Rules and Guidance

V8 – April 2018

The Equity Release Council (“The Council”) is a voluntary body which aims to ensure that its members are highly professional and act with integrity and transparency in offering high-quality products and services to customers.

These Rules & Guidance incorporate a number of documents which set out The Council’s requirements and expectations of its members.  Rules, with which members are expected to comply, are set out in italics.  Guidance, which is intended to assist members and indicate best practice, is set out beneath the rule to which it refers.  This document is subject to regular review by the Standards Board.  Members are also required to comply with the high-level Statement of Principles.

It is recognised that there may from time to time be exceptional circumstances concerning a particular product or practice which is not in line with the rules, but which may be beneficial to consumers or a particular group of consumers.  Where such exceptional circumstances arise, the Standards Board will consider what action to take on a case-by-case basis. 

Implementation

These Rules & Guidance were originally adopted by The Council on 11th July 2013 and came into effect on 1 January 2014.  This version (V8), dated 14^th March 2018, was approved by the Standards Board on 1^st March 2018 and by the Main Board on 14^th March 2018.

INDEX

1.     Annual Certificate of Compliance  
2.     Accepting business
3.     The sales process
4.     Product standards
5.     New products
6.     Presentation of plan to customers and Statement of Principles
7.     Checklist for advisers
8.     Independent legal advice
9.     Complaints
10.   Use of the Council’s Logo
11.   Membership subscriptions

APPENDICES

Appendix A: Annual Certificate of Compliance

Appendix B: New products: Certificate of Compliance with the Product Standards

Appendix C: Checklist for Advisers

Appendix D: Solicitor’s Certificate and accompanying Guidance Notes

1.        Annual Certificate of Compliance

All members are required to complete and submit, on the anniversary of their admission as members of The Council, an Annual Certificate of Compliance with these Rules & Guidance.  A copy of the Certificate appears as Appendix A.

 2.         Accepting business

2.1      Provider members may only accept applications for home reversion plans and lifetime mortgages through advisers who are authorised and regulated by the Financial Conduct Authority (FCA) and who are permitted to advise customers on a home reversion plan or regulated lifetime mortgage.

Giving advice on a home reversion plan or lifetime mortgage is a regulated activity under the Financial Services Act 2000 – and anyone carrying out such an activity must be appropriately authorised by the Regulator.  It therefore follows that any provider of home reversion plans or lifetime mortgages may not accept mortgage business which is introduced to them by persons who are not appropriately authorised.  It is up to individual firms to decide how best to comply with this requirement, but The Council understands that in most cases, as a matter of best practice, firms check the authorisation of any intermediary which submits an application for a home reversion plan or lifetime mortgage in respect of every case submitted, at the time when the application is submitted.

2.2      Each application for business must be supported by the following declaration, which must be signed by the adviser or, where an application is being submitted online through secure password protected access, that confirmation is separately acknowledged.

”I confirm that I have passed an appropriate examination in Home Reversion Plans/Lifetime Mortgages as prescribed by the Financial Conduct Authority and that I have provided/supervised this equity release advice and recommendation.”

Provider members should satisfy themselves that all advisers are appropriately qualified: many will incorporate this requirement in their standard Service Level Agreement with advisers.  Provider members will also, as a matter of good practice, carry out regular checks as part of their regular fraud prevention work.  The Financial Conduct Authority publishes a list of approved qualifications in the Training and Competence section of the FCA Handbook.

3.         The Sales process

3.1      Provider members are not permitted to accept execution-only business.  Sales must always be made on an advised basis, with a personal recommendation being given to the customer.  This rule also applies where the application relates to an existing customer who seeks an increase in the amount to be borrowed under a lifetime mortgage contract over and above the maximum amount or loan commitment on which advice was originally given, or an increase in the share of ownership to be sold under a home reversion plan.

3.2      Provider members will not accept business unless they have taken reasonable steps to ensure that:

(1) There has been a full discussion as to the implications of the plan for the customer(s) and for their family and that the customer(s) was (were) made fully aware of such implications.

(2) The customer(s) has/have been advised of the risks, features and benefits of the relevant product.

