The Council of Mortgage Lenders (CML) has announced that it has made significant revisions to the CML Handbook which became effective as of 1 December 2014. In all, 33 sections have been revised and amended (accounting for over 10% of Part 1 of the CML Handbook) which constitutes the most substantial revisions made in over a decade.
The CML has also instructed all mortgage lenders to update their Part 2s, and these will become available on the CML's website as and when provided by lenders to the CML. As it is not practicable in this update to set out every lender's particular requirements, we concentrate on Part 1 of the Handbook.
The following is a summary of the amendments made to Part 1 of the Handbook for England & Wales as set out by the CML. Revisions have also been made to the CML Handbooks for Scotland and Northern Ireland, so firms handling conveyancing transactions in those jurisdictions should check the CML's website for further information.
Given the significant number of changes made, if you haven't already done so, you should implement training for your conveyancing staff as soon as possible to bring them up to speed with these changes. You should also review and update relevant precedent documents and letters to ensure that these changes are incorporated into them.
Summary of Changes to CML Handbook Part 1
Part 1 General
An amendment to update references to solicitors' and licensed conveyancers' respective Codes of Conduct.
1.5 General
An amendment to refer to the solicitors' regulator.
Paragraphs 1.17; 2.2; 10.4; 14.3.3
Amendments to above paragraphs if necessary to move to all upper case, to provide consistency across the Handbook, where the Part 3 is referenced in Part 1.
Section 3 Safeguards
Amendments to update references to the relevant guidance and legislation.
Paragraph 4.1 Valuation of the property
An amendment to clarify that solicitors and conveyancers are not expected to advise on any discrepancies between the valuation report they receive and what the lender has, if the lender does not supply the report directly to them.
We particularly welcome this change. given that there was no way that a solicitor could know that more than one version of a valuation report existed. Insurers have previously faced a significant number of claims against firms where lenders had alleged that this was a requirement which had been breached by the solicitor handling the transaction.
Paragraph 5.5.1 Planning and building regulations
An amendment to clarify that, if the conveyancer can provide an unqualified certificate of title with respect to planning and building regulations, the lender will not insist on indemnity insurance.
It also removes the Part 2 question which allowed lenders to specify further requirements as to time limits, on the basis that the lender should be able to rely on the professional judgment of the legal representative.
Paragraph 5.5.2 Planning and building regulations
A clarification to 5.5.2 in light of the amendment to 5.5.1, which instructs the conveyancer to report to the lender if the conveyancer cannot give an unqualified certificate of title.
Paragraph 5.6.1 Good and marketable title
An amendment that lenders will not insist on indemnity insurance being obtained in certain situations.
Paragraph 5.11.2 Restrictive covenants
An amendment that lenders will not insist on indemnity insurance being obtained in certain situations.
Paragraph 5.14.13 Leasehold property
An amendment to allow either evidence of service of notice on the landlord or any management company or receipt of notice from the landlord or management company introduced to recognise the practical difficulties in obtaining a receipt of notice.
Paragraph 5.14.16 Leasehold property
A change to recognise that original leases may not be available because they have either been lost or destroyed through Land Registry dematerialisation policy.
Paragraph 5.15.2 Management company
An amendment to require that the conveyancer arranges for the borrower to follow the procedure necessary to become a member of a management company after completion, if appropriate, rather than on or before completion, as it was practically difficult to achieve by or before completion.
Paragraph 5.16.2 Insolvency considerations
A minor change to replace 'certify' with 'satisfy' reflecting that there are no longer paper searches capable of certification.
Paragraph 6.4.1 Incentives
Removes the stipulation that the DIF must come from the conveyancer, as it may come from the seller or developer direct.
Paragraph 6.6.2 Properties let at completion
Additional text in Part 1 ' if the letting does not comply, or' to reflect the preceding sentence more accurately.
Paragraph 6.9.2 Easements
An amendment to remove the requirement to mortgage adjoining land in limited circumstances, where valid easements exist.
Paragraph 6.14 Insurance
This section has been much simplified to remove the list of risks and range of Part 2 questions in relation to buildings insurance requirements. A part 2 has been retained to allow for lenders to include specific requirements.
Paragraph 11.2 Signing and witnessing
A change to recognise the current requirements regarding signing of documents – aligns to the current Land Registry requirements with regards documents related to land.
Paragraph 14.1.1 After completion
Removes the requirement to save a copy of results on the mortgage file as this is already covered by the general requirement at 14.3.
Paragraph 14.1.5 After completion
A change to reflect the much increased use by conveyancers of electronic registration processes at the Land Registry and to reflect the Land Registry's move toward dematerialisation and increased digitisation as they now have a policy of destroying all original documents they are sent. The amendment also clarifies that conveyancers will not need to keep original documents on file on behalf of lenders, given that the Land Registry will have official copies.
Paragraph 14.2.1 Title Deeds
Addition of wording to clarify that stated documents should be held 'pending completion of the retainer'.
Paragraph 14.3.1 Your mortgage file
A change to clarify that documents which a reasonably competent conveyancer would retain should be kept – and to clarify that material held electronically is suitable compliance (i.e. hard copies need not be held). This brings the CML Handbook up to date with current (perfectly good) practice in many law firms.
Paragraph 15 Legal costs
Removes last sentence of section, as advised that this is no longer a requirement under Law Society or SRA regulation.
Paragraph 16 Properties let after completion
An addition at 16.4.1 to clarify that the instruction only applies prior to the end of the retainer and deletes 16.4.4.
Paragraph 17.2 Discharge
Addition of words 'if required' to reflect the part 2 option.
A version of this article was originally published in Zurich Insurance's bulletin for Solicitor clients.