Formerly known as the CML Handbook, the UK Finance Mortgage Lenders’ Handbook is an important aspect of the conveyancing process whenever secured lending is involved, setting out a lender’s requirements in any secured lending situation (such as purchase or re-mortgage of a property, but also sale or discharge of a standard security) and forms part of the lender’s instructions to the solicitor.
For anyone dealing with conveyancing transactions, no matter how experienced, it is important to keep their knowledge of the Handbook and its requirements regularly refreshed. Failure to comply with the provisions of the Handbook may lead to claims for breach of contract and breach of professional duty by a firm or the solicitor involved, and potential reputational damage.
The Handbook itself
There is a Handbook for each legal jurisdiction in the UK. All have a Part 1, containing requirements which are uniform to all lenders, whilst there is a separate Part 2 for any lender-specific requirements. There are eighteen titles within Part 1, while Part 2 varies in length depending on the lender. The latter contains lender-specific details relating to the provisions of Part 1, such as contact details for different departments, or whether the lender will accept search insurance.
The Handbook for England & Wales also includes a Part 3, which sets out standard instructions to be used where a conveyancer is representing the lender but not the borrower. Part 3 should be read in conjunction with Parts 1 and 2.
Most of the Handbook’s requirements relate to a purchase or re-mortgage, but the Handbook is not limited to those circumstances. Paragraph 16 addresses transactions during the life of the mortgage and paragraph 17 deals with discharges, so make sure you understand whether the Handbook applies to your transaction.
Risks of non-compliance with the Handbook
Failure to comply with the provisions of the Handbook can be a serious matter and may lead to claims for breach of contract and breach of professional duty by a firm or the solicitor involved. Following the 2008 recession there was an influx of claims against solicitors alleging failures by conveyancers to follow the requirements of the then-CML Handbook, resulting in major losses to the policy and the profession.
With both the emergence from the COVID-19 pandemic, and other global events causing straitened economic circumstances, it is now more important than ever for staff working on conveyancing transactions to familiarise themselves with the Handbook, and for firms to make sure that that is happening and to provide training where necessary.
Some of the Handbook’s provisions
A sample of the provisions of the Handbook are highlighted below, but this is by no means an exhaustive list and is intended only to give an idea of the range of matters covered by the Handbook. Any guidance offered here is nothing more than that, and it must be stressed that practitioners should take care to check that they have complied with the Handbook’s requirements in full.
For illustration, some of the provisions of Part 1 of the Handbook are as follows:
- 3.2 If the seller's solicitors are unfamiliar to you, you must verify them through the Law Society, Council for Licensed Conveyancers, or other legal regulatory body.
- 4.2 You must take reasonable steps to verify that there are no discrepancies between the description of the property as valued and the title and other documents which a reasonably competent conveyancer should obtain; and if there are, you must inform the lender immediately.
- 5.4.3 Any searches except where there is a priority period must be no more than six months old at settlement.
- 6.3.1 You must make sure the purchase price accords with what is in the lender’s instructions.
- 7. You must check the situation of any occupiers of the property other than the borrower, and depending on the circumstances you may need to report this to the lender or obtain such other occupier’s consent to the mortgage.
- 11.1.2 You should explain the legal implications of the mortgage conditions and any other documents to be signed to the borrower.
- 14.3.1 You must keep your file for at least six years from the date of the mortgage before destroying it.
- 16.4.1 You should advise the borrower that letting is prohibited without the lender’s consent.
The above is intended only to give a flavour of the Handbook’s requirements. There is really no substitute for reading through and familiarising yourself with the Handbook itself, and it is strongly recommended that you take some time to do so if you have not recently. If you are a manager, you may also want to consider organising refresher training on the Handbook for your team.
Conveyancers’ obligations in respect of the Handbook
When acting in a purchase or re-mortgage, it is important to remember that the lender is just as much your client as the borrower, and that you have a professional duty to follow their instructions, of which the Handbook forms a part.
There are numerous circumstances which the Handbook requires be reported to the lender, and if in doubt we recommend reporting anyway. Paragraph 2.3 requires that “If you need to report a matter to us you must do so as soon as you become aware of it so as to avoid any delay.” It goes on to require that where you believe a matter is not adequately provided for in the Handbook you should report to the lender with a concise summary of the legal risks, including the provision of the Handbook which you think inadequately covers the situation, and your recommendation as to how the lender should protect its interest.
Importantly, paragraph 2.3 also emphasises that reporting a matter is not enough and that you must await the lender’s further written instructions on that matter before proceeding. Receipt of monies without instructions that a matter is accepted cannot be taken as an acceptance. It also explicitly recommends not concluding missives before relevant matters have been reported, as the lender may have to withdraw or change the mortgage offer.
Above all it is crucial for solicitors and other staff working on conveyancing transactions to be aware that the Handbook affects their work and to familiarise themselves with its terms, so that they can keep themselves on the right side of the Handbook’s requirements.
For further information, please visit our Lockton for Solicitors page, or contact:
Eilish Cullen, Compliance Consultant at Teal Compliance