Law firms are suffering financial loss because lenders are incorrectly advising clients that they cannot use their own solicitor for conveyancing and mortgage work, the Law Society has warned.

Law Society chief executive Desmond Hudson said Chancery Lane had received a stack of complaints from firms that had lost out on work because lenders’ staff had wrongly told clients they must use a firm on the lender’s panel, even though this is not the lender’s actual policy.

He said the volume of complaints was such that the Society has appointed a dedicated member of staff – the lender and panels co-ordinator – to deal with lender issues.

Hudson singled out Santander and The Mortgage Works, which is part of Nationwide, as the most frequent offenders, but said the problem occurred at most lenders.

He said the Society had received complaints that staff from Santander had advised clients they would be charged a higher interest rate if they sought to instruct a non-panel firm.

Solicitors have also reported that Nationwide staff were preventing people from instructing their solicitor of choice, Hudson said.

Both lenders deny the allegations.

Hudson said he accepted that the lenders’ policies do not prevent clients from choosing a non-panel solicitor, adding: ‘I don’t believe it is malicious on the part of Santander management, but their staff appear to be ill-advised of the position.

‘There is a persistent problem with their staff not understanding the right of clients to choose a solicitor, and they are misleading members of the public about the choices they have.’

Hudson added: ‘We have sought to resolve the issue amicably [with lenders], but we have made it clear that the negligence of their staff is causing financial loss to solicitors’ firms.’

A Santander spokesman said: ‘Santander fully appreciates that everyone has the right to use a solicitor of their own choice, and does not challenge this right.’

He said the lender had been in dialogue with the Law Society and has agreed to enhance its communications to frontline staff where necessary.

A Nationwide spokesperson said it would be ‘clarifying our current position to our employees’.

He added: ‘The Mortgage Works and Nationwide recommend that borrowers use a solicitor from their panel.

'However, we recognise the individual's right to separate representation at their own cost.’