When a lender is investigating allegations of professional negligence (either against its panel conveyancing solicitor or against another professional involved in the transaction, such as a chartered surveyor), or where the lender suspects mortgage fraud, the lender will usually want to see a copy of the file of the solicitor who acted for it in the transaction.
Occasionally, the solicitor will refuse to produce the file, on the ground that the file is subject to solicitor/client privilege (meaning the borrower’s privilege). The position has been now clarified by The Law Society. On 8 December 2011, The Law Society issued a practice note dealing with requests made by lenders for conveyancing files.
The practice note makes clear that a lender is entitled to:
(a) documents which relate solely to the lender's retainer (e.g. lender's instructions to the conveyancing solicitor, the certificate of title and the executed mortgage deed); and
(b) documents which relate to the borrower's retainer, but which are also relevant to the lender because they cover an area of common interest (e.g. pre-contract enquiries, search results and title information).
However, the lender will usually want to see the whole file, which will include documents which relate solely to the borrower's retainer (e.g. correspondence between the conveyancing solicitors and the borrower). The Law Society's practice note makes clear that the lender will only be entitled to these if the borrower has consented to this disclosure. If a lender claims to have obtained the borrower's consent, The Law Society advises conveyancing solicitors to ask to see a copy of that consent, and to carefully consider its terms and scope, before deciding whether to release the whole file. The conveyancing solicitor should also consider whether the borrower's consent was meant to be permanent and ongoing, or whether it was only intended to apply until such time as the transaction completes. The lender often relies on the consent contained in the declaration contained in the mortgage application form. This may present a difficulty, as some lenders, for example GMAC-RFC, did not always require a signed mortgage application form to be submitted by the borrower and where the consent is not signed, it is difficult to see how this can be construed as a “written consent”.
An example of the type of consent wording which the courts have found to be both enforceable and ongoing is as follows:
"I/We declare and agree that I/we irrevocably authorise my/our conveyancer to send their entire credit file relating to the whole transaction (not just the loan) to you at your request."
The Law Society's practice note deals only very briefly with the issue of a file request from a lender who has purchased the loan from another lender. The practice note states that a successor in title can enjoy the benefit of a consent given by the borrower to a predecessor in title, but only whilst the matter is continuing. It refers to the case of Winterthur Swiss Insurance Company v AG (Manchester) Ltd in support of this. However, it is difficult to square the conclusion set out in the practice note with what that case actually says. Also, many borrower consents are drafted so as to make clear that they are given for the benefit of the original lender and the original lender's successors in title (which does not seem to have been the case in the Winterthur case). A conveyancing solicitor may attempt to rely on this paragraph in The Law Society's practice note to justify a refusal to provide documents to a lender which has taken an assignment of the original loan. We would challenge this stance with reference to (a) the actual jugdement in the Winterthur case and (b) if appropriate, the wording of the borrower’s consent.
The practice note does not change the legal position as regards lenders' requests for files. However, it does mean that conveyancing solicitors are likely to have the issue more in the fore-front of their minds. It is therefore likely to make it very difficult to obtain complete copies of conveyancing files where the borrower's wirtten consent was not obtained. We may also find conveyancing solicitors looking more closely at the precise wording of the borrower's consent. However, the practice note makes clear that the documents to which a lender is automatically entitled go beyond the bare minimum of retainer letter, certificate of title and mortgage deed, and this will be helpful to lenders who wish to obtain as full a picture as possible of how a particular transaction was conducted.
