Ban that inflates cost of a home

SOME mortgage lenders are refusing to allow solicitors or licensed conveyancers who work alone to do the legal work on a mortgage, writes Sue Fieldman.

If your solicitor cannot act for the lender, you end up paying two sets of legal fees - your solicitor's costs and those of the lender's lawyer.

Sole practitioners account for more than 30 per cent of all legal firms. The one-man or woman band represents an even higher percentage of solicitors who specialise in the legal side of homebuying.

They have for years provided a personal service to their clients, often at a very competitive cost compared with the big firms. They have also acted for the lenders in exactly the same way as larger legal practices.

Many solicitors made redundant from the bigger firms are now setting up on their own, which can only help to keep costs competitive. But they are being scuppered by lenders who put a blanket restriction on using sole practitioners.

The practice smacks of the same sort of restrictive behaviour that the lenders employ with the choice of surveyors. The Office of Fair Trading has referred the surveyor situation to the Monopolies and Mergers Commission for investigation. Walter Merricks, a spokesman for the Law Society, says: 'The discrimination against sole practitioners is anti-competitive. We will want to complain loudly about it.

'The lenders, of course, say that you can still use your own solicitor to look after your interests. But if you are then faced with two legal bills the temptation is to dump your own solicitor and get the lender's lawyer to act for you as well.'

But why should your choice of lawyer be determined by the whims of the lender? The lenders justify their discriminatory policy by the increase in fraud among solicitors practising alone.

However, the number of bent solicitors is less than 1 per cent of the legal population. And, while sole practitioners make up a large proportion of these, we are hardly being overrun by legal fraudsters.

The lenders that do discriminate do not believe that they are over-reacting. Nick Eyre, chief solicitor for Bristol & West Building Society, says that until the Law Society moves more quickly to track down fraudsters and makes speedier compensation payments the discrimination is likely to become more widespread. 'We are not taking any new sole practitioners on to our panel,' Mr Eyre adds. 'If they are already on they will stay unless there is reason to take them off. They can act for us if the business is direct, but if it is introduced through a third party we will not instruct them.'

Woolwich Building Society is not adding any new sole practitioners to its panel. National & Provincial will do so only in exceptional circumstances.

Portman Building Society has gone even further. Since 1 January it will not instruct any sole practitioner to act for the society, even those who have been on its panel for many years.

Lambeth Building Society has removed all sole practitioners from its panel. Lenders that discriminate are at present in the minority. However, all the others are closely monitoring the situation.

The two largest mortgage lenders, Abbey National and Halifax, have no plans to veto sole practitioners. But if either does change its policy you can guarantee that the other lenders will follow like lemmings.

On 10 June the Law Society decides whether to put a cap on compensation payments paid to the victims of bent solicitors. If the society puts a ceiling on the payouts, the lenders will have the ideal excuse to discriminate further against sole practitioners.

Mr Merricks says: 'Nothing has been decided and the indication is that we are not moving towards a cap.

'It really seems quite wrong for the building societies to act in this way before we have made any decision. They really do seem to want everything.'

The Solicitors' Complaints Bureau has this week responded to criticism that it is too slow.

New 'fast-track procedures' will be introduced to identify and bring defaulting solicitors to justice.

An immediate decision to refer serious professional misconduct to the Solicitors Disciplinary Tribunal can be made without the need to go through the bureau's time-consuming procedures.

The bureau has been investigating one solicitor for more than five years, still with no result.