Mortgage clients accepting product recommendations with 'free legals' have been hit with unexpected legal fees for what one broker has called "standard" work.
Chris Ioannou, senior IFA at Bolton-based Prestige - Specialist IFA, said legal fees were "getting more and more extortionate and creeping up", with one client being hit for nearly £100 on what was a "straightforward buy-to-let remortgage".
Mr Ioannou said he uses various sourcing platforms, such as Trigold, to find providers offering free legals. But even when choosing such a package, there were "hidden costs" coming through in the final bill for his clients.
He explained: "We went to Trigold to look for a free legal package. Most times if the client has a clean credit record, it makes sense to have free legals and no fees.
"But even then, more often than not, there are hidden costs even when the mortgage comes with 'free legals'."
Maybe I’m just being a grumpy old man but why do lenders and solicitors still insist in charging telegraphic transfer fees when most banks offer faster payment transfers for free?. Chris IoannouFor example, Mr Ioannou said one buy-to-let client had agreed to a mortgage with The Mortgage Works, owned by Nationwide, which offered free legals.
On the key features (KFI) document, seen by FTAdviser, The Mortgage Works states there could be "other taxes or costs in addition to any fees shown here".
However, according to Mr Ioannou, his buy-to-let client's application was a "straightforward re-mortgage", so he did not expect the client to be hit with any legal fees.
But when the final bill came through, the client was charged for anti-money laundering checks, which many legal firms and mortgage providers consider to be 'standard' and therefore do not charge for, as well as £60 for an AST tenancy agreement check and a £25 telegraphic transfer (TT) fee.
A spokesman for Nationwide/The Mortgage Works said: "We can confirm the solicitors charged for items that others do as standard (i.e. anti-money laundering checks and tenancy checks).
"We are unable to comment on what other lenders offer as standard" but added: "We believe that we are not out of line with the rest of the market. It’s clear in our contracts what additional fees can be charged, and law firms are unable to deviate from this."
Mr Ioannou queried the other charges, stating: "This was a buy-to-let re-mortgage so an AST is almost always involved anyway (unless inbetween tenancies). Also, this is often checked by the lender in any case before issuing a mortgage offer and instructing the solicitor.
"As for the £25 TT fee, maybe I’m just being a grumpy old man or it’s my lack of knowledge but why do lenders and solicitors still insist in charging TT fees when most banks nowadays offer faster payment transfers for free?
"Either way, this was nearly £100 for what is meant to be ‘free legals'". He said this was confusing to the client and "makes a mockery of the key features illustration".
When asked about the other charges, the Nationwide spokesman said: "The solicitors acting for TMW set out their terms of business to the customer, outlining that standard legal fees were to be paid by the lender and that for any additional work required over and above that needed for a standard remortgage an additional charge will be payable."
The spokesman added that the solicitor "has been clear from the outset that additional charges could be applicable and provided details about these, including the costs involved.
"The only non-standard check carried out by the solicitor was the tenancy agreement check, also outlined at the outset."
The spokesman said Nationwide/TMW regularly reviews the free legals package, and the related disclosure, to ensure it is fair and clearly communicated.
Mr Ioannou also had a similar issue with Platform. When he complained to Platform, the business development manager "apologised" for the "unexpected solicitor fees".
According to Mr Ioannou: "I received a call from my BDM at Platform, who apologised for the unexpected solicitor fees and explained this is something that Platform are aware of, which is why they offer a further £250 cashback on top of the ‘standard’ free legals package.
"It seems like a good response."
Andrew Simon, executive general manager for product, UK at Iress, which owns the Trigold platform, said: "Lenders supply us with the information that is keyed into our database and the details provided are replicated in good faith in the sourcing system.
"As an added measure to ensure accuracy, lenders have the option to check and verify the display of the data as it appears in Trigold. ‘Free legals’ is an option lenders can select to be displayed. We also allow for notes to be entered, so lenders can supply additional information if required.
"If there are potential ancillary costs, the notes option provides lenders with the facility to supply this additional information to ensure complete clarity for users of Trigold. We support the CML guidelines, which are aiming to ensure all lenders use generic-fee type categories so information on all costs is transparent."
