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News Analysis: Brokers raise questions over effectiveness of free legals

Instructing own solicitors using cashback offers seen as better alternative

Issues with free legals have come to the fore once again as a number of brokers have expressed dissatisfaction with processes involved in remortgage deals that come with the so-called benefit.

Manchester Money managing director Chris Barker says that when dealing with free legals, he often can’t get through to the solicitors who have been assigned to his cases when he needs to – and that when he does get through, problems such as documents not having been sent out are abundant.

“Clients are moving on to SVRs when they shouldn’t have to,” he says. “I worry that it is affecting our reputation.”

He reports that if they are given the option, he always encourages his clients to opt for cashback instead, so that they can appoint their own solicitors. “The service when opting for cashback is always exceptional,” he says.

Barker isn’t the only broker in this situation. KB Mortgages mortgage consultant Kate Burns comments: “I have had lots of issues with this and do try to avoid free legals and instead take cashback for my clients to pay for the legals.

“This way it is much easier to control and is a smoother process. With free legals the lender doesn’t intend to instruct the legals until the mortgage offer is produced, which can delay the process.

“As long as there is no detriment to my client, and the option is either free legals or cashback, I would always advise the client to take the cashback and instruct their own legals.”

Next Step Advice director Craig Hammond says that, as well as informing his clients that some solicitors will try their utmost to charge £50 to £100 despite the service being advertised as free, he also warns them that these firms tend to take on more work than they can handle, so a lot of chasing is required.

With mortgage clubs often acting as an effective conduit between lenders and brokers, Mortgage Strategy approached some of the largest for comment.

Sesame and PMS head of business development Lauren Bagley confirms that, being the “glue that holds the mortgage transaction together”, any conveyancing issue can cause major issues.

She adds that “the department for communities and local government has committed to reform the process and it has identified three key areas that has already started to galvanise the industry to think about how they can create a better customer experience, reduce time from offer to completion, and reduce failed transactions”.

Legal & General Mortgage Club director Kevin Roberts points out that “often the amount of cashback available is not sufficient to cover all costs. Free legal services provide an alternative [but] in some instances, these arrangements are perhaps not providing the high service levels expected by customers”.

He adds: “We are in constant talks with brokers on this topic and we will always represent their feedback in our discussion with lenders and conveyancers to help find a solution that works for all. As a club we will continue to work hard to understand the role we can play in driving this agenda forward.”

TMA senior product and business manager Rob McCoy says that, while feedback suggests that advisers often opt for the option of cashback when remortgaging, “in buy-to-let scenarios, advisers are more inclined to encourage the free legals offering”.

He adds: “This is because clients prefer to be more in control of their transaction when it affects their primary residence but are more hands-off when it comes to buy-to-let deals as these are viewed more as business transactions.

“When it comes to mainstream remortgages, we have even heard of clients opting for products that don’t include cashback or free legal services because they want to maintain this control and, in some cases, a cheaper rate.”

TSB’s recent announcement that its remortgage products will come with the option of £300 cashback rather than taking the free standard legal services hints that lenders aren’t necessarily deaf to these complaints.

Could all this be an indicator of a new direction?

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  • Carl McGovern 15th February 2019 at 10:46 am

    Very much like the Brokers quoted in this article, I use the cashback option when I can and do find that I place cases with law firms, who charge an amount where the cashback, covers the whole costs, most of the time. A delays caused by free legal fees, resulting in the client ending up on the SVR costs them ultimately and add to the £50 to £100 being charged too, getting it wrong can prove to be costly. I guess it also opens up the debate about product transfer V Re Mortgage, which seems to be the current hot topic.

  • Charlie Baker 15th February 2019 at 10:44 am

    I try to make my clients aware of the difficulties faced by many who chose the free legals option. Land reg not updated for YEARS, Ex’s not removed from titles, only discovered on sale years later…. the list goes on, and that’s not to mention the non-existent service levels.