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
- Prove whether or not the person selling had the right to sell.
- Prove whether or not the borrower understood the mortgage commitments.
- 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:
- 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.
- 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?!
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.