Legal Advice on Remortgages

01.01.07

Legal Advice on Remortgages

Contact - Jeremy Fraser, Partner

The Council of Mortgage Lenders have issued a circular to their members (Circular 2301) regarding legal advice on remortgages.

The issue has arisen as a result of a letter to the CML from the Legal Complaints Service for England & Wales (LCS). LCS refers to recent complaints which give rise to concerns firstly that lenders' documentation may not be sufficiently clear that legal advice on remortgages is only for the benefit of the lender and secondly that the customer has no redress as the solicitor or conveyancer acts only for the lender. LCS admit that the complaints have been of a relatively minor nature. However, now that the point has been raised this seems likely to increase the risk of challenge if lenders' financial promotions and customer communications are unclear on this point.

The primary risk for lenders is that a promotion could be held to be misleading if it gives the impression the customer will receive (free) legal representation for their own benefit, even if the point is clarified in subsequent customer communications. There may also be a risk that legal advice provided in these circumstances could be held to have been given for the benefit of the customer, which could open up a risk of claims for misadvice.

Lenders may therefore wish to review relevant financial promotions and customer communications to ensure promotions are clear fair and not misleading and that the customer is advised that the legal services provided under any packaged offer - for example as "Free Legal Fees" - will not be for the customer's benefit and that if they wish to obtain their own independent advice this is a cost they will have to bear themselves.