(3) The customer(s) has/have considered all alternative courses of action.

(4) The customer’s(s’) physical and mental health has been considered in relation to the suitability of the plan.

The FCA’s Mortgages: Conduct of Business (MCOB) Rules refer to the customer’s “health” – which The Council interprets as meaning both physical and mental, including the customer’s capacity to enter into a legal contract.  The Mental Capacity Act specifically lists Solicitors amongst those deemed competent to assess mental capacity.  The Solicitor who gives the customer independent legal advice about the contract should therefore be able to make this judgment but if the Solicitor does not know the customer well, or has any doubts about the customer’s mental capacity, a medical certificate will usually be sought.  If the adviser has doubts about the customer’s capacity to enter into the contract, they should seek an opinion from an appropriately qualified medical practitioner.

(5) Any impact on the customer’s personal tax situation and/or eligibility for welfare benefits has been assessed.  If the adviser member does not have the expertise to advise on this they must refer the customer to a suitably qualified source of advice and must confirm this referral in writing to the customer(s).

MCOB 8.5A.6R requires a firm advising a customer about equity release to consider whether the benefits outweigh any adverse effect on the customer’s entitlement (if any) to means-tested benefits and the customer’s tax position.  8.5A.8R states that: “where a firm has insufficient knowledge of means-tested benefits and tax allowances to reach a conclusion, the firm must refer a customer to an appropriate source or sources such as the Pension Service, HM Revenue & Customer or Citizens Advice Bureau (or other similar agency) to establish the required information.”

The Council is aware that some of the sources listed in the MCOB Rule are over-stretched, and that none is able to offer fully integrated advice on all the aspects which firms are required to consider.  Furthermore, as the benefits system undergoes wide-ranging reform, access to comprehensive information may not be easy.  The Council is aware of, and fully endorses, the efforts that many members already make to use a range of existing systems and calculators which can be used to evaluate benefits and provide further information to customers.

(6) In the case of a joint application, all customers have received all the information listed above.

Where the provider is aware of any other person being resident at the property who is not party to the contract, it is considered good practice that such person(s) should also be advised to take independent legal advice to ensure they understand and accept the implications of the customer proceeding with the equity release plan.

Tenants who are occupying all or part of the property under an Assured Shorthold Tenancy agreement will have their right to remain in the property for a specified period protected under the terms of that Tenancy agreement.

4.         Product standards

4.1      Provider members may only indicate that a product meets the Equity Release Council standards if that product meets all of the product standards.  If an equity release product is offered that does not meet all of the product standards the product provider must state prominently in adviser- and consumer-facing literature that the product does not meet all of the standards and must explicitly state which standards are not met and give an illustration of the types of risks this poses to a borrower.

The standards are as follows:

(1)  Customers must have the right to remain in their property for life, or until they move into long-term care, provided the property remains their main residence and they adhere to the terms and conditions of the contract.

Provider members’ definitions of “long-term care” may vary.  It is therefore essential that providers make it clear in their product literature and contract terms what is or is not acceptable under their definition of long-term care.  For example, the definition should include:

• whether the provider regards the long-term care as being in an institution such as a nursing home;
• whether moving in with family members or friends, to be cared for by family or friends in conjunction with other carers is acceptable; and
• whether the provider requires a certificate signed by an appropriately qualified medical practitioner who specialises in making these assessments to confirm that the long-term care conditions have been met. 

(2) Customers must have the right to move to a suitable alternative property.  An alternative property will be deemed suitable if the plan provider would normally issue a new plan on it to a new customer at the time of the move.  This means that:

(a) For home reversions customers must be offered a new home reversion plan in respect of the alternative property on terms no less favourable than those offered to new customers at the time.  A provider member may charge a customer reasonable costs and expenses for entering into the new plan.

(b) For lifetime mortgages customers must be allowed to transfer the lifetime mortgage contract to the alternative property, with no increase in the rate of interest.  If the new property is of insufficient value to secure the amount owed to the provider, any partial repayment will be limited so that the net amount remaining due shall not be less than the provider would advance to a new customer in comparable circumstances.  No early repayment or similar charge may be made in respect of the property agreed to be the customer’s main residence at the time the lifetime mortgage contract was entered into, but a provider member may charge a customer reasonable costs and expenses for transferring a plan to the alternative property.

