Why you need to check your lawyer’s lender panel membership
When you choose a solicitor to handle the legal work for a property purchase, you must check that your choice can also act for your mortgage lender.
Not all solicitors can act for every lender. Some lenders will only work with a small number of law firms.
If your solicitor cannot work with your mortgage lender, the solicitor will have to arrange for another law firm to carry out legal enquiries on behalf of the lender. This can cost more money, and can waste valuable time. A long delay could cause a chain to collapse and scupper your purchase.
Why does it matter?
When you buy with a mortgage, your lender is understandably eager to ensure that the money they are lending is “safe”.
The lender will want to understand whether the property is worth what you are paying for it. This is so that, if you stop paying the mortgage and the lender needs to sell the property, they will be able to recover their money.
In addition, the lender will want to ensure that the property has a “good and marketable title”. This means that your solicitor can establish ownership of the property, and they can transfer the property into your name.
Like you, the lender doesn’t want to face a legal challenge at some point in the future from some party that claims ownership. Again, they want to protect their “investment”.
Understanding lender panels
The choice of a solicitor to handle the conveyancing work is a major part of buying a home. You might have received a cheap quote from one firm, or you like the idea of using a local solicitor – perhaps one that a friend or family member has recommended to you.
However, your solicitor may not be on the list of firms (or “lender panel”) that your mortgage lender is prepared to work with. If so, the lender will insist on using a different solicitor to conduct their legal work.
You will be expected to pay the legal costs of the firm the lender uses, but you won’t have any choice over which firm is used!
When you plan to buy a home, it is a good idea to think about your choice of solicitor at the earliest stage. This will give you time to compare quotes and make enquiries to find the best choice for you.
Most firms work on a “no sale, no fee” basis, so you can even instruct a solicitor before you find a property if you wish.
When your solicitor is on your lender’s panel, the lender will automatically send them instructions, usually at the same time as issuing the formal mortgage offer.
This means that the solicitor will have all the necessary paperwork and can easily get you to sign the mortgage deed when completion is approaching. The solicitor will also handle the registration of the mortgage themselves together with the registration of the title transfer.
Avoid delays plus paying twice for your conveyancing
If the lender insists upon instructing a separate firm, your own solicitor will have to correspond with the lender’s solicitors in connection with completion of the mortgage. The work will be duplicated by two firms of lawyers. This likely to cause you delays. Furthermore, the lender’s solicitors won’t be under any pressure to work quickly.
When you are getting quotes, you should always ask whether the firm is on the panel of your intended lender.
If you haven’t yet decided on the lender you should ask whether the solicitors are on the panels of lenders you are likely to approach, such the high-street banks and building societies, as well as any other more specialist lenders.
If your solicitor is not on the lender’s panel and they instruct another firm to complete the mortgage, you will then be faced with the choice of:
- sticking with your own solicitor and accepting any delays, plus paying two sets of legal fees, one to your own solicitor and one to the lender’s solicitor, or
- using the lender’s choice of solicitor to handle all the conveyancing work.
If you do opt to use the solicitor appointed by the lender to handle all the conveyancing work they may well charge you much more than your preferred firm.
The lender’s preferred firm is unlikely to match your ideal criteria. They could be located on the other side of the country, more expensive, slower or more difficult to contact.
You may also discover that the firm appointed by the lender will not act for private residential buyers, so you won’t be able to use them, even if you wanted to.
Not all solicitors are on all lender’s panels
Whether a solicitor’s firm is or is not on the panel of a particular lender is not necessarily a reflection on the competence or quality of that firm. Some lenders will only appoint firms with three or more partners. Some lenders will only work with firms that regularly handle a certain volume of residential conveyancing. Others require panel firms to be accredited by the Law Society’s Quality Conveyancing scheme.
There are a few lenders which only have a very restricted panel, or may even only employ one solicitor’s firm to complete their mortgages. If you do want to get a mortgage from one of these lenders then you will probably need to instruct your own solicitor as well (and expect to pay two sets of costs) since these lenders’ solicitors often do not act for individual buyers as well as the lender.
Buyers who use a broker to obtain a mortgage (whether via the seller’s estate agents or an independent firm) may find that the broker recommends a particular solicitor.
This will not necessarily be because the firm is any better or cheaper than another solicitor you want to use, but because the broker or agents are getting a commission from the solicitor. The broker should inform you if this is the case.
There are many brokers who but don’t think that you must use the recommended firm even if pressurised to do so.
The reasons that lenders need to instruct a solicitor
Buyers, especially those buying for the first time, often fail to understand why a lender also needs to appoint solicitors. You would not expect this formality when getting a loan to buy a car. Why should it be necessary when borrowing money to buy a home?
The reason is that a mortgage is ‘secured’ upon the property being purchased. Lenders have to advertise that ‘your home is at risk if you do not keep up the mortgage repayments.’ This is because their ultimate sanction is to take possession of the property and sell it without your consent.
A lender must be satisfied that the property has a good and marketable title if they need to sell it. A solicitor must also register the mortgage against the owner’s title. Otherwise, the lender would be unable to enforce their security. “Security” refers to the lender’s right to reclaim their loan plus interest when a property is sold.
Lenders therefore insist upon using solicitors to complete all the legal work to ensure that they will have good security for their loan.