This article is supported by Pure Retirement
The Council’s requirement for independent legal advice sets the sector apart from other financial services. We asked some of the industry’s foremost legal experts why it’s so important.
The equity release sector stands apart from other financial services for many reasons. Chief among them is the requirement for equity release customers to receive independent legal advice. We asked some of the industry’s foremost experts why it’s so important.
Peter Barton, head of equity release at Ashfords, says sitting down with a client is the best way to give advice, partly because you clarify so much for them while providing reassurance. But there’s so much more to it than that. Lawyers are also there to protect people, he says, and in some cases end the transaction there and then.
“At a meeting that I recently conducted, with a husband and wife, it became clear the wife was uncomfortable,” said Peter. “At an opportune moment when alone with her, I spoke openly regarding my concerns.” The woman admitted her husband was forcing her to proceed and Peter took appropriate steps.
Duress between partners and other parties is clearly a problem but a more common issue, for the industry, is that of mental capacity. Media attention is often drawn to the children of deceased borrowers who say they never knew their parents had taken out a lifetime mortgage. It’s not uncommon or unreasonable for descendants to wonder if their loved ones knew what they were signing up for, when they’re no longer around to explain their actions.
Modern advisers, supported by the Council’s standards and good practice, play an incredibly valuable role. However, a lawyer’s duties surrounding mental capacity are both enshrined in law and underpinned by Government guidance. This is where independent legal advice takes on an entirely different significance.
“It immediately provides a defence to any suggestion the borrower didn’t know what they were signing,” says Claire Barker, CEO at Equilaw. “A reasonably common scenario is where one child of the borrower had no knowledge of the equity release, as the parents have helped another child. This can result in a challenge on either duress or mental capacity issues, so it’s vital that a process is followed and that the paper trail supports this.
“The fact borrowers are seen by a qualified lawyer makes it difficult to assert they were rushed into signing or were under duress. Ultimately, the inclusion of face-to-face legal advice has been instrumental in creating a truly safe and robust market for these products.”
“I have had several cases where families have come forward claiming their relatives did not understand what they had signed,” says Peter. “But that is easy to refute when we evidence a home visit, coupled with an attendance note and a video recording, clearly showing full capacity and understanding.”
Rachael Brandon, director at Boyd Legal, says that what is unspoken can provide all-important clues. “You can ascertain from speech and body language what the background is. We can identify if there is someone with them who might be putting on undue pressure. Are they sure about what they are doing? Do they really understand what the risks and implications are?”
All corners of the equity release sector have pulled together to enhance its reputation, a point not lost on Rachael, who says: “We help to ensure that they all maintain high standards.”
Independent legal advice has been a required standard since the Council’s predecessor, Safe Home Income Plans, formed in 1991. Since 2013, outside the pandemic, lawyers were required to conduct at least one in-person meeting with their clients. A temporary modification to the rule allows a case to go ahead without such a meeting, with the signing of the mortgage deed witnessed by a separate party.
The change has been vital to keeping the market open during lockdowns. Some clients prefer remote legal advice but whether there could be a role for it when conditions return to normal remains to be seen. Nevertheless, the temporary modification is only more onerous, and deliberately so.
Claire, who led the development of the modification, said: “Mandatory contact points have been put in place if there’s not at least one in-person meeting. Lawyers must speak to every party to the mortgage at least four times, to ensure they build up a good relationship and rapport with their clients. Lawyers are also required to identify the witness to the mortgage deed, to ensure they are not a beneficiary to the transaction, which is not ordinarily a requirement in English law.”
The Council’s solicitor’s certificate, which must be completed in all provider-members’ equity release transactions, leaves no room for doubt either. It says solicitors must be satisfied that they’ve done everything reasonably possible to ensure customers aren’t acting under undue influence and have the mental capacity to make the decision.
In some industries you’d be forgiven for thinking this was just a box ticking exercise. Not so here. And of course it’s not just the process that matters, it’s the fact that lawyers, in particular, are involved that sends an extremely powerful message to customers and regulators.
Rachael highlights the comfort brought by having a lawyer look at the offer in detail. “With fraud being an especially hot issue now,” adds Claire. “Solicitors’ involvement significantly mitigates this risk by adding an extra layer of diligence.”
Claire credits this step as one of the key factors in the growth of the lifetime mortgage market. “The industry has benefited enormously, with negligible numbers of upheld complaints and high levels of customer satisfaction. This has allowed the lifetime mortgage market to become increasingly mainstream over the past decade.”
The views of contributors are not necessarily those of the Council’s