In addition to the provisions in 4.1 (2) (b) above, lifetime mortgage products must also meet the following criteria, which should be included in the provider’s contract terms:

(1)  Interest rates must be either fixed or, if variable, with a cap fixed for the life of the loan.

(2)  The product must have a “no negative equity guarantee”, so that, whenever the amount owing to the provider member is to be repaid from the proceeds of sale of the secured property, the amount owing must not exceed the net proceeds of sale (after deduction of selling agents’ fees, legal fees, disbursements and reasonable costs).  Provided the property is sold for the best price reasonably obtainable, the provider member shall accept the net proceeds of sale in full and final settlement of the amount owing. 

(3)  If a customer has more than one lifetime mortgage contract outstanding with a provider member, the “no negative equity guarantee” applies to each property individually, so that a member may not seek to recover any shortfall in repayment from the sale of one property by claiming from the customer, the customer’s estate, or the sale proceeds of any other property.

As a matter of best practice, and to avoid the risk of future complaints or disputes, provider members should explain clearly when the NNEG does and does not apply.  This explanation should be included in Section 6 of the KFI and also in the Offer document and may also form part of the provider’s Terms and Conditions.  The explanation should clarify when the NNEG does apply, for example, where the property is sold and there is a shortfall between the proceeds of sale and the amount owed to the lender, and when the NNEG will not apply, for example where:

• The borrower repays the loan early without selling the property.
• The borrower’s beneficiaries wish to keep the property after the borrower has died or moved permanently into long-term care and intend to repay the loan from funds other than the proceeds of sale.
• The property is sold, but not at market value.
• The property has not been kept in a good state of repair.

Members may wish to note that the term “best price reasonably obtainable” is not the term generally used by professional surveyors, who use the term “market value” in accordance with the rules published by the Royal Institution of Chartered Surveyors.  Members may wish to consider whether to reflect the use of the term “market value” in their own literature.

The criteria set out in provider members’ contract terms cannot be varied unilaterally, either by the provider member, or any person to whom the provider member may subsequently sell the loan or plan, unless the homeowner is in breach of the terms.  Should a homeowner fail to abide by the terms and conditions of the contract entered into, and thereby be in breach of the terms of that contract, the provider member or any person to whom the loan or plan was subsequently sold would no longer be bound by the terms of the contract and could choose not to honour all of the original terms and conditions.

4.2      In respect of all products, a valuation must be carried out by an independent valuer who:

(1) is a current member of the Royal Institution of Chartered Surveyors and registered under the RICS Valuer Registration Scheme;

(2) works in a practice comprising at least two fully qualified RICS members who are also registered under the RICS Valuer Registration Scheme;

(3) works in a practice which carries professional indemnity insurance in compliance with the RICS’s requirements.

Any chartered surveyor who is undertaking valuations that fall under the RICS Valuation – Professional Standards (the “Red Book”), and this includes valuations for equity release providers, must be registered under the RICS Valuer Registration Scheme.  This is a mandatory requirement and registration is subject to annual renewal.  The onus is therefore on the equity release provider (or its panel manager) to ensure that each individual valuer instructed to undertake valuations on its behalf is RICS VRS registered.

In the interests of transparency and good customer service, it is good practice for a copy of the valuer’s report to be given to the adviser.

5.         Certificate of compliance with the Product Standards

5.1      Whenever a provider member introduces a new product, or materially varies an existing product, a Certificate of Compliance with the Product Standards must be completed and submitted to the Council.  A copy of the Certificate appears as Appendix B.

