Letter: Lenders’ changes – a step too far

Whilst I am sure I am not alone in worrying about the apparent “bully boy” tactics and frequent changes in policy by all the major lenders which has led to the current debate relating to separate representation, I was horrified when a colleague brought to my attention an offer of loan from the HSBC for a client. The loan stated that the conditions were to be governed by English law. On checking with the Law Society we were informed that this was indeed the current position of the HSBC, but, however, it did not need to concern us as we did not require to provide advice on this.

Obviously, the vast majority of Scottish lawyers cannot provide advice on English law contracts (even although the terms look suspiciously familiar). However, I have always understood until now that the reason we were sent a copy of the offer of loan was to check the document over on behalf of our clients, and ensure that they understood the obligations not only of the standard security but of the offer of loan.

Whilst I would never give financial advice on these documents, I would always check the client understood same and that there wasn’t anything in the agreement that required to be separately considered – such as a requirement for guarantors or large early repayment fees etc.

The current state of affairs seems to be nonsensical. If there was ever an argument, the lender would either have to raise separate actions for default in England and repossession in Scotland or raise a combined case in Scotland. A Scottish court would require to apply English law to the loan agreement notwithstanding the potential difficulties with the interface with Scottish property law. It therefore seems a bad idea all round as (1) clients cannot be given proper advice; (2) the lender no doubt is trying to streamline their situation and apply the same rules UK wide, but this inevitably will not happen given the Scottish dimension and could well backfire; and (3) it again seems to be attempting to sideline both Scottish law and the vast majority of the Scottish legal profession, which at the end of the day will simply disadvantage the majority of clients who will not be able to get full, local advice.

I hope that rather than simply shrugging shoulders, the Society’s Property Committee is actively seeking to change HSBC’s view in this matter and dissuade any other lenders from taking a similar route.