SGS 5 - Professional Conduct Concerns in Land Flashcards
What is an example where a mortgage is NOT ‘standard’?
- Lender is an individual
- Loan whose terms are negotiated and are not standard terms
When would it not be in the clients best interests to act for both the lender and borrower?
- Where firm does lots of work for a certain lender
- And does not want to lose it as a client
- So risks ending up agreeing a deal, which would not be in the borrowers best interests
When would it not be reasonable to act for both the borrower and the lender?
- Where firm does lots of work for a particular lender
- And does not want to lose it as a client
- So risks ending up agreeing a deal which would not be in the borrowers best interests
When would you not be using the certificate of title in form that is approved by CML?
- When the lender starts to insist that you include information
- Outside of the remit of the certificate of title
- E.g. as to the borrowers creditworthiness
Can you personally act for the LENDER and BORROWER for a RESIDENTIAL PROPERTY MORTGAGE?
- Yes
- Provided that you can comply with IB 3.7
Can you personally act for the LENDER and BORROWER for a Commercial PROPERTY MORTGAGE?
- No
- Would not be able to comply with IB 3.7
- The mortgage may be with lender which provides loans during its normal course of activities but the terms may be negotiated, not standard.
- There is negotiation = won’t be able to rely on O(3.6) because of:
• IB(3.3) - ought not act for both parties if you are negotiating on matters of substance +
• IB(3.5) = ought not act for both if you cannot represent them even-handedly.
you cannot represent them both even-handedly – both parties want different things.
What is one of the few examples where the SCI exception may apply?
- In a lender / borrower situation
- Where the lender and borrower are companies who are part of the same group of companies
- And they share the same shareholders
What are the 3 elements that make up a “Regulated Mortgage Contract” under the RAO?
- Lender provides credit to individual / trustees
- Obligation on borrower to pay is secured by first legal mortgage
- At least 40% of property is used as a dwelling by the borrower to an individual who is a beneficiary of the trust or a related person
What restrictions apply under the FSMA in relation to advising on the merits of a mortgage of a residential property?
- Article 53A RAO: giving advice to a borrower / potential borrower which is advice on the merits of entering into a particular regulated mortgage contract is a ‘specified activity’.
- If the mortgage is a ‘regulated mortgage contract’ then this would be a regulated activity under s.19(1) FSMA and, in order to give this advice, the solicitor would need to be authorised (by the FCA) or exempt.
What restrictions apply under the FSMA in relation to advising on the merits of a mortgage of a commercial property?
- No restrictions
- If property is not used as a dwelling, mortgage contract = not regulated mortgage contract
- So advising on it - cannot be regulated activity
Do some bullet points of which steps need to be taken to do customer due diligence?
- Reg 27 MLR - relevant person to carry out due diligence
- Relevant person defined in Regulation 8
- Regulation 8(2)(d) MLR - CDD carried out by indepedent legal professionals
- Reg 12 expands on this meaning
- Reg 12(1) - clear that a person who relevant person it
- Reg 12(1)(e) - covers actions of relevant legal professional.
- Reg 28 - steps for CDD.
- Reg 30 - timing of the verification; completed as soon as practicable after contact is first established
- Reg 4 - defines business relationship
What happens if one party wants to deal with all legal matters, and that the other party “does not have the time / capacity” to come into office or take calls etc?
- “third party instructions”
- (P4) - Have to act in boths best interests
- (O.12) - to achieve this
- Default position is suggested in IB 1.25
- Should not take any more steps until both clients have confirmed that other can speak on their behalf.
- Email / telephone enough to achieve P4 / O (1.2) and IB (1.25)
- Best practice to get this recorde in writing as well
- Have electronic trial of Tim instructions just in case subsequent actions are questioned
Which 3 statutes are relevant for third party instructions?
- P4 - acting in best interests
- (O.12) - protection of interests
- IB 1.25 - suggestion of default position
What is the ability of a lawyer to advise with the merits of proceeding with a certain mortgage/ advising them on other mortgage products?
- S19(1) FSMA (both) - no carrying out regulated activities unless directly regulated by FCA etc.
- Regulated activity - activity in Part 2 RAO.
- Investment - defined in Part 3 RAO
- Article 61(3) RAO - definition of a regulated mortgage contract (40% occupation requirement)
- S19(1) - general prohibition under this section, cannot give advice unless authorised.
Can generic advice be given re mortgages?
- Yes
- Generic advice re mortgage contracts
- However, also need specific advice on the comparative merits of 2+ regulated mortgage contracts
