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Transfer of equity and free legals

ended 23. November 2022

Newspager Craig Fish of Lodestone says he is currently doing a remortgage with a TOE (transfer of equity) involved. He says the ‘free’ legal service being used has classed this as highly complex and, as a result, it's causing huge delays. His client has now been on an SVR for up to 3 months. Is this another risk of going down the free legals route, or just an isolated incident? Are TOEs complex? 

10 responses from the Newspage community

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Craig Fish
Director at Lodestone Mortgages
TOEs aren't complex, unless you're using free legals. For me, this isn't an isolated incident. This year I have had several clients complain about the extremely poor level of service they are receiving from solicitors that provide 'free legals'. There is clearly no service if it ends up costing the customer money. In one situation I helped the client draft a letter to the solicitor and this resulted in them getting back compensation for the 'lost interest' caused by them not completing on time. This is all well and good, but it just isn't fair. It looks bad on the solicitor but far worse on the lender and the broker, especially when it's beyond our control. In some cases, I have now started looking at lenders offering cashback options, and then choosing a solicitor for the client myself, using one of the popular services that is available to all brokers.
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Bob Singh
Founder at Chess Mortgages
Free legals is a concept born out of distrust in the legal profession due to previous negligence and fraud losses. Lenders want total control of the situation and have jumped into bed with selected large scale firms who prefer volume over speed and, dare I say, quality. Cases get lost in these factories and it’s quite painful. I prefer not to use free legals unless it’s an easy non-time critical deal and where there is no transfer of equity or connected onward transaction. The chances of it being delayed are highly likely, leading to a poor outcome. You pay peanuts...
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Kylie-Ann Gatecliffe
Director at KAG Financial
As a firm, we haven't recommended free legals to anyone for a long time. They have had a bad reputation for years and I would never go down this route unless we had no other option. We discuss the pros and cons of free legals versus the cashback and instructing your own legals option. This is even more so the case when there is a transfer of equity involved. Free legal firms get paid very little by the lender, so expecting this to be a good service is simply not happening unfortunately. Our experience with using solicitors we instruct is much, much better, especially in today's market where clients don't want to be ending up on an SVR.
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Paul Neal
Mortgages & Equity Release Advisor at First Choice Financial Services
Free legals are currently a minefield and are causing huge delays. Throw anything even faintly outside the norm into the mix and you are asking for trouble. Most "freegals" won't include anything outside the normal scope so a transfer of equity is a bolt-on you will usually pay for in time and money. Our advice, if you are wanting a quick completion or have a case outside the norm, is stay well away from free legals. However, if you are in no rush and have a straightforward remortgage then 'freegals' could save you in the region of £500.
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Justin Moy
Managing Director at EHF Mortgages
For some time the standard of the ‘Free Legals’ sector has generally been poor. Many of the firms that are in this space work on thousands of cases a week and won’t have the capability to work at speed and communicate with all parties involved. Where a cashback is utilised instead of the free legals, the ability to pick a solicitor who will have a relationship with the broker, and will work with everyone at a decent speed, is crucial in today's environment. I am sure all brokers have a favoured conveyancing firm and will appreciate being involved form start to finish. Yes, Transfers of Equity can take some time, but I would say this has been a wider problem for many years with free legals, in terms of overall efficiency. Maybe the significant reduction in remortgages over the past few months will allow these firms to re-think their process and strategies, and look to improve.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
The transfer of equity application is normally treated as any other mortgage application because the affordability of the new owner(s) has to be assessed. That said, the conveyancing should be very straightforward so I am surprised there has been delays with this. I would hope that this is an isolated application and that conveyancers working on free legals don't apply this as a rule.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Firstly, I would avoid free legals provided by the lender at all costs. Life is too short. I would especially avoid free legals if there is any level of complexity to the case. A proactive solicitor with a smaller caseload will cost more but will save a lot of time and headaches.
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Matthew Jackson
Director at Mint FS
Highly complex? Given that the estimated divorce rate in the UK is circa 42%, I would think this now classes as a standard enquiry. Problem is with one actual solicitor in an office of 200 conveyancers everything is made to feel "highly complex". We have seen at least two of these fee-free conveyancers refuse to deal with a remortgage just because there was a TOE involved. And when they can, or at least try to, deal with it, they charge twice what a proper solicitor would.
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Jonathan Burridge
Founding Adviser at We Are Money
A Transfer of Equity includes more work and time, which conveyancers set up to deal with lender-paid services cannot provide easily. The outcome was sadly predictable. The revenue paid by a lender for the legal work on a remortgage has led to the service being pared back so much that conveyancers can only deal with the most straightforward of transactions. Even though they will offer additional services at the borrower's expense, the wrong team are dealing with the transaction. Its like asking my daughter's hockey team to play the local pub darts team in a curling match. They all play sport, so why not? Lender paid conveyancing is fine if your client is in no rush and has no need to engage with the conveyancer and has no service expectation. Basically, always encourage your client to use a firm that is instructed for their benefit, not the lender and that will mean from time to time that the borrower will pay cash, otherwise they will pay in experience.
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
It's a brave/foolish/insane broker that still recommends a 'free legals product' given that 'free legals' is a synonym for awful service, unreturned calls and missed deadlines. I drew attention to this back in September that the free legals system would likely go pop by the end of the year as they failed to cope with the huge influx of remortgage submissions around the mini-Budget. More and more we're recommending deals from lenders offering cashback instead to put towards instructing an actual good conveyancer. Clients, brokers and their admins are happier as a result.