Equity release and legal advice

The sheer flexibility and applicability of equity release means that it can no longer be considered just another successful financial product. Equity release is revolutionising later-life choices and changing people’s lives for the better - a meaningful force within our society.

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By Matthew Taylor, Senior Business Relationship Manager at Equilaw, leaders in the field of legal advice for equity release.

Professional and impartial legal advice is essential

The list of possible scenarios which can be supported and enhanced by equity release is beyond parallel (whether it is to service debts or home improvements, provide financial support for loved ones or offer a lifeline to clients who are coming to the end of an interest-only mortgage), while the range of in-built safeguards (such as the no negative equity guarantee) should be apparent to even the most jaundiced of observers.

But as levels of demand continue to grow with every passing year, so too does the need to maintain irreproachable standards of protection for prospective customer-bases, especially those whose individual circumstances may not be compatible with the demands of equity release (for example, those who are reliant on means tested benefits or who wish to leave the full value of their property as an inheritance).

This means that taking professional and impartial legal advice alongside that of a financial adviser is nothing less than essential - a means of establishing whether customers are making the right financial decision. Thankfully, however, one of the great strengths of equity release is that all customer applications are supported by a rigorous legal process.

All of the key players within the equity release industry are members of the Equity Release Council; an organisation committed to maintaining high standards or service and advice throughout the sector and ensuring that firms comply with regulatory rules provisions. One of the principle requirements of the Equity Release Council membership is that providers must confirm that their clients have had at least one face to face meeting with a fully qualified and independent legal advisor, and to submit a signed Solicitors Certificate to support this consultation before they are allowed to proceed with the completion of the contract.

Providing legal advice remotely

On the back of the Equity Release Council’s temporary relaxation for the requirement for a face to face meeting in April (in direct response to the COVID-19 lockdown experienced), Equilaw have developed a process to allow our legal advice to be provided on a Stay At Home basis. However, we are expecting to only have to use this in rare cases where a “distance face to face” meeting with us is not possible. The major challenge of using the SAH process is the requirement for an independent witness (non-family member) to witness the mortgage deed, as this is a legal requirement enshrined in the Law of Property Act (LPA). We will also need to ID them and speak to them to ensure they have not witnessed the mortgage deed out of duress, which on a practical level adds a layer of work / complexity that we don’t experience when our solicitors see clients face to face.

In practice, this means that the client’s legal advice will comprise of a written report which is specifically tailored to reflect the type of plan that the customer has been offered. This report will outline the way in which the plans works and list the comparative pros and cons of proceeding with such an option, although it will not advise customers on whether one product is more suitable than another. The solicitor will also address a range of other pertinent and potentially crucial issues (such as the desirability of making a will or, in the case of couples, of taking out a Lasting Power of Attorney in order to ensure their wishes are followed in the event of any future loss of mental capacity) and analyse each and every aspect of the report to ensure that the customers understands the full implications and obligations of their plan.

The process also allows solicitors to gauge whether a customer has been unduly influenced or even pressurised into entering an equity release contract by a third party and to ensure that they have sufficient mental capacity to proceed; a valuable safeguard, especially at a time when the treatment of potentially vulnerable customers is of such a concern and apparently growing. Indeed, given the rigour of this process, it is easy to see why the Equity Release Council has so warmly welcomed the FCA’s draft recommendations on vulnerable customers as many of the suggested safeguards are already in place.

Once this stage has been completed, all records relating to advice are then stored for a minimum of six years in order to safeguard practices from the possibility of complaints at a later date, either from customers themselves or, perhaps more likely, from disgruntled beneficiaries; a policy which effectively protects all parties and maintains high standards of accountability.

Making a difference

Ultimately, equity release represents a substantial financial commitment on the part of customers and therefore our position as solicitors means that we can make the difference between positive outcomes and the possibility of harm - a position which we take very seriously. But, it’s also one that we believe is helping to contribute to the success of equity release while availing customers valuable peace of mind. And, that, for us, is priceless.

For more information on equity release and legal advice speak to Matthew Taylor, Senior Business Relationship Manager at Equilaw on 07436 098093.

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