In assessing whether a variation to an existing product is “material” providers should consider:

• whether the features or options available to the borrower under an existing product have changed. Examples include, but are not limited to, adding, offering or changing a cashback option, a free valuation, or a drawdown facility.
• whether the name(s) or description(s) of an existing product have changed. Examples include, but are not limited to, the introduction of a ‘lite’, ‘max’ or ‘plus’ version of an existing product.
• whether the variation imposes a new requirement on the customer, in particular, one that would not meet the existing requirements set out in the Product Standards.  An example would be mandatory or contractual repayment of an element of either interest or capital during the term of the plan, as opposed to at its end (which would normally occur due to death or move into long-term care);
• whether the varied product still meets the guarantees set out in the product Standards; and
• whether any element of the varied product could be detrimental to the customer.  “Detriment” might arise if the product were structured in such a way that additional costs could arise during the life of the loan.  It could also arise if any element of the product were so complex as to be difficult for a customer to understand.  Providers should be aware that the FCA requires firms to ensure that all communications with customers are clear, fair and not misleading, and also that any contract terms which are not in “plain, intelligible language” may be at risk of being judged unfair and therefore unenforceable.

The following variations are not considered material and do not require a new Certificate of Compliance:

• A change in loan-to-value ratios offered for each age,
• A change in the maximum loan amount offered,
• A change in the range(s) of ages to which a particular product is made available, or
• A change to the interest rate offered under an existing product.

6.         Presentation of plan to customers and Statement of Principles

6.1      Provider members must either give customers a copy of the Statement of Principles or advise them that a copy is available on The Council’s website, or on request.

Some members may wish to include the text of the Statement of Principles in their product literature.  That is a matter for individual members to decide, but they would need to make sure that any amendments and revisions to the Statement of Principles were reflected in their product literature in order not to cause any confusion with the current version as approved by The Council.

7.         Checklist for advisers

7.1      Adviser members are required to use the Checklist for Advisers which is set out at Appendix C.  Each of the points contained in the Checklist should be fully covered.  Adviser members must ensure that the customer is provided with a copy of the Suitability Report referred to in Point 13 of the Checklist and obtain confirmation that the customer has received it.

The Checklist is designed to help ensure that no significant points are omitted when advising customers on equity release products, or when preparing the information to be provided to them in the Suitability Report.

The MCOB Rules (4.7A.25) require advisers to make and retain (for a minimum of 3 years) a record that explains why the adviser considers that the advice it has given the customer is suitable.  MCOB does not require the adviser to give the customer a copy of this record.  The Council is aware that COBS 9.4R requires advisers to give customers a copy of a “Suitability Letter” in relation to investment advice.  It considers that it is best practice to give a customer seeking advice on equity release products a copy of the record which the adviser is required to retain in order to comply with MCOB (and referred to in these Rules as “the Suitability Report”), and for the adviser to retain a copy of that Suitability Report for at least 3 years.

The Council also considers it very important that the customer should signal receipt and acceptance of the Suitability Report.  The method by which firms present the information which is required to be contained in a Suitability Report, and seek confirmation from the customer that the information has been received, may vary from firm to firm according to their sales practices and the channel chosen by the customer.  Some firms may choose to provide the Suitability Report in written format; others may choose to send a written follow-up letter to confirm information which may have been given over the telephone or on-line.  Others may be content to rely on recordings of telephone conversations to provide the necessary evidence that the required information has been given.  Whatever process is adopted, firms should bear in mind the need to ensure that:

• A record of the information provided is kept, so that it can be clearly demonstrated that each of the points contained in the Adviser Checklist has been fully covered.
• Where information is given over the telephone, the identity of the customer being spoken to has been verified.
• Where there are joint applicants, each has been given the required information.
• Records are kept in such a way that they are easily retrievable and an effective audit trail is maintained.
• All methods and systems are assessed for their vulnerability to fraud or error.

As a matter of good practice, the customer should be sent or offered a record of the information provided, for their retention: it is up to firms to decide the most appropriate format in which to provide/offer this.

8.         Independent legal advice

For the purposes of this section, all references to “Solicitor” shall be taken as meaning “or Barrister, or Licensed Conveyancer or Chartered Legal Executive.”  Any such Solicitor must hold a current Practising Certificate and have the benefit of appropriate Professional Indemnity Insurance.

