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The Success of the High Street; How Much is it Worth to You?

By AP Bassett Solicitors Lostwithiel  |  Posted: November 02, 2012

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It was only a generation ago. The nation of shopkeepers it was

called.  In the good old days before 'Big Bang' in 1987 the High Street

was the place to shop. High Streets were full of businesses that were

independent. Butchers, bakers, grocers, clothes shops, toyshops,

solicitors and accountants offices, travel and estate agents, pubs,

newsagents, chemists, florists, banks and things called Building

Societies.

Today they are mostly peopled by charity shops, betting shops and

estate agents. There are still banks and solicitors offices, but few

pubs and travel agents.  Its Boots and W H Smith.

It is true that the supermarkets who have had a major impact are the

ones that are blamed for the decline of the High Street.  They offer

convenience.  They offer free car parking to go to the shop, and load

your shopping afterwards.

They sell at prices that drive their competitors out of business.

Remember when you used to drive to a garage to fill up your tank. Their

forecourts are all empty now.  Sainsburys and Asda and Morrisons and

Tescos  offering  5p off a litre, depending on how much you spend in a

supermarket, soon put paid to them.

And when you wanted to buy a house you contacted a Building Society

to borrow the money. They checked that you had sufficient income and

warned you of the pitfalls and, subject to your means, were willing to

lend you monies, sometimes up to three times what your annual income

might be, but usually two and half times that income.  The buyer was

also expected to have sufficient funds available to pay a % of the

purchase price as a deposit .

But then the Big Bang liberalised the banks to be able to take risks

with people's money and they soon started lending up to 6 times a

borrowers income and notoriously even offering 125% of the purchase

price.

And then there was Amazon. Now not only can you buy anything you want

online, but they'll deliver it to. Tesco transits are today's white van

man. You do not have to decide what you want. That's already known from

what you bought before.  It is all so convenient. Don't bother to peel

the spuds and carrots and cook the meat, we'll put it in a dish for you

which you could microwave.

But there is a rival force and it's a growing one. Literally. 

Markets. Not the stocks and shares kind, but those that were in High

Streets not long ago and now find themselves in community centres and

church halls. Farmers produce markets where you can buy the real thing,

fresh locally grown seasonal food. Food which does not have to travel

miles and miles to get to you and you don't have to travel miles and

miles to it.

In the legal sector the Coop and Lloyds are already selling legal

services. Tesco is offering mortgages. Sainsburys  and Asda sell

insurance.

With the advent of the banks selling legal services and offering

deals on conveyancing to their customers there is a risk that the buyers

are going to lose the chance for consulting an independent solicitor.

How far fetched is that idea?

Those who have tried online legal services may be very satisfied.

Those solicitors who have dealt with online legal conveyancers seldom

are. No one has any difficulty with emails communications. They are

rapid and clear. The problems come when something out of the ordinary

happens.  When the bit of land you see on the ground isn't quite what is

being sold because someone has built a fence or the planning

permissions don't reflect the current arrangements.

The online solution- buy insurance.

Insurance products which are not going to ever need to be relied on

are commonplace in today's conveyancing. For hundreds of years property

was sold and bought without insurance products and yet no one wasn't

able to sell or buy the house again.

Now, simply because the Land Registry depiction of the boundary based

on a plan doesn't abut a road that the local council highways authority

is willing to confirm is looked after by them, you need an insurance

policy.

You need an insurance policy because the Church of England might

decide to commit suicide by demanding payment from properties in the

locality to repair its buildings.

You need an insurance policy to cover the risk that a planning

officer might decide that a conservatory built 20 years ago would have

required planning permission even though it doesn't do so now.

An insurance policy will not suffice where a house with a loft

conversion done over 30 years ago without building regulation

certification, and has been accepted by each of the main lenders for

different owners over the intervening years as adequate security,

because the new lender (who has previously held a charge over it) now

wants the seller to get a regularisation certificate

Who is it that insists upon such insurance policies? The banks!

Pre-1987 a solicitor acting for the bank as well as the borrower was asked to certify title to the bank. It wasn't complicated

  1. Prove whether or not the person selling had the right to sell.
  2. Prove whether or not the borrower understood the mortgage commitments.
  3. Prove that there weren't onerous conditions or restrictions which might make the property unmarketable.

Now it is a different world. The lenders will sue the solicitor if

they can and want the solicitor to give them a guarantee that there is

nothing wrong, when in reality there are often things that are not

perfect in the way a house has evolved.

Point 1 hasn't changed.

