Dial M for mortgage

Our lawyer Fiona McNulty looks at the issue of when a buyer does not want to advise their lender that a property price has been reduced
Mortgage reduction cartoon
© Malcolm Willett (www.willett-ink.co.uk)
Question: I am buying an apartment and have persuaded the seller to accept a price reduction of £55,000. I have a mortgage and my solicitor has said that he needs to tell my lender of the price reduction.

I do not want him to do this as my lender may then lend me less money. My solicitor is insistent we call them - what shall I do?

Answer: Unless your lender has instructed a separate lawyer to act on its behalf your solicitor will be acting for both you and your lender. Your solicitor owes a duty to both you and your lender and, therefore, must act in the best interests of both of you.

However, your solicitor has a duty to report to your lender any alteration in the purchase price (and any other information which the lender’s mortgage instructions identify).

But your solicitor also owes a duty of confidentiality to you, which means that if you do not consent to your lawyer notifying your lender of the price reduction he must not do so and then there will be a conflict of interests between you and your lender.

You are both clients of your solicitor and so he cannot act for both of you any more. If one of you consents, your solicitor can act for one of you but the other must go to another company.

I think that what you will find is that your solicitor is not prepared to act for either of you. This is because a solicitor can be guilty of conspiracy to defraud by undertaking conveyancing work for a client involved in a fraudulent transaction.

Do remember that if you fail to inform your lender of the price reduction and you obtain a mortgage based on the higher purchase price this is mortgage fraud and mortgage funds obtained by fraudulent means such as this will be the proceeds of crime.

What's your problem?

If you have a question for Fiona McNulty, email legalsolutions@standard.co.uk. We regret that questions cannot be answered individually.

Fiona is a partner in the property team at Thring Townsend Lee & Pembertons Solicitors www.ttuk.com.

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