Two out of three property lawyers expected to closeMake Text Bigger
Some fear the lack of competition in the market may lead to rising costs that will hamper an already fragile housing recovery.
Lawyers are feeling the squeeze from three sides –
- The falling number of house transactions that is expected to last for up to three years
- A change in professional indemnity cover that removes protection from claims by lenders
- Lenders cutting the number of firms they will let act on their behalf following millions in losses from mortgage fraud
The latest figures from the Council of Mortgage Lenders show mortgages for buying a home were approved at a rate of 46,000 a month for the last quarter of 2010 – a fall of 16% on 2009.
The CML predicts a similar level of lending for 2011, which equates to funding for about 550,000 home purchases in the year – down from a peak of more than a million before the credit crunch.
Conveyancing costs expected to rise
Plans by the Solicitors Regulation Authority may hit harder than a low number of house sales.
The SRA is removing protection for claims from mortgage lenders from the minimum cover requirements of solicitors’ professional indemnity insurance. This will leave lawyers to settle claims for compensation by lenders from their own funds, rather than have an insurer picking up the tab.
The principle behind the move is to let firms concentrating on conveyancing pay extra for indemnity cover rather than share the burden of cost for expensive settlements across the profession.
The net result is firms not specialising in conveyancing will immediately stop offering the service rather than put their personal funds at risk.
Banks and building societies are also reducing the number of solicitors they will let act on their behalf.
In many cases up to now, they would agree a multi-partner firm could handle the lender’s legal work as well as the buyer’s – but lenders will now only pass work to a much smaller network of ‘trusted’ firms after many mortgage fraud cases have shown lawyers have been involved in the crimes.
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