As anticipated in my blog from last week, the motion to remove the exemption to the conflict of interest practice rule for Scottish solicitors which currently allows them to act for both a borrower and a mortgage lender in the same mortgage security transaction ('joint representation') was passed at the Law Society's AGM last Friday. 57 solicitors voted in favour of the motion, with 27 against and 3 abstentions. Interestingly no proxy votes were cast, suggesting to me that there were no last minute attempts to vote the motion down.

The next stage will see the Law Society bring forward new practice rules to be voted on at an SGM in September. Assuming these rules are passed, and then approved by the Lord President, separate representation will become the norm in Scotland, and solicitors will no longer be able to act for both borrower and lender.

The CML were quick to respond, with their Director General, Paul Smee issuing a press release on Friday, stating:

"It is disappointing that a measure which is so blatantly against consumer interests and will impose added costs and added scope for confusion and delay has been voted through, with not even the pretence of wider consultation.

"At a time when housing and mortgage markets are still recovering, this is a protectionist measure with little regard for the interests of consumers."

It is unfortunate that Mr Smee did not check his facts on the 'wider consultation' point before the release, as it is quite clear from their report to the AGM that the working group consulted widely over a lengthy period.

Austin Lafferty, President of the Law Society, addressed the issue of increasing consumer costs in the Society's own press release, stating:

"Solicitors provide conveyancing services for communities the length and breadth of Scotland and we are fully aware of the potential for increased costs for buyers and increased paperwork for solicitors. However these costs are not the borrowers, they are costs associated with lenders satisfying themselves on their own lending risk - and it will be for the lenders to decide on whether they are prepared to pass on these costs to their customers."

It will be interesting to see how the end game plays out over the next six months.

  • Will mortgage lenders play a "wait and see" game and hope the new practice rules are voted down in September, or will we see lenders rushing to set up their own mini panels so they can implement separate representation by then?
  • Is there some middle ground involving an adjustment in the CML's lenders handbook for Scotland, or will we end up with some sort of title insurance in play?
  • Will there be a groundswell of opinion against separate representation, or are the legal profession just not that interested?