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Title insurance – a product for its time (and now just a click away!)

27th November 2012

The recent issues surrounding access to Lender’s panels were brought into sharp focus by HSBC’s initial decision to restrict their conveyancing panel to some 43 firms.  Thankfully they revised this position and have wisely accepted that firms that are CQS accredited may now act for them. It is of course understandable in today’s current conveyancing climate that banks and other lending institutions wish to have greater security in line with requirements being placed on them by the FSA. However, it does raise the question as to whether tighter controls and restricting access will help to improve the lending process and in turn drive a recovery of the property market

Perhaps the simplest way for a firm of solicitors to show they are capable of looking after the interests of lenders for whom they wish to work is to ensure the conveyancing process they use is efficient, professional and, most importantly, thorough. Most firms that deal with conveyancing (both residential and commercial) will have structures in place to deal with what is usually a fairly standard process for the purchasing, selling and re-mortgaging of property. However, is a good process structure by itself sufficient to give the necessary comfort to lenders?

As all conveyancers will be aware, the current property climate has increased the challenges they face, which in turn has increased the pressures (in terms of time, monies which can be charged for fees and competition) upon them. Unfortunately, therefore, even the best conveyancer using the best conveyancing processes cannot always resolve every title issue that arises during the course of a conveyancing transaction. Adverse entries on title and the timing of the transaction can thwart diligent conveyancers in providing a clean title to their client or providing sufficient peace of mind (and thereby security) for the bank.

How can these issues be resolved? One option is for title insurance to cover the points that are not able to be solved from a legal position (e.g. the inability to locate the necessary entities in order to resolve any given issue), or are unable to be solved within a time frame which is acceptable to all parties concerned with the transaction.

Using title insurance as a way to resolve what appears to be title issues without solution, or to provide assistance to allow a transaction to complete in the necessary time frame, is nothing new. Insurance can cover the majority of adverse title issues which arise and which are noted on the title to any given property. However, can insurance be part of the conveyancing process to provide comfort to lenders, if the issues are not identified at the outset? The bank’s security may not be as strong as they perhaps would have expected or require.

This brings us back to firms being sufficiently thorough in their conveyancing process to provide the necessary comfort to lenders. As mentioned above, with all the challenges and pressures that conveyancers already face in today’s current climate, to change their process and the way they deal with conveyancing transactions could be a monumentally difficult (and potentially costly) thing to do.

However, maybe the solution lies in a marriage between redefining processes and the use of title insurance. If the opportunity for error and/or fraud has been dramatically reduced in the form of helping the conveyancer assess and insure more efficiently, this could not only provide time and cost savings for conveyancers, but also provide the lenders with the necessary assurances they require in order to lend more frequently.

It could be imagined that it would be safe to assume that the majority of firms dealing with conveyancing transactions, and lenders alike, would benefit from a system which is able to provide the above. It would not only neatly deal with all of the requirements which firms expect of their conveyancers (i.e. to identify and consider issues which are noted on the registered title), but also the requirements of the bank, which state any issues which could affect their security have been identified and considered and suitably dealt with.

However, would it ever be possible to have a system which is both beneficial to firms and lenders alike or is that only a pipe dream? Who knows what the future may hold, but what is clear in today’s climate is that changes are coming and the ability to adapt and embrace these changes, may for some, be the key to survival.

Adam Harmer
Lead Underwriter and Solicitor
CLS Ltd
Adam@clsl.co.uk

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