Interview with Claire Barker, Managing Partner at Equilaw
Claire Barker is Managing Partner and one of the founders of Equilaw — a unique law firm offering advice to clients considering releasing equity from their homes. She told Jane Common at Today’s Wills & Probate why it’s so important that consumers buying equity release products have a will or an LPA…
So you set up Equilaw, Claire?
“Yes, originally it was a bolt-on to the residential property team of our previous law firm — it got branded as Equilaw in 2007 and hived off as a separate business in 2008. Then, in 2010, my two business partners and I organised a management buy-out. So three of us own Equilaw and Thomas Legal Group as well which is great. And it’s lovely to have Equilaw because, as far as I know, we’re still the only law firm in the whole country that focuses exclusively on equity release. We were fortunate because we were in the sector right from when it began to grow and some big financial advisers started looking at it seriously. We spotted the opportunity and now have 40 members of staff from administrators doing data entry and initial title checks on properties, to paralegals and qualified lawyers looking at the issues which are deal breakers for clients and lenders.”
So what exactly does Equilaw do?
“It gives homeowners legal advice about the pros and cons of entering into a referred equity release scheme. We can’t advise homeowners whether one product is more suitable than another — that’s down to the financial adviser who will undertake a full fact find on the health, wealth and needs of the client. There’s a huge range of products out there these days. But, after the client has chosen a product, he or she has to go to an independent firm of solicitors for legal advice on the risks, rewards and obligations attached to equity release and that’s where we come in.
“A qualified lawyer will sit down with the client and ask whether they understand the report on the product they’ve chosen. Our lawyers will go through it forensically with them. And that obligation has been set down by the Equity Release Council — it doesn’t regulate the sector, as such, but all the key players are members and uphold the rules, standards and guidance that stakeholders in the industry should comply with.”
What’s your day-to-day role?
“I direct the business, obviously — so that’s making sure it’s performing as it should — and I’m responsible for quality control, compliance and working in line with regulations. I talk to financial advisers and I also sit on the Equity Release Council’s Standards Board which meets every couple of months — by invitation year on year there’s a guest financial adviser, solicitor, surveyor and representative of one of the equity release lenders on the board and, for the last three years, I’ve been the solicitor member. We look at upholding standards in the industry and ensuring that everyone works in a safe and compliant way in line with FCA, SRA and other rules and regulations.”
So how does the process work from a client’s point of view?
“We give people an eight or nine page report explaining how equity release works and outlining the risks, as well as the upside. We’re very careful to record all of the telephone advice we give to people and we take it all down in writing as well. Then, in most instances, we store the files for 30 years — by law it’s only six or seven but for our own safety we like to keep them longer and that’s because we don’t expect complaints to come from the people who take out the equity release policies but, instead, potentially from disgruntled heirs and beneficiaries down the line. But complaints in our sector are almost never upheld because the quality of financial and legal advice is so robust.”
Is it law that a homeowner releasing equity must have a will?
“No it’s not law — it’s just best practice to have a will and also an LPA. To be eligible to release equity, clients have to be at least 55 and typically they’re in their late 60s so it’s all part of holistic retirement planning. And wills and LPAs relate to that too — people ensuring their affairs are in order for peace of mind.
“Another reason that many clients make wills when releasing equity is that, finally, they have the spare cash to do so — finding the money out of their normal monthly budget can be tough — and they’re seeing a solicitor anyway. So releasing equity and making a will at the same time offers a neat way for people to sort out their affairs in one go and it is something that Equilaw’s advisers mention to clients when we talk to them.
“I believe that equity release and will writing are going to become more married over time as, with the Government’s pension reforms, there’s a lot of work going on to make sure everybody is looking at retirement in its entirety.”
What sort of problems can clients hit with equity release if they don’t have a will and LPA?
“Well, for couples not having an LPA can cause problems. A good example is that of drawdown products so that’s when a lender gives a lump sum at the beginning. A client might take out £10,000 initially because that’s what they require immediately and then ring fence a certain amount — maybe £50,000 — that they won’t be paying interest against. But for a couple, to draw against that £50,000 — generally in chunks of £2-5000 at a time — both of them need to agree and sign the papers. And if they don’t have an LPA and one of them loses mental capacity that facility is essentially going to be withdrawn as only one of them can make the request. So LPAs are really important in instances like that, ensuring that the spouse and a third party are appointed so that property and affairs can continue to be managed as our clients would wish.”
Do you think having wills and LPAs when taking out equity release products should be written into law?
“I think that would be a little too nanny state — obviously there’s a cost associated with making a will so it has to be down to personal choice. And there could be people who just don’t have a problem with the intestacy rules and are happy for their money to go wherever so, for them, setting down that a will has to be part and parcel of an equity release scheme would be unfair, although it’s obviously strongly advised to be a good idea to sort it out.”
What do people generally use released equity for?
“Using the money for home improvements and holidays — that trip of a lifetime — is massive but there’s the other end of the market too, when clients release equity because they have no choice. A couple might have an interest-only mortgage which is coming to the end of its term and be in a position where their existing lender can’t give them anymore so they’re in a nightmarish situation and being threatened with repossession. And often people don’t want to sell or move somewhere cheaper because that would mean leaving all their friends and family behind. Equity release provides a way of solving that problem and that’s one aspect of the sector I really enjoy —witnessing the positive effect it can have on people’s lives.”
What else do you enjoy about the industry?
“The products are evolving all the time, so rather than clients just taking out a lump sum at a high interest rate, providers are coming up with new and innovative ways for people to service the interest if they want to — and can afford to. There are also lots of rumours right now about some mainstream lenders entering the market and that would be great because it would help de-stigmatise equity release and offer greater choice to homeowners.”
Why do you think equity release is stigmatised?
“Products available in the 80s and 90s didn’t have the safety regulations and guarantees that current products do, but today’s equity release products are probably the safest financial products people can get their hands on. And our industry has an extremely low level of complaints — the FCA has had only a handful as compared to, say, the general mortgage market. With equity release the guarantees are there and the products have safeguards in place so customers are protected: there are negative equity guarantees so people can’t owe more than the value of the loan when eventually the house is sold; generally, their homes can’t be repossessed because most of the products don’t require payments; and people have the right to live in their house for as long as they want to.”
You’ve got an office dog —is he a good worker?
“Cai — yes, he pops in now and again. He belongs to Shawn Carr our Relationship Manager and he’s the sweetest dog — he does tricks and even lets us dress him up and wears antlers at Christmas. The only trouble is he was getting quite fat — he’s a Labrador — because everybody fed him treats so he’s gone on a spa break for the summer and will return to wear his antlers in December.”
For more information about Equilaw log on to www.equilaw.uk.com.