The Equity Release Council has temporarily changed the requirement for equity release customers to receive legal advice in a face-to-face setting during the Covid-19 (Coronavirus) pandemic.
The revision follows a detailed consultation with members and industry on the most effective way to maintain product safeguards, while also protecting customers’ personal health and wellbeing in the current climate.
It involves a new process designed with input from across the sector including providers, funders, advisers and in particular expert legal advisers with experience of equity release transactions across the UK. The Council’s Standards Board, with independent consumer and regulatory experts, also supported this process.
This will enable legal advice to be provided remotely without a physical face-to-face meeting during this unprecedented period of national lockdown and social distancing.
The agreed approach ensures multiple, mandatory contact points between the solicitor and customer before committing to take out an equity release plan. It involves a combination of written advice and documented video or telephone calls, which increase the total number of interactions between customers and legal advisers as a result.
As a temporary measure, it will enable independent legal advisers to continue fulfilling their key duties to consumers who are considering the option of equity release, by ensuring that:
- The client’s identity has been fully established;
- The client has mental capacity to enter into an equity release contract;
- The client is not under duress or coercion to enter into the equity release contract;
- Where there is more than one party, both agree to enter into the equity release contract.
The revision can only be used while the Government has directed the public to stay at home to contain the spread of Covid-19. During this period, the mandatory physical witnessing of a client’s signature on the mortgage deed can be carried out by an independent adult witness of the client’s choosing, who will also be subject to identity checks and due diligence.
Once restrictions on movement have been lifted, the aim is to return to the full face-to-face legal process with immediate effect. Any cases where sufficient checks cannot be carried out should be delayed until Government restrictions have lifted.
David Burrowes, chairman of the Equity Release Council, said: “These are unprecedented times and the Council is pleased to have secured industry support for a solution that ensures consumers can continue to access quality, independent legal advice when considering whether to release equity from their homes.
“The new measures have been designed with input from expert solicitors who provide legal advice on equity release transaction across the UK. It is designed to support large and small solicitors to advise safely on equity release at this time.
“This unique and temporary solution is the result of collaboration and sharing of legal expertise among Council members in challenging circumstances, to ensure consumers’ interests remain protected. The Council will keep this modification under close review until it ceases, when the Government ends its ‘stay at home’ requirement.
“The process has also reaffirmed the value of the ‘gold standard’ face-to-face requirement for independent legal advice which is retained to use if and when Government guidelines allow.
“Property wealth plays an increasingly important role in later life planning, and these measures to maintain access to equity release legal advice for older consumers will continue to ensure it is chosen for the right reasons, as part of a carefully considered process that looks at both short- and long-term needs.”
Claire Singleton, CEO of Legal & General Home Finance, added: “We are pleased that the Equity Release Council, in collaboration with the industry, has secured a solution for borrowers to access remote legal advice on equity release applications, during this period of lockdown.
“The move announced today is a great example of an industry working together to swiftly adapt to the current climate, so that we can continue to support both our end customers and the adviser community, while ensuring an essential product is available to customers at this time.
“We remain open for business and have been working hard to ensure any impact on our services to customers is as minimal as possible. In common with much of the market, we have stopped physical valuations, and will now be offering desktop valuations for all of our lifetime mortgages. These will be done by an independent valuer, using publicly available information to assess the value of clients’ homes. These will be less accurate than physically visiting a property, so we’ll use 95% of the desktop valuation when we calculate how much we can lend. These will be just for our information, and won’t change the loan amount.
“We’re also allowing OPLM customers to miss up to three monthly interest payments, without these counting towards their six missed payments, allowed in the product terms. I hope this will help any customer who finds themselves in financial difficulty due to Covid-19.”