It announced that in a case where a property purchaser had been defrauded by a criminal imposter pretending to be the owner of a property, the solicitor acting for the innocent purchaser should bear the liability for the fraud, and be denied relief from a finding of breach of trust, simply because it was insured and had deeper pockets that the purchaser.
This was in circumstances where the solicitors themselves had not done anything wrong, and had not been negligent (contrary to previous fraud cases, where it had been shown there had been deficiencies in the solicitors' due diligence and in dealing with enquiries of the fraudulent seller’s solicitor).
By way of background to the case, Dreamvar sought to purchase a property in Central London for £1.1m, and having “completed” in November 2014 it came to light upon enquiry from Land Registry when dealing with registration that a fraud had been perpetrated. Dreamvar sued their solicitors (Mischcon de Reya) for negligence and breach of trust, as well as the seller’s solicitors for negligence, breach of warranty of authority and breach of trust. The High Court held that the seller’s solicitor owed no duty to the buyer, even though they were negligent. It also refused to uphold a finding of breach of trust for paying away the money in circumstances where there was no genuine completion.
The ruling therefore seemed also to suggest that the solicitor perhaps best placed to prevent the fraud, the solicitor acting for the purported seller, was not liable. This seemed counter-intuitive on a number of levels, not least as there seemed to have been no breach of the well-established warranty of authority.
In the appeal heard last week, the court decided that in this case, the seller’s solicitor was indeed at least partially liable, both due to their breach of warranty of authority, and importantly for breach of trust as they had not paid away the money to effect a genuine completion.
A second, related case was heard at the same time and it was found the “seller’s” solicitor was indeed liable due to inadequate due diligence.
So far, so good. This gives innocent parties in a transaction some ability to seek recompense, and shares that liability among both solicitors acting.
However the effect of the decisions is to make property solicitors the guarantors of a transaction, without any real guidance on how they mitigate the risk, and without the tools to be able to do so.
Furthermore the majority decision confirmed that the High Court was correct not to give the solicitor acting for the buyer relief from breach of trust even though they had acted honestly and reasonably, simply because they had insurance. It is unclear how this can be a just outcome for the solicitors. It suggests the only way they can be granted relief is if the defrauded buyer has insurance as well (which is unlikely). There was one dissenting judge, and this could be grounds for appeal to the Supreme Court.
So what now for conveyancers? There is likely to be some attempt to limit liability by both buyer and seller solicitors.
Can solicitors acting for buyers amend their Terms and Conditions to exclude liability? Probably only with informed consent at the outset of any transaction, such consent being unlikely to be given. Can they seek assurances and further warranty from the sellers solicitor? Such moves are likely to be resisted, although if there is too much resistance, should this lead to an adverse inference anyway?
Will conveyancers acting for sellers seek to alter the code for completion to avoid breach of trust claims? Again such moves will be vehemently resisted by conveyancers acting for buyers.
So, what is the answer? It is difficult to see any short-term solutions here. One long term solution would certainly be updating the Land Registry so it can hold biometric data on all registered proprietors. This would clearly eliminate any doubt.
It will involve investment by the Land Registry, and perhaps now is the time. All the stakeholders in property transactions need certainty, and this would seem to be the most sensible solution.
Is there anything a buyer can do to protect themselves? Good question.There are some sensible steps a buyer can take:
- Most importantly they can appoint a local solicitor who has been perhaps recommended to them, who is CQS accredited, to give themselves the best chance of employing a solicitor who can spot any signs of a possible fraud.
- Secondly, all parties to a transaction may have to show some patience. One thing is for sure, these rulings will mean solicitors have to take much greater care in checking sellers and their title, and ask more questions if they feel anything is amiss.
- And finally, be vigilant! Read the warnings your solicitor gives about paying money to bank details provided by email only without verifying them, try and meet the seller to see if any alarm bells ring, ask the estate agent what steps they have taken to verify the seller, don’t be fobbed off!
In theory at least, you can do your own conveyancing. The reality though, is that it’s simply not worth the risk (not to mention the sheer hassle). When you’re taking ownership of what’s likely to be the most expensive item you’ll ever own, it makes sense not to take any chances.
We have to admit that we’re obviously biased here – and of course we’d be more than happy to have a word with you when the time comes to instruct a solicitor.
Perhaps it’s something to do with being over 250 years old, but we’re not ashamed to say we’re somewhat old-fashioned when it comes to client care. There’s nothing quite like being able to pop into your solicitor’s office to deal with an issue – or even just to drop in some paperwork.
It’s also rather reassuring if you’re dealing with a solicitor who knows the local area, the estate agents, and, very likely, the seller’s solicitors.
Wherever you’re based, “think local” for convenience and personal service. Even then, quality can be mixed. Look for the Law Society Conveyancing Quality Accreditation (this tells you that lawyers in the firm are expert conveyancers).
Also, keep an eye out for the Lexel quality mark (this tells you the firm is managed to a very high standard – which means your calls are going to get answered and your file’s highly unlikely to go astray!).
A handful of other awards are a pretty good indicator of quality too, and if your conveyancers have picked up any prestigious awards then you know you’re in the right hands!
There’s no excuse for a firm of solicitors not to give you a realistic quote right from the outset.
Cunningtons, for instance provides a quote via their website. This is a quote, not an estimate: i.e. it is the figure you will pay barring unforeseen complications.
In a small minority of cases, issues may arise which means there is an inevitable costs overrun. If this is the case, you will be told in advance, and asked if you wish to proceed.
Costs will no doubt be an important factor in determining who to instruct – but look at expertise and reputation too. Ask yourself, “Do I feel at ease handing over the legal side of my house purchase to this firm?”
You should instruct a solicitor at least as soon as the offer is agreed. The seller will want to move fast, so instructing will show you mean business. At the same time, tell your lender which solicitor they will be dealing with.
There is a reason that the best time to sell property used to be the spring: after the dark days of winter, everyone wants to live in a cheery and bright home.
These days the spring effect isn’t so pronounced, with autumn now a hot contender for the title of peak housing sales time, but people are still more drawn to property they’ve seen in the sun. And natural light bouncing around the interior of your house helps too, glinting off pristine surfaces through newly-washed windows and not being banished from dark corners.
When your house goes on the market it can be easy to concentrate on the look of the place, as this is obviously vital when the photos are being shot. And the photos are genuinely how potential buyers first meet your home.
However, when the fabulous photos have done their job and you have people booked in to actually visit the property, remember that they are bringing all their senses with them – and ideally you need to appeal to all 5, and not just sight. So let’s have a quick word about smells.
All the guides we looked at advise a seller to declutter before showing potential buyers around their home.
In the real-life example of Patrick – our conveyancing client in Hove – the decluttering process was undertaken earlier, before the photographs were taken and as part of the moving process.