Evidence that independent legal advice has been provided by signing the Solicitor’s Certificate

The requirement for customers to receive independent legal advice is one of the key features of The Council’s Statement of Principles and is regarded as an essential aspect of consumer protection.  These Rules are therefore intended to ensure that there is always clear evidence that at least one face-to-face meeting takes place between the customer and a Solicitor, whether that is a Solicitor from the firm which is advising the customer (“the Advising Solicitor”) or another Solicitor acting under written instructions from the advising firm as its agent (“the Agent Solicitor”).  This evidence is provided in the form of the Solicitor’s Certificate which must be signed both by the Advising Solicitor and by the customer (see Rule 8.7 below).  Whether the face-to-face meeting is conducted by the Advising Solicitor or an Agent Solicitor acting on the Advising Solicitor’s instructions, it remains the responsibility of the Advising Solicitor to complete and sign the Solicitor’s Certificate.  Amongst other things, the Solicitor’s Certificate, which appears as Appendix D to these Rules, includes the following declaration:

“I confirm that I am acting independently of [name of independent financial adviser] and [name of lender/provider], and that I have acted and advised in the best interests of my client and complied with all relevant obligations within either:

England & Wales:

• the Solicitors Code of Conduct 2011 (as amended); or
• the Handbook published by the Council for Licensed Conveyancers

Scotland:

• the Solicitors (Scotland) Standards of Conduct, which are contained in Rule B1 of the Law Society of Scotland’s Practice Rules 2011 (which came into effect on 1 November 2011)

Northern Ireland:

• any practice rules or guidance issued by the Law Society of Northern Ireland

and in all cases the Rules and Guidance issued by the Equity Release Council and the guidance notes which accompany this Certificate.”

Independence of the Advising Solicitor

The Council is aware that there are circumstances where the firm which provides legal advice to a customer may be part of a group which also provides the financial advice on equity release products.  This situation may become more common in future following the enactment of the Legal Services Act 2007, which permits legal firms to be acquired by companies which are not legal services firms.

All Solicitors are bound by their professional rules to uphold rigorous standards of professional conduct.  These include acting with integrity, and always in the best interests of their client.  The Council has not hitherto sought to define what is intended by the term “independent legal advice” nor to impose any requirements on professionals giving such advice to equity release customers that would conflict with or exceed the requirements already imposed by the relevant professional body.

The Council’s view is that the question of “independence” from the financial advice provided to a client remains ultimately a matter of professional judgment for the individual concerned.  However, it would suggest that, in considering the matter, any individual legal adviser should have regard to the way in which any link to a financial adviser might be regarded, not only by the customer, but by others who might at some future date have reason to question or investigate the advice given, and by whom.  This could include family members or (other) beneficiaries of the customer’s estate and possibly the Legal Ombudsman (LeO) or equivalent or the Financial Ombudsman Service (FOS), if a complaint were to be referred to the LeO or FOS.

Where a link does exist between those who provide the financial and independent legal advice to the customer, the Advising Solicitor should take care to document clearly:

• the reasons why he or she considered that there was no risk of a conflict arising;
• that the legal advice provided was entirely independent; and
• that the customer was made aware of any such link.

Provision of advice to persons acting as Attorneys on behalf of customers

Any person who is acting as Attorney or Deputy for the customer in the equity release plan must also receive independent legal advice as if he or she were the customer.

Requirement for a face-to-face meeting before completion of the initial contract

8.1      It is essential that the Advising Solicitor, or an Agent Solicitor, should meet the customer (and (if applicable) the Attorney or Deputy) face-to-face in order to satisfy the requirements set out in Rule 8.4 below.  It remains the responsibility of the Advising Solicitor to sign off the Solicitor’s Certificate.

The Advising Solicitor will normally prepare a written report, setting out the risks and rewards of proceeding, based on the offer which has been issued by the provider.  This report will ideally be sent to the customer in advance of the meeting between the Solicitor and customer, to allow the customer time to read it and consider any points which need to be clarified.

Where the customer is temporarily living outside the UK at the time the equity release contract is entered into, the Advising Solicitor must be registered with the appropriate jurisdiction in the UK but may instruct an Agent Solicitor outside the jurisdiction.  It will remain the responsibility of the Advising Solicitor who appoints the Agent Solicitor to satisfy itself that said Agent Solicitor is appropriately qualified and registered.

