obtain so we would strongly recommend that this is sought prior to the issue of the offer as this will cause delays to the transaction.
You should, of course, also ensure that the purpose of funds is to pay for care or benefit the party who does not have incapacity. This is a requirement of the Lender.
We have had instances where Attorneys will request that appointments take place at their property and not that of the client as it is more convenient for them or, as occurred on one occasion, we had one client request that all correspondence be sent to her and that her parents must have no knowledge of the transaction. This obviously sent red flags flying across the room.
Thankfully, there were no concerns once we looked further into this. However, we did find out that she was the only attorney nominated on behalf of both parents, both of whom had lost capacity. This is not possible as if there are two parties to an application, there must be two different signatories. This is something you should always consider with your clients at the point of instruction where you are aware that one or both parties have capacity issues.
Clients are commonly advised to name each other as their first Attorney, and thereafter, their children may be named. This is fine until you come to later life lending. In an equity release transaction, a wife could not stand as Attorney for her husband if both of them are named on the title and on the application. In this scenario, the wife would have to give up her position as Attorney by filing the appropriate documents with the Office of the Public Guardian which would mean that moving forward, she would be unable to act as Attorney on any other matters. This is far from an ideal situation for many couples and they may not wish to do this. There are alternative routes available and if you find a scenario such as this, you should advise your client to seek specialist legal advice or speak to your specialist solicitor, if they have a private client team who can help.
Solicitors or Estate Planners who specialise in private client matters and who prepare Lasting Power of Attorney applications will rarely advise on these implications as Later Life Lending is still not recognised widely enough and solicitors do not have the experience to advise on this. Therefore, seeing Lasting Powers of Attorney which are not fit for the purpose of an equity release transaction, will not be uncommon. Therefore, when you come across any transaction where there is a Lasting Power of Attorney in place, please do ask to review the documents straight away and, if you need to, forward this on to the specialist solicitor to advise as to whether or not this will be acceptable or whether there are any potential problems and if so, how to deal with them.
Needless to say that unless specialist solicitors have a valid and original Lasting Power of Attorney in their possession together with the written confirmation from a medical specialist confirming lack of capacity, this will unfortunately cause delays to the application. So, again, the sooner the specialist solicitor is able to review the documents, the more chance you have of problems being resolved before the offer expiry date.
The list of what could cause delays is endless, with any new instruction having the possibility of throwing up new challenges for solicitors.
All parties want a swift completion of their cases but this is not always possible. The next best thing is to have the most efficient journey for your client. Efficiency can only be born with communication between the parties, successful management of your client’s expectations and avoiding providing unrealistic targets for clients. With the best will in the world, if a solicitor is presented with an equity release with an offer period of 42 days but there is an unregistered title on a property that has been passed through a family and there have been deaths and marriages during that time or mortgages on the property, then unless the family in question have been extremely efficient and filed everything together in one very accessible place, then the chances of releasing funds in two weeks to pay for a car that your client has placed a deposit on, are zero. Therefore, to avoid an inevitable complaint, realistic expectations must be provided to that client.
This is where the journey can be improved massively by financial advisors, borrower’s solicitors and lenders solicitors working hand in hand to deal with the lenders requirements, to manage and nurture the client and, most importantly, to provide the best service possible to the client.
Should you want any further information on any of the subjects covered in this article, then please do not hesitate to contact Carol at Adlington Law or speak to your preferred specialist solicitor.
- The views of contributors are not necessarily shared by the Council.
