Update to MCOB rules affecting mortgagee sales
The FCA introduced a new rule from 21 March 2016 in the Mortgage Conduct of Business Rules (MCOB Rule 13.4A) which contains specific requirements for Assisted Voluntary Sales and Voluntary Surrenders:
- If a customer voluntarily surrenders possession of their property, notice of the surrender must be given to all persons at the time it happens or as soon as reasonably practicable afterwards.
- If a borrower is placed in an Assisted Voluntary Sale process a notice must be given that the customer has entered into an assisted voluntary sale process within 10 working days from the date the customer entered the scheme. Further, notice of the proposed sale and details of the proposed sale price and method of sale must be given at least 10 working days before the date when the property is proposed to be offered for sale and details of the sale price within no more than 10 working days from the acceptance of an offer to purchase the property.
Consumer Protection Regulations in Conveyancing
In February 2016, the Law Society published new guidance on the implications of consumer protection regulations on conveyancing practice, setting out its initial view of the implications for conveyancing practices of the Consumer Protection from Unfair Trading Regulations 2008 (as amended) (CPR). This guidance is in line with the guidance in place for estate agents which has already highlighted their potential liability when acting for a client in the sale or letting of property.
The CPR prohibits traders from engaging in unfair commercial practices in dealings with consumers and offences carry criminal sanctions ranging from a fine to imprisonment for up to two years. Although currently untested in the courts, the Law Society has considered the potential impact on:
- solicitors acting on the sale or letting of a property to someone for personal use or private investment (which includes purchasers and tenants), even where the client (seller or landlord) is acting in a non-business capacity, such as in the sale of a residential property.
- the application of the principle of “caveat emptor” or buyer beware.
- the solicitor’s duty of client confidentiality.
Potential offences under the CPR include providing false information or presenting information in a way which deceives or is likely to deceive the average consumer, omitting or hiding material information, as a result of which the consumer takes a decision they would not otherwise have taken. The Law Society’s view is that the regulations reduce the application of the principle of “caveat emptor” and this is of particular concern to conveyancers. The guidance provided indicates that the test is whether omitting to disclose material, or a failure to provide it in a clear, intelligible and unambiguous manner, is likely to cause the average consumer to make a different decision in the transaction. The solicitor acting may have material information which they must disclose, for example knowledge of an adverse survey or information relating to the title, and they must also make reasonable enquiries to find out if such information exists.
There is a clear conflict between a solicitor’s duty of confidentiality to their client and the disclosure duty which arises under the CPR. Due to the possibility of criminal sanctions against solicitors for breach of CPR, the Law Society recommends that the solicitor should err on the side of caution and strongly advise and encourage their client to disclose any known material information. If the client declines to authorise disclosure, a solicitor should consider whether it is still possible to continue to act and meet all professional and regulatory obligations.
Whilst the Law Society has made it clear that their recommendations have been put forward on a cautious basis due to the uncertainties surrounding the application of the CPR, and that solicitors are not required to follow them, doing so will make it easier for a solicitor to account to regulatory bodies for their actions. All solicitors engaged in residential conveyancing are advised to take note and review their conveyancing practices.