Appointment of advising Solicitor

If a customer chooses not to instruct their own Solicitor, the adviser member (or provider member, if appropriate) may offer the names of at least one law firm which has experience in equity release products.  Members should note that where they pass on details of law firms to customers, they should satisfy themselves that the firms in question have relevant experience in providing legal advice to equity release customers and are familiar with the current products in the market place.

8.2      Adviser members must ensure that no pressure or financial inducement is involved in directing customers to any particular law firm.  Any choice made by the customer(s) in choosing a particular law firm must be fully documented by the adviser member.

8.3      Solicitors may pay periodic contributions towards the marketing costs of intermediary firms in return for non-specified numbers of referrals, provided such payments are not calculated or aggregated on the basis of the number of cases referred.  Solicitors must inform the client in writing of the amount and frequency of any financial arrangement, including marketing contributions, when issuing client case documentation at the outset.

The Council acknowledges that Solicitors may pay periodic contributions to intermediary firms: these are generic payments, designed to publicise the law firm’s services in the hope of receiving a non-specified number of referred clients.  Solicitors will be aware that they retain an over-riding duty, in accordance with their professional rules of conduct, to disclose to the customer the existence of any such payments and to act in the best interests of each customer.  Solicitors must not therefore make any payment of give any other consideration to an intermediary firm on a case-by-case basis.  Further, Solicitors must not, under the terms of their Code of Conduct, allow their independence or integrity to be compromised.  Intermediary companies may also wish to disclose any marketing contribution, so that customers are informed by both parties at the outset.

Requirements of the Solicitor who meets the customer

8.4      The Solicitor (whether this is the Advising Solicitor or the Agent Solicitor) who meets the customer face-to-face is required:

(a)   to witness the customer’s (or Attorney’s) signature on any documents which are required to be executed as deeds; and

(b)   to verify (insofar as they are reasonably able to, acting with all due diligence):

i          The customer’s (or Attorney’s) identity and signature;

ii         That the customer(s) (or Attorney/s) has(have) sufficient mental capacity to enter into the equity release contract;

iii        That the customer(s) (or Attorney/s) is(are) not under any duress or undue influence to enter into the equity release contract;

iv        That, in the case of joint customers (or Attorneys), each agrees to enter into the equity release contract; and

v         That, in the case of the equity release contract being entered into by an Attorney on behalf of a customer, the Power of Attorney or Deputyship Order under which the equity release contract is to be made is valid and correctly executed. 

In relation to 8.4 (b) (iii) above, the Solicitor who meets the customer(s) face-to-face would not normally expect any other person to be present.  In particular, the customer should receive independent advice in the absence of any intended or potential beneficiary, to avoid any duress being exerted by such a person on the customer(s).  There may be circumstances where it is reasonable for a person who is not a beneficiary of the proposed equity release to be present in order to assist a customer.  Such circumstances might include, for example, where a customer requires help to hear or understand what is being said, or does not speak English as a first language and requires assistance from an interpreter.  In any circumstances where a third party is present, the Solicitor should satisfy him- or herself that this is at the request of the customer, that the request is reasonable, and that the third party’s presence and purpose in being present is clearly documented.

8.5      Where the Solicitor who meets the customer is acting as the Agent of the Advising Solicitor, he or she must act in accordance with the written instructions issued by the Advising Solicitor and highlight any concerns to the Advising Solicitor following the meeting with the customer.  As such, the Advising Solicitor must outline the requirements in 8.4 i-iv above to the Agent Solicitor and request confirmation that each element has been satisfied.

8.6      Provider members are responsible for ensuring that the customer’s Solicitor is provided with copies of all the literature provided to the customer.

The literature referred to will generally be sent by the provider’s Solicitor to the customer’s Solicitor rather than directly from the provider.

Completion of the Solicitor’s Certificate

8.7      A Solicitor’s Certificate, signed by both the Advising Solicitor and the customer, must always be in place before an equity release contract can be completed, thereby providing confirmation that the advice referred to above has been given.  The Certificate confirms that the Advising Solicitor has drawn the customer’s attention to the risks of entering into a home reversion plan or lifetime mortgage.  