Point 2 understanding the loan – it was a simple point. You are

borrowing money, it is a debt. If you fail to pay you will lose your

home. You owe the money and interest on it until you pay it off. Now 

you have to prove the borrower is not using proceeds of crime money and

is not only going to insure the property against every conceivable risk

including flooding, but that you will do so from exchange of contracts

with the lenders interest notified on the policy, even though the lender

hasn't given you the loan.

Point 3 is where the lenders conditions have become onerous. You

undertook a local authority search , a water search and any other

relevant  searches. You raised enquiries. Now you require an environment

risk assessment in case the land has been subject to contamination. 

You have to make sure there's been no dispute with a neighbour or if so

that it has been resolved. If someone has done a bit of DIY, or hasn't

regularly serviced their boiler so they don't have all the certificates

in place, you have to negotiate who is going to pay to get this done to

satisfy the lender.

The point is that the lenders now control what the solicitors do and

require them to undertake considerable work at no cost to themselves

which at the end of the day means the solicitor carries the liability

for risk and the lender will readily sue the solicitor if the borrower

should fail to make payment and repossession is obtained of a house that

does not sell for as much as the loan.

However, there are interests at stake here which are not simply those

of the lenders. The fact that a home which is secure and affordable

could be taken away by illness or redundancy is a risk that all buyers

must face and can take some steps to safeguard against with insurance.

That it could go down in value so that the monies you have paid into it

as a deposit will be lost, is not often considered.  But it is the

deposit that the buyer has put in which is the first tranche of monies

that are lost on a repossession.

As a profession we have been expected to willingly put up with all

this and in return solicitors firms are now being driven out of the High

Street by the lenders.

But it's not just about us, the banks policy to remove hundreds of

small law firms from their residential conveyancing panels is also bad

news for the consumer as some of the banks are now dictating which

conveyancer the borrower can use, or stand to have their mortgage

product offer withdrawn.

The Law Society's answer is a Conveyance Quality Scheme (CQS) which

it says will enable law firms entry onto the lender's conveyancing

panels. But with only 1800 CQS firms and 300 more in the pipeline that

still leaves many towns without any choice of legal representation for

the sale or purchase of their property for the people of those towns.

The CQS seeks a future where there is an electronic portal, with a

trusted community of solicitors firms who can amend and draft

documentation in the cloud. It will be a small community. It will be one

that is beholden to and dependent on the lenders. If the legal

profession hasn't learnt the lessons of how franchising has removed

access to justice, then it isn't going to learn that CQS is just a step

on the road to its own elimination from the High Street.

We don't think CQS is the answer. CQS is pandering to the bank's

demands when it is the banks that should be responsible for taking the

risk. They are the ones lending the money after all. Currently the

bank/lenders interests are looked after by the same solicitor as the

borrower (joint or dual representation). The lender will require the

solicitor to undertake extensive work at no cost to themselves but will

look to sue the solicitor if the borrower should fail to make payment

and repossession is obtained of a house that does not sell for as much

as the loan.  Solicitors pay extremely high insurance to cover that

risk.

We see separate representation as the way forward. The bank/lender

instructs and pays for their own independent legal advice while the

borrower is entitled to choose who they want to represent them.

Ask the banks why they don't want separate representation.

We suggest it is because:

  1. The onus will be on them. The FSA found the banks/lenders wanting

    when it came to their own policies and procedures in safeguarding

    against risk. Too many were found to be non-compliant when it came to

    validating a mortgage application or checks against a third party. The

    CML response to the FSA's findings is to attack the High Street and

    claim they have to reduce the firms dealing with their work as proof of

    managing their panels.

  2. With separate representation the lenders will have to be more

    transparent about their fees to be competitive. They don't want to pay

    for their legal costs. But why should the borrower pay for them?!

Can sole practitioners survive in the new legal marketplace?

There is no question to ask. They must survive! Without them the

consumer will be left without access to firms in many High Streets who

offer affordable, local legal services. With the advent of Alternative

Business Structures; (ABS) the new business structure that allows

non-solicitors to sell legal services, some banks are already selling

legal services and there will be a lot more in the future. After the law

firms have been squeezed out of the High Street, there will be nowhere

local for the consumer to go. Perhaps banks should be excluded from ABS.

There's a thought!

It takes all sorts of independent business to make a High Street

successful and we need our High Streets to be successful for the sake of

our communities and local economies. It's time for the legal profession

to stand up, not just for ourselves, but for the towns and communities

we serve!

If the farmers markets reflect how society has adapted to the

supermarket, it also shows that there is a wish to have good local

services.

http://www.banksbad4biz.co.uk/

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