There are around 2,900 property firms that are accredited to the Law Society’s Conveyancing Quality Scheme (CQS), and that rely on the accreditation to be able to undertake work on behalf of mortgage lenders; the loss of CQS membership could potentially be catastrophic for a firm heavily reliant on property work, so it is essential that they ensure continuing compliance with the CQS Protocol and Core Practice Management Standards.
Over 550 CQS firms recently registered for a webinar run by Riliance that gave an overview of the scheme and covered the obligations firms have as scheme members; it also covered the dangers of not complying with these. The webinar covered key topics including:
- CQS scheme overview, objectives, obligations, enforcement and revocation
- Lender assurance
- Core practice management standards
- Where firms are falling down
- CQS questions put to attendees
The webinar, which was delivered by Brian Rogers, Director of Regulation & Compliance Services, and Law Society Lexcel Consultant, was very well received by attendees, and many answered the questions that were put to them, providing a real insight into their knowledge of the CQS Scheme; nearly 50% of those that answered the questions will need to do some homework!
During the webinar a number of questions were posed by attendees and these were put to the CQS Team at the Law Society.
The first question related to the use of Standard Conditions of Sale, and whether firms would be complying with Protocol B24 if they used versions published by local law societies.
The CQS Team responded by saying: “There is no obligation on local law societies to issue the same Standard Conditions of Sale (the ‘SCS’) as those published by the Law Society. However, the SCS published by the Law Society have been created in line with current law and practice, with the aim of reducing the need for special conditions so its use is beneficial in achieving a balance between the interests of the buyer and the seller. Furthermore, CQS accredited firms will need to comply with the Protocol and follow its obligations. This includes incorporating the latest edition of the SCS published by the Law Society.”
The second question related to firms that initially agreed with the other side to comply with the Code for Completion by Post, but then sent scanned registration documents (TR1) via email.
The CQS Team responded by saying: “Under General Obligation 9 of the Protocol there must be an agreement between both parties to deal online and agree arrangements.”
The third question related to the number of file audits a firm should be carrying out on property files as it was unclear from the Core Practice Management Standards; the Law Society CQS Handbook stated that it should be three files per fee earner per quarter.
The CQS Team responded by saying: “As a minimum, three files per quarter should be reviewed for all fee-earners. Two files should be for purchase matters and one for a sale matter. Where the practice undertakes remortgage work, an additional file should be reviewed for a remortgage transaction each quarter.”
The fourth question related to lenders and whether they insisted on firms handling a certain number of registrations in order to be considered for panel appointment; small firms were concerned about applying for CQS membership when there may be little or no chance of them being appointed on accreditation.
The CQS Team responded by saying: “CQS has been recognised by various lenders as a quality benchmark, which has led some lenders to mandate CQS as a pre-requisite to applying for panel membership, including HSBC, Santander and Nationwide. That said, CQS will rarely be the only pre-requisite that a lender will impose for access to their panel. Lenders have their own individual criteria that practices must meet, including requiring a certain transaction volume. I am aware that Lloyds Banking Group have such a requirement. Ultimately, lenders are free to keep their panel criteria confidential if they wish. We are urging lenders to make the criteria for access to their conveyancing panel known to firms that apply and to provide reasons for rejecting firms, to help ensure transparency and accountability in their decision making. We continue to engage with lenders on an ongoing basis with respect to their residential conveyancing panel and highlight to them the benefits of using CQS accredited solicitors as a panel requirement.”
There were concerns from several firms over delays in the handling of initial and renewal CQS applications; the CQS Team is aware of these concerns and is doing its best to address them as soon as possible.
Lenders, for obvious reasons, are keen to ensure that law firms appointed to their panels are trustworthy and meet strict levels of quality and compliance; as confirmed by the Law Society, many lenders use CQS accreditation as part of their risk assessment and panel membership process, so it is imperative for firms to ensure they meet the obligations they have signed up to.
So how are some firms failing to meet their CQS obligations?
Firms are failing to:
- Maintain a regularly reviewed risk register, which includes the risk of losing CQS and lender panel membership
- Ensure their IT systems are robust enough to reduce the risk of clients and lenders suffering as a consequence of cybercrime
- Provide staff with sufficient anti-money laundering and mortgage fraud training
- Ensure business continuity plans are updated and tested at least annually
- Check incoming/outgoing correspondence (letters, emails, faxes, texts)
- Carry out effective file reviews
- Review risk assessment data at least annually (complaints, breaches, claims, file reviews, etc.)
- Have email, internet and social media policies
- Implement an effective complaints handling procedure
- Carry our robust client take-on risk assessments
- Monitor key dates properly
- Ensure their publicity is clear in relation to costs and disbursements
- Ensure end of matter procedures are completed (reporting to the client, clearing residual balances, returning client documents)
CQS firms need to ensure they maintain compliance with the CQS Standards at all times, otherwise they risk the loss of their CQS and lender panel memberships, which for most firms would be catastrophic!
If you would like further information on CQS, or would be interested in an on-site review of your current levels of CQS compliance, please contact us on 01829 731200 or send an email to [email protected].