Limitation on extent of legal privilege confirmed

Confidentiality between client and lawyers is one of the bedrocks of the way the legal profession works and something that clients have always taken for granted (and indeed should be able to!)

One of the rare instances when that confidentiality does not apply quite as clients might expect is the situation in which their lawyer is acting not only for them but also for the mortgage lender in a property transaction - this happens in about 95% of cases.  If mortgage lenders routinely instructed separate lawyers then the costs of buying property would increase significantly and this is why mortgage lenders are happy for the same lawyers to represent their interests and the interests of the buyer.

What happens, though, where for example the buyer ultimately defaults on the mortgage and the mortgage lender requests the lawyer's file?  Many clients assume that the file cannot be released to the mortgage lender because of the confidentiality rules and that even if some papers can be released, then those released are limited to such documents as directly involve the lender.

However, the High Court has now confirmed that borrowers have waived their right to legal professional privilege over those documents in their mortgage files that may otherwise have benefited from that protection. The reason being that the borrower will have signed a mortgage application form which contains a declaration consenting to the whole file being handed over to the lender on request!

The case is a useful reminder to both lawyers and clients that signing a standard form which is as simple as an application for borrowing can have consequences which last well into the future.

Tenants Rights - Changes to the rules

The Civil Procedure Rules are being amended and some of those amendments have consequences for mortgage lenders who have mortgages over tenanted (rather than owner-occupied) property.

In particular the rule changes will allow tenants about whom the lender has no knowledge (that is to say tenants who the property owner has not told the lender about!) who are living in a mortgaged property to apply to the court for postponement of any repossession order granted in favour of the lender.

That obviously has repercussions for lenders being able to sell the property to recover their loan.

The new rules also require lenders to notify tenants and occupiers of a property before taking steps to enforce a possession order.

In those circumstances any tenant who the lender has had no previous knowledge of can apply to the lender for a delay repossession to allow the tenant time to find another home.

If the lender does not agree to an extension of time the tenant may apply to the court for a decision.

At the moment we can only speculate about what effect these changes may have on the willingness of lenders to make mortgage advances to landlords in relation to "buy to let" properties.