House transactions hit by bank's IT problem
Monday 25th June 2012
House sale completions due to take place over the last few days were hit by the computer system problems at NatWest and RBS banks, leaving buyers and sellers stuck. One couple were made to move out of the house they thought they had just bought.
As work on the backlog caused by the bank’s IT problem continued over the weekend, stories emerged of home-buyers who were unable to prove that their funds had been transferred and sellers unable to show they could redeem their mortgages – worrying both sets of solicitors who had given, as is routine, written undertakings.
It is not known how many transactions were hit by the chaos, but the number could have been substantial.
Mark Groom, of Groom Halliday Property Solicitors in north London, said: “If we can’t see the money – whether or not it is actually there – a property sale simply cannot complete.
“Because so many completions occur on Fridays, the numbers affected will be huge.”
In fact, on Friday afternoon, as the chaos continued, solicitors were issued with emergency guidance that they would not risk disciplinary action if the conveyancing transaction had to go ahead without the normal bank checks – provided they had taken other precautions.
The Solicitors Regulation Authority wrung promises from NatWest and RBS that they would indemnify the conveyancers in such circumstances. The banks said they were treating those requiring property purchase completions as priority.
A spokesperson for NatWest Intermediary Solutions said as the problem wore on: “Our priority is to ensure that those applications that have had a mortgage offer issued and require an urgent completion are dealt with as quickly as possible.
“We are treating this issue with the utmost priority and are working around the clock to resolve this issue. We would like thank brokers and their clients for their patience over this matter.”
Also affected by the glitch were tenants needing to pay their rent, whether by cash or direct debit, and people waiting for salaries.
Altogether, some 12m customers were affected by the IT glitch which prevented payments being made in and out of accounts from last Tuesday onwards.
Buyers Mike and Laura Johnson thought they had paid for their new-build home on Thursday after transferring the money to their solicitor’s NatWest account on Monday.
But the payment had still not arrived and although they had been allowed access to the property, they were asked to leave on Thursday evening.
One family, Lance and Gemma King and their children, had the frustration of a removal van waiting outside their new home, but were unable to get in because the sale could not complete. Instead, the furniture had to go into storage while the family moved in with in-laws. The Kings are not themselves NatWest customers, but their solicitor is.
Another buyer, first-timer Paul Roddy, together with his toddler and pregnant wife, had been due to complete on the purchase of their home but instead, faced having to sleep on a mattress in the empty rented property they were meant to have moved out of.
The family’s belongings could not be unloaded into their new home, and sat in a removals van instead – all because solicitors could not check that the funds to complete the purchase were available. However, after their story was featured by the BBC, the keys were eventually released.
The Solicitors Regulation Authority issued a statement on Friday afternoon. It said: “The SRA has discussed this issue with NatWest and RBS. The banks are trying to resolve these problems and recognise the difficulties being caused to solicitors and their clients.
“They have confirmed that where firms have used best endeavours to ensure the payment has been made into their account, for example by contacting lenders (or the buyers’ solicitors) direct for confirmation of payment, they are prepared to give appropriate undertakings to indemnify solicitors.”
The statement gave some detailed advice to conveyancers and concluded: “We would like to assure those solicitors who have given undertakings with regard to completion that we cannot foresee a situation where disciplinary action would be taken due to problems that arise as a result of these difficulties.
“Equally, should there be a breach of the SRA Accounts Rules as a consequence of the present system failures, and solicitors acting in their clients’ best interests to nevertheless complete transactions, disciplinary action will not be taken.”
The Financial Ombudsman Service said that anyone affected should keep records, and advised that banks are obliged to return affected customers to the position they would have been in had the problem not occurred. NatWest has already said no one will be left out of pocket.
The IT glitch was apparently caused by bank staff trying to install a software update on the system, but ending up corrupting it instead.
Earlier this month, RBS-NatWest launched a mobile banking app that lets people withdraw money from cash machines using their smartphone.
But experts warned that banks could be in too much of a rush to deliver new services.
Daoud Fakhri, senior analyst at consultancy Datamonitor Financial Services, said: “This episode is emblematic of wider problems facing the banking sector as a whole.
“Many providers, being early adopters of IT systems when the technology was still in its infancy, have been left saddled with inflexible core systems that are often several decades old and that are increasingly unable to cope with the demands being placed on them.”
He said it increased the likelihood of episodes such as the NatWest mishap occurring again.
Conveyancing expert Rob Hailstone of the Bold Group said the NatWest failure had highlighted the need for all conveyancers to get mortgage advances available the day before completion, and not on the day. He said: “Whilst it might not have stopped this particular problem, it might well have clarified the position 24 hours earlier, providing more time for damage limitation.
“The peace of mind a buyer has knowing the mortgage advance is in the day before, is well worth an extra day’s interest.
“Even without these current problems, waiting for mortgage advances to arrive in the buyer’s solicitors account on the day of completion is ludicrous. It can’t be sent out until it arrives and sometimes it doesn’t arrive until midday (or even later). That is the main reason why even small chains take so long to complete and people are left outside their new house on a rainy Friday in a removal van, just waiting.”
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