It is acknowledged that the requirement for customers to sign the Solicitor’s Certificate will impact on members’ procedures.  The requirement for customers to be given independent legal advice is however one of the features of The Council’s standards and outweighs any minor delays to completing transactions which might be caused as a result.

Other circumstances where independent legal advice may be advisable

As stated at the start of this section, the requirement for customers to receive independent legal advice applies before completion of the initial transaction takes place.

With regard to home reversion plans, the MCOB rules provide as follows:

“MCOB 9.9.8R further releases: all home reversion plans

If the customer wants to release further equity from the property through a home reversion plan the firm must treat this transaction as a new home reversion plan even if the parties to the arrangement are the same.”

Given that further releases are to be treated as new plans – it therefore follows that fresh independent legal advice should always be given.

With regard to lifetime mortgages, where additional sums may be withdrawn over a period of time (“drawdowns”) and are part of the initial contract, these will have been part of the original advice/planning process and will have been subject to the initial independent legal advice.  It is not therefore considered necessary for further legal advice to be given in respect of such drawdowns.

The Council is aware that there are other circumstances where existing customers may seek to withdraw additional equity from their property.  The precise circumstances and terminology may vary according to the nature and structure of the initial contract and may include further advances – meaning additional lending which was not envisaged in the original contract.

The Council acknowledges that there are arguments both in favour of and against requiring independent legal advice to be given in every case where customers seek to release further equity.  It has concluded that it would not be appropriate to make this a requirement in every case, but that providers should make their own decisions, having regard to a number of factors and circumstances.

The following non-exhaustive list sets out some of the main factors which should be considered:

• The amount of the further advance in relation to the initial contract, for example:
  • The further advance is larger than the initial advance; or
  • The further advance, together with the initial advance, would take the LTV of the combined loans above a percentage specified by the provider in its Responsible Lending Policy.

It may be that the cost of seeking additional legal advice would be disproportionate to the amount being sought by the customer, if this is relatively small.

• The period of time which has elapsed since the original contract was entered into: if the period of time is significant, it may be advisable for the customer to receive further independent legal advice to ensure they fully understand the implications of the new contract.  Equally, however, if the period of time which has elapsed since the contract was entered into is relatively short, this could indicate either that the customer had not fully understood the implications of the original contract, or had not been properly advised, or could be subject to some coercion by a third party.     

• Whether there have been any significant changes to the customer’s circumstances such as:
  • the death of one party;
  • a move to another property;
  • divorce and/or remarriage or co-habitation;
  • a member of the family or a friend coming to live with the customer(s) (son/daughter/grandchild/other family member/friend/companion);
  • any significant change to the customer’s physical or mental health;
  • a Power of Attorney having taken effect since the original application;
  • a family member or professional carer attending regularly to give care, or living in the property and what, if any, access to/control over the customer’s financial affairs such a person might have;
  • the provider/adviser is made aware of particular circumstances which are peculiar to an individual customer;
  • any other issues of which the provider and/or firm providing the independent legal advice is aware which could affect the customer’s circumstances or capacity which may not be addressed sufficiently by the financial advice which will be given in connection with the further advance.

It will be for each provider and adviser to decide how much weight needs to be given to any of the above in the individual circumstances: but where any factor appears to be significant, or more than one factor applies, consideration should be given to whether it would be prudent to recommend to the customer that further independent legal advice is taken.  In some cases, providers and advisers may consider that it would not be prudent for them to continue with the case unless they had made such a recommendation.

In all cases where further independent legal advice is deemed necessary a new Solicitor’s Certificate should be completed prior to the further release or further advance proceeding.

9.    Complaints

9.1      Members which are providers or advisers will be required to deal with any complaints brought by customers in relation to a home reversion plan or lifetime mortgage in accordance with the procedure and rules laid down in the “DISP” chapter of the FCA Handbook.  A customer who is dissatisfied with the response received may refer the complaint to the Financial Ombudsman Service (FOS).  Provider and adviser members are obliged to co-operate with a FOS investigation and are bound by any decision reached by FOS at the end of the process.

