Lenders have hit out at proposals to reduce the requirements for conveyancers to hold professional indemnity insurance.

The Solicitors Regulation Authority would require compulsory cover against claims by individuals, small companies, and smaller trusts and charities. Conveyancers would not have to have PI to cover claims by either larger bodies or any financial institutions, including lenders.

Conveyancers would also be able to reduce the level of mandatory PI cover to £500,000.

The SRA says that the proposals – on which it has just finished consulting – are aimed at helping smaller law firms provide the right level of protection for their clients, but without having additional costs.

PI costs have been spiralling for conveyancing firms.

But lenders say that if the proposals are adopted, they would damage the conveyancing market and would shrink the pool of conveyancers that lenders would use.

The Council of Mortgage Lenders said that lenders will be unlikely to instruct firms without PI. In the SRA proposals, there would be nothing to stop conveyancers taking out fuller PI on a voluntary basis, and the CML says that lenders could well require conveyancing firms to do just that.

But, says the CML: “There is no clear indication from the insurance market as to whether this kind of top-up cover would be available, and on what terms.”

It warns that lenders would slash the number of conveyancing firms on their panels, and might even take conveyancing work in-house.

The CML warns that sole practitioners and sole conveyancing firms would be most affected.

It is urging the SRA to reconsider.