Prospective homebuyers are being put at risk of losing their deposits due to problems which have arisen since Covid-19 lending checks were introduced by banks, the Law Society has warned.
Solicitors say clients committed to buying property have been encountering difficulties drawing down loans already approved by lenders.
The issue arose after the Banking and Payments Federation Ireland (BPFI) issued new guidance about mortgage approvals and the drawdown process on April 20.
It said people who already had mortgage approval and were moving to the next stages in the process - the letter of offer and the drawdown of the mortgage - were likely to be asked to confirm that their employment and income situation had not materially changed since they were granted approval.
If circumstances had changed, lenders would do a review to determine if the homebuyer could still afford to make repayments.
The BPFI said such reviews were in the interest of prospective homebuyers. Lenders would facilitate the drawdown of mortgages within the normal time-frame once all standard requirements have been fulfilled and up-to-date documentation provided.
However, conveyancing solicitors have reported clients' problems getting funds released by lenders on some approved loans, even though all the usual pre-drawdown requirements are in place.
"This is happening at a very late stage in the process, at a time when the clients are already committed to contract, and it puts them at risk of losing their deposits," Law Society president Michele O'Boyle said in a circular. She highlighted a society recommendation to include a special condition in contracts which safeguards deposits.
In a statement, the BPFI said that, while lenders "understand the frustrations that some borrowers may be experiencing", how deposits are dealt with was a matter for the solicitors involved.
It pointed to the Law Society recommendation, which states contracts should include a special condition that the loan approval of the lender is in place at the date of completion of the contract and for an amount that will allow a buyer to complete the purchase.
"If a contract includes this special condition, the purchaser can rely on it to ensure that he or she can proceed to complete the purchase," the BPFI said.
"If the loan approval changes, a purchaser is entitled to a refund of the deposit, if this special condition had been included in the contract."
In a letter last week to the federation's chief executive, Brian Hayes, Law Society director general Ken Murphy also outlined a number of other issues of concern raised by conveyancing solicitors.
These included difficulties in cases involving stage payments.
The concerns reported by the Law Society come amid a general tightening of lending criteria by several financial institutions.
Bank of Ireland, Ulster Bank, KBC and Dilosk/ICS have all temporarily suspended allowing exemptions from Central Bank lending rules.
First-time buyers are expected to be hit hardest by the move.
Mortgage approvals in March were down 10pc compared with the same month last year.