9.2      Complaints which relate to solicitors should be referred in the first instance to the law firm in question, for it to deal with according to its published complaints procedure.  Customers who remain dissatisfied may refer their complaints to the Legal Ombudsman, whose address should be published by the law firm in response to any complaint, together with information about the timescales within which such referrals should be made.

9.3      Complaints which relate to valuers should be referred in the first instance to the relevant firm, where the RICS’s rules require that it should be considered by a senior member of the firm or the firm’s designated complaints handler.  If the complaint cannot be resolved, the parties may agree that it should be referred to an independent third party.  The RICS is able to provide a list of persons who are approved to adjudicate in such matters and award redress, where appropriate, to the complainant.  The decision of the independent third party is binding on both parties to the dispute.

9.4      All members are required to keep for 6 years full records of all complaints, both to them and to the Council concerning them, to be available on request to The Council.

For the purposes of Rule 9.4 above, “complaint” is defined as being a matter which has been dealt with according to the firm’s formal internal complaints procedure, which will generally mean that it has been considered by a senior member of staff.  Records of minor issues, which are resolved swiftly and to the customer’s satisfaction, need not be kept.

Complaints which relate to incidents which occurred after 31 October 2004 (for lifetime mortgages) or 6 April 2007 (for home reversion plans) will come within scope of the Financial Ombudsman Service (FOS).

For those cases which fall outside FOS’s scope, customers will have the usual contractual rights to complain formally to the party concerned and, if not satisfied with the outcome, to pursue an action in the courts.

The Council is not able to adjudicate on complaints which are not within FOS’s scope, but it will offer a helpline service to customers to ensure that they have addressed their complaint to the appropriate party.

10.      Use of the Council’s Logo

10.1    Whilst it is entirely a matter for each member to decide whether or not it wishes to display the Council’s logo on its literature and websites, the Council is naturally concerned to ensure that non-members do not seek to pass themselves off as members when this is not in fact the case.

10.2    The Council is aware that there are some websites which show the Council’s logo, but which are not the home websites of Council members.  In some cases the site showing the Council’s logo may be linked to a genuine member, but this is not always clear.  The Council therefore asks members to ensure that, in order to avoid misuse of the Council’s logo, and to avoid the risk of confusing or misleading potential customers, any website with which they are linked, or through which they accept business, and which shows the Council’s logo, should explain clearly and prominently how it is linked to a Council member or members.  This will enable customers to check the list of members on the Council’s website and reassure themselves that they are dealing with reputable firms and sources of information about equity release.

10.3    Members are also reminded that the Council issues each new member with a copy of the “Terms and Conditions for use of the Equity Release Council’s Logo” when they join the Council.  The current version of the Terms and Conditions is dated June 2014 and a copy is available in the “Documents” section of the Members’ website.

11.      Membership subscriptions

(1) All subscriptions and fees shall be fixed by the Main Board and that Board shall have the power in cases where it should think sufficient, to waive all or any part of the subscription or fees, or any arrears thereof due from a member.

(2) The subscription and fees levels will be set by the Main Board at two year intervals but that Board reserves the right to review and amend rates of subscription at a shorter interval if so deemed appropriate

(3) The subscription year for each Member shall run for no less than a period of 12 months from the first day of the month following the date on which the Member’s first subscription is credited to the bank account of the Council or from such other date as the Board or Executive may determine in respect of any particular Member or group of Members (i.e. join date 23/6/15 – renewal date 1/7/16)

(4) Any Member who fails to pay their subscription within three months of its falling due may be excluded from membership, unless the Board or Executive determines otherwise. If excluded that Member shall cease to have any rights or privileges of membership and must return any certificates or cards or any other relevant materials denoting membership to the Council. Such a member shall remain liable to the Council for the amount due unless the Board directs otherwise and in association with Article 34 of the Articles of Association.

Notices

(5) Any Notices for payment or otherwise formally served by the Council are permitted to be served by electronic, post or other means and will have been deemed to have been served at the expiration of an appropriate timescale for the method of transit and there being no proof that failure of such Notice being received is available.