Cheltenham & Gloucester (C&G) stands accused of applying excessive fees after it said it would refuse a homebuyer survey from an independent chartered surveyor as part of a mortgage application.
IFAonline has learnt a branch of the Lloyds TSB subsidiary would not accept the homebuyer survey unless it came from a company that was on C&G’s own panel of surveyors.
The case has come to light after an IFA applied for a mortgage with C&G and was told a basic valuation would cost £450. The IFA, who wishes to remain anonymous, claims he was initially led to believe by C&G branch staff the £450 fee covered a full survey of the property he intended to purchase.
When he discovered this was not the case he asked for a full homebuyer survey to be completed at which point he was told the fee for this service would be £825.
The IFA checked with a local firm of chartered surveyors who offered to do the same homebuyer survey for £500. But when he returned to C&G the lender refused firstly to lower the fee for its own homebuyer survey and then told him that if he was unwillingly to use a surveyor from its own panel, instead of using an independent chartered surveyor, it would not be able to go ahead with the mortgage application.
The fees for a valuation or homebuyer survey through either a surveyor directly employed by C&G or one on its panel would remain the same.
In a recorded telephone conversation the local branch manager is clearly heard stating: ”If you say to me that you don’t want to go ahead with our surveyor then obviously we are going to have to try and get the fees refunded and obviously we are not going to be able to do it [the mortgage].”
Moreover the IFA claims to have spoken with the surveyor - a direct employee of C&G - who had been due to conduct the initial valuation and discovered the surveyor was carrying out eight such valuations, at £450 per valuation, that day.
Were this the average number of valuations carried out by a single surveyor for C&G per day this would mean the lender could potentially earn up to £936,000 in fees from the work of that one surveyor in a year. Even taking into account figures from the Council of Mortgage Lenders (CML) suggesting remortgaging is running at 30% of all mortgage business this would still mean C&G could potentially earn around £624,000 a year in valuation fees per surveyor.
A spokeswoman for C&G defended the lender’s stance saying: “Valuations are a key part of the mortgage application process and it is therefore crucial that we use surveyors that we know and trust, are broad in scope and high in quality. The surveyors we use undergo vigorous quality checks and those who fail to meet our rigorous demands are struck from our panel.
“While it is very difficult to compare different surveys by both quantity of and scope of the survey, our valuation fees reflect the costs to C&G of administering the quality panel and, in many cases, providing a large amount of business and training and technological support.
"The full structural fee charged is backed up with the knowledge that it includes a mortgage valuation figure for C&G, is undertaken by a known and trusted surveyor and offers peace of mind that full responsibility and liability for the survey is being taken by a major UK bank."
The spokeswoman adds the lender requires the valuation to be undertaken by a surveyor on the C&G panel but does not require any further surveys such as a homebuyer survey, to be undertaken with its panel.
She says this decision can be undertaken by the customer, but they would still have to pay £450 for a valuation to be conducted by a surveyor on C&G's panel regardless of whether the homebuyer survey contains a valuation or not.
Tamsin Hemsley, a spokeswoman for Nationwide Building Society, says its policy regarding valuations and full structural surveys is the same. The lender relies on national surveyors Countrywide to deal with valuations for it, while in the case of a full structural survey and valuation, Hemsley says Nationwide will accept a survey from any fully qualified chartered surveyor. However in the case of Nationwide were the customer to obtain a full survey from a surveyor on Countrywide's panel of surveyors it would waive the valuation fee.
This is seen as standard industry practice as a valuation simply provides a lender with information to enable it to make a decision as to whether to go forward with a mortgage offer and therefore lenders are generally at liberty to choose their own surveyors.
Stephen Sidkin, a commercial law partner at Fox Williams LLP, says: "The reason C&G will maintain a panel is because they will be able to maintain a certain level of quality control. So C&G will tell the panel it wants the survey to be carried out in a particular way . The fact that an independent chartered surveyor may be perfectly qualified to carry out the survey won't make a difference because the surveyor is not a panel member.
"While this may touch on the fringes of competition legislation I don't think the Office of Fair Trading will be doing anything about it in the near future."
Both the Royal Institution for Chartered Surveyors and the Council of Mortgage Lenders declined to comment.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7484 9893 or email [email protected].IFAonline
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