Legal advice requirement returns for equity release plans

All clients considering taking out an equity release plan are now required to have at least one face-to-face meeting in person with a solicitor before going ahead.

The rule begins from today (19 April) and applies to all members of the Equity Release Council, which covers most providers.

The ERC change marks a return to pre-pandemic requirements and follows a temporary amendment to the Council’s rules in place since April 2020.

The temporary lifting of the rule meant cases could still progress where appropriate and customers could access funds despite lockdowns and social distancing measures. The temporary amendment permitted a new process based on a combination of written advice and documented video or telephone calls but this has now ended.

The ERC says that independent legal advice is one of the “core consumer safeguards” in the equity release market.

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New customers have been required to go through the legal process since 1991, when the first industry standards were launched. The face-to-face requirement was added in 2013.

The rule is to allow additional checks to establish the client’s identity, mental capacity to enter into a contract and the agreement of all parties to proceed with no duress or coercion.

Existing cases which are in progress today and have used the temporary amendment must now be completed by 31 July.

All new cases from today must involve an element of in-person, face-to-face legal advice in order to be accepted. Industry data suggests the vast majority of cases in Q1 2022 already involved face-to-face legal advice.

David Burrowes, chair of the Equity Release Council, said: “The temporary amendment to our requirement for face-to-face legal advice served its purpose well by protecting customers and maintaining their access to vital funds in trying circumstances.

“The Council’s unique ability to bring together firms from across the market helped to identify a practical solution whereby customers were not cut off from money tied up in their homes, which in some cases was key to accessing care services when they most needed them.

“While restrictions have ebbed and flowed during the pandemic, we are hopeful the worst is now behind us. The time is right to return to the default of in-person legal advice while learning lessons about how technology can best support the overall process and customer experience.”

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