CQS Lender Reporting Procedure (Sept25)

Purpose

We must ensure that lender clients are properly advised about matters relating to the property which may affect the lender’s decision to lend. Reporting to lenders includes not only submitting a certificate of title to the lender before requesting to drawdown funds in the transaction, but also reporting on matters of concern which arise during the transaction.

If you discover any issue which may materially affect a lender’s decision to lend, or which may affect the terms of the mortgage/ the lender’s potential security, you must advise the lender as soon as you become aware of the issue (subject to your duty of confidentiality if you are also acting for a purchaser client and legal professional privilege – see below for more information). You must do this, and ensure the issue is resolved to their satisfaction, before the purchaser exchanges contracts to buy the property.

Scope

This policy applies to all staff in The Eric Whitehead Partnership that are subject to compliance with the Conveyancing Quality Scheme (CQS). For the purposes of this policy, the term “Staff” means all members of The Eric Whitehead Partnership staff including permanent, fixed term, and temporary staff, any third‑party representatives, agency workers, volunteers, engaged within the business under CQS.

This policy is in line with Requirement 6.4 of the CQS Core Practice Management Standards, Version: 23February 2022 (effective from 1 May 2022).

Background

Where the lender is a member of UK Finance, the provisions of the UK Finance Mortgage Lenders’ Handbook (‘Lenders’ Handbook’) will apply and should be followed. Where a lender is a member of the Building Societies Association (BSA), it may choose to use the BSA Mortgage Instructions. In addition, lenders may have further and additional requirements that alter from time to time.

Lenders who are not members of UK Finance will have their own instructions and requirements which may differ from those in the Lenders’ Handbook.

The principles

You must observe the following principles when acting for lender clients:

• Know and adhere to the standard requirements applicable to the relevant mortgage lenders as set out in the Lenders’ Handbook, BSA Mortgage Instructions or otherwise as applicable.
• Explain to the purchaser client that the lender is also a client and you will need to report to them on all relevant matters.
• Ensure that all matters that need to be reported to a lender client are reported, in writing, using the form of communication required by the lender (this may involve a specified reporting form or certificate of title provided by the lender) and that a written copy of the report is retained on the file.
• When acting for both a purchaser client and a lender client, you must be mindful of and comply with your obligations under the SRA Standards and Regulations as to conflicts of interest, disclosure and confidentiality – see the section headed the same in the Mortgage Fraud and Property Fraud Prevention Policy for further information.

How to report to the lender client

In reporting matters to a lender, ensure that you:

• Firstly, check part 1 (general instructions) and part 2 (lender-specific instructions) of the Lenders’ Handbook to ascertain the lender’s standard requirements, as well as those specific to the transaction.
• Clearly identify the nature and potential implications of the matter upon which you are reporting.
• Provide sufficient details of the nature and effect of the matter upon which you are reporting ie by providing copy documents or extracts.
• Explain the implications of the existence of the matter that is being reported upon (for example how the matter affects the title to the property, how it might affect the value of the property, how the matter might be relevant to the physical condition of the property, and how the matter might affect the future ability to use or develop the property).
• Provide appropriate written legal advice/ recommendations on how the lender might be able to eliminate or minimise its exposure to risk and within what timescale and at what cost. This may involve advising the lender that a title indemnity policy should be put in place or advising the lender that something in the title (e.g. a defective lease) needs to be corrected.
• Make it clear whether the lender client should consult its valuer or surveyor in respect of any matters which the fee earner considers might impact upon the value or physical condition of the property.
• Check Part 2 of the Lender’s Handbook again prior to exchange of contracts to verify that all of the lender’s standard and specific requirements have been satisfied and record on the file that this check has been carried out.

Examples of matters which might need to be reported

There is an extensive range of matters that can arise upon which the lender may need to be advised. By way of example only:

• Restrictive covenants may prevent certain uses or restrict development or further buildings and/or extensions. This may affect the ability of the owner to use the property and may therefore affect the value and/or saleability of the property.
• Restrictive covenants may appear already to have been breached. This may expose the owner to legal proceedings resulting in the possibility of a requirement to revert to a former use of the property or to remove unauthorised alterations.
• The property may lack full access rights or full enjoyment of essential services. This may affect the ability of the owner to use the property and may therefore affect the value and/or saleability of the property.
• There may be a doubt over whether apparent rights to access or services have been properly established. This may affect the ability of the owner to use the property and may therefore affect the value and/or saleability of the property.
• Enquiries may reveal that building regulations approval was not obtained for works at the property. This may expose the owner to local authority enforcement proceedings. Perhaps more importantly there is the possibility that there are serious defects in physical condition if there has been no oversight of works.
• Boundary issues.
• Cladding, fire risk and other potentially dangerous construction issues, together with the potential need to refer to a fire safety expert for advice on building safety and the potential costs involved.
• The potential contamination of the land.
• There being a serious flood risk.
• Title may be less than absolute.
• Part of a freehold property may sit wholly or partly above or below another freehold property. This may affect the ability of the owner to carry out repairs. Some lenders will not lend on this type of property.
• There may be evidence of a past undervalue transaction. There may be risk that a past transaction is set aside under the insolvency legislation.
• The price paid by the current owner (as shown in the register) may appear to be low.
• The price currently being paid for the borrower on its purchase of the property may have been incentivised by the seller. This may affect the lender’s view of the current valuation of the property.
• The property may be a new build property, or recently built or converted property, but may not have NHBC or equivalent cover. The property owner and its lender may have no effective remedy of the physical condition of the property is defective because of the design or construction of the property.
• The property may be leasehold and there are concerns over the length of term remaining on the lease, the level of the ground rent, provisions for review of the ground rent or other provisions of the lease. See the Leasehold Purchase Policy.
• The client’s disclosure of redundancy or dismissal from employment.
• Sub-sales or where the client has owned the property for less than six months.

In each case, the nature of the particular matter must be identified with sufficient detail, the extent of risk to which the lender will be exposed by the matter must be explained, the possible impact of the matter upon the value of the property or its physical condition must be reported and advice must be given as to how, if at all, risk can be minimised or eliminated explained.

Final communications with lender client

Once a purchase has completed, you must ensure that the lender’s charge is registered at HM Land Registry within the priority period set down in the official search.

When you receive the completed title information document, you must advise the lender of completion of registration and that their charge has been registered within the priority period.

File and risk reviews

The actions required in this policy will be checked as part of the firm’s periodic file review process and as part of the file closing risk assessment process and client account closure process.

Review of policy

This policy will be reviewed by the CQS SRO on an annual basis.

September 2025