Thursday, 19 January 2017

Should clients play home or away when choosing a conveyancer?


The online revolution has changed almost every aspect of our lives and, finally, it is beginning to impact upon the rather reactionary world of conveyancing. With the rise of the online conveyancer, writes Will Clayton, New Business Advisor at MJP Conveyancing, there is now some much-needed competition and a greater degree of variety within the legal property market. This can only benefit you!

Many people, however, continue to work under the misconception that it is necessary to appoint a local solicitor to undertake your conveyancing; here, we look at the pros and cons of choosing a local or online conveyancer.


Do I need to meet my solicitor? 

For those who have not bought or sold a property in the last few years, it may come as a rather unnerving surprise to learn that you can buy or sell a house without ever meeting your solicitor. It really depends on the type of service you desire. Some people will like the reassurance that speaking with someone face-to-face can provide, but it does not necessarily mean you will have greater communication with your solicitor or greater access to your case. 

Good online companies will have multiple avenues of communication (email, online messaging and the old-fashioned telephone) to discuss your case with you and will not charge you for this service. Better case-management systems will also allow you to view and monitor progress as and when it happens – this can be particularly useful for those who work during the day and do not have the time or resources to organise multiple meetings with their solicitor. 

There are, of course, the dreaded faceless online companies, who are impossible to reach and who seem to have no idea who you are or show any awareness that you are in fact their client! A quick google search, however, will normally reveal how accessible your conveyancers are and how responsive they are to their clients’ needs based on their reviews. 

It can be very useful to be able to drop in to your local solicitor if documents need to be passed on urgently, but you will of course have to make an appointment in advance. 

Will I get a better service on the high street? 

Not necessarily. Without competition, high street solicitors have been able to charge higher legal fees without proper justification for it. In most cases, conveyancing should be a straightforward, quick process – that is not to say there are not cases where a transaction is more complex, but there is no reason why a higher fee should indicate a higher level of service. It is simply a different type of service. The extra you pay reflects the face-to-face time you will get with a local solicitor that would not be available to you when using an online company.

Conversely, there is an argument to be made that the online conveyancers can offer a more efficient service; firms that deploy technology to their advantage and have effective case-management systems can process work quicker. Everything from transferring documents to providing a report on a lease can be done much more efficiently online. More traditional firms, still dependent upon snail mail, can take much longer to process administrative tasks. 

There are, and always will be, firms that do not provide an adequate level of service (amongst both high street and online conveyancers alike) but, once again, basic research will save you from possible catastrophe. Websites like Solicitorsfromhelluk.com aim to expose bogus firms and those offering a terrible service, but do not rely on a single site or review when making a final judgement. 

Do my solicitors need to have knowledge of the local area?

Essentially, no. The information which solicitors rely on to provide legal advice is all obtainable online; everything from the risk of flooding to the planning history of property is digitized enabling solicitors to provide you a full report on a property without ever having to have visited the local area.

That is not to say, however, that local knowledge is not useful; local solicitors who have been operating in an area for their entire careers will of course carry with them vast experience and an in-depth knowledge of the particulars of the area. This may or may not benefit you especially, depending on the type of property; with some more distinct properties, that local expertise may come in very useful.

Conclusion

As discussed, there are benefits and drawbacks to both sides; the important distinction to make is not in terms of the quality of service on offer, but the type of service you will receive. 

If you want a more traditional, personalised service it may be better to use a local solicitor; if you are comfortable with technology and are looking for a cheaper and, often, more efficient service, try using a reputable online conveyancer. 

Ultimately, both local and online solicitors would benefit from learning from each other; increasingly, local solicitors will have to incorporate technology into their processes, just as online conveyancers should be looking to develop a more personal, communicative approach to the way they operate too. 

This is certainly the balance that MJP Conveyancing aim to strike in 2017, between a technology-driven, efficient service and one that retains the personal characteristics of a small, local firm.  MJP Conveyancing also offer their clients free and lifetime access to an online property log book which is used to store all of the information and documents generated within the course of the transaction.   

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877067 or via email at william.clayton@mjpconveyancing.com

Friday, 13 January 2017

Is the writing on the wall for Panel Conveyancing?

Arrangements whereby a client is introduced to a conveyancer by an agent or broker through a third party panel manager have over the years become a major feature of the property industry.   


It was only recently the online B2B platform, ULS Technology, announced the ‘take over’ of the Conveyancing Alliance for an initial £7.2m.  This move was herald as part of ULS’s strategy to become the Country’s leading handler of conveyancing.


So how do these arrangements work?

The model is pretty simple.   The panel manager provides agents, brokers and lenders with online access to a managed panel of conveyancers to which their clients can be introduced.   The access to, and management of, the panel of conveyancers is made possible through an online platform and this technology allows the referrer to choose a conveyancer from the panel, to view the price charged by them for the conveyancing work and to enable the referrer to earn and track a commission for the introduction. 

The panel manger charges a fee for the management of the panel solicitors, and also raises additional revenue through selling ancillary services such as searches and identity checks to the panel conveyancer.

The panel managers are not regulated even though the majority are heavily involved in generating a fee quotation for the end client (consumer) which will detail all of the fees payable and which will include the hidden commission payable to the referrer and the fee charged by the panel manager for the service/facility it is providing to the referrer.

The quoted fee will also include the cost of the ancillary services provided by the panel manager such as the cost of the searches. 

The success of these panels is very much dependant on bringing more referrers on board and making sure the referrer persuades the client to make use of the panel of conveyancers provided.   The will often be guided by the agent or broker on choice of legal representative ( normally on price)  and it is this influence which has played a major part in the growth of these arrangements.

So what does this mean for the end client?

The panel manager will no doubt argue that those who are placed on their panels are closely vetted and that through review systems, they can guarantee the conveyancer appointed to handle the client’s transaction will provide a reasonable level of service.  

In addition to this the panel manager will be there to chase the panel conveyancer, and also handle complaints and generally oversee, through the panel manager technology, the overall progress of the transaction. Some of the technology will also allow clients to view the progress of the transaction online.  There is no doubt that many of these panel solicitors provide a first class service to the client.  

The major problem lies with the cost of the transaction.  

Not many clients know that when a quote is produced by the panel manger on behalf of the panel conveyancer that the fee for the legal work will have built into it not only the fee paid to the referrer for the introduction ( commission ) but also the panel manager's fee.  In addition to this, the quote will often include the cost of searches and other third party costs which will be a much higher level than that payable had the client sought a quote directly from the conveyancer. 

The reason for this is that many panel managers make it a condition of membership that the panel conveyancer must purchase services from the panel mangers chosen supplier.   The reason for this is obvious.  The panel manager is purchasing the service in at a low price and then often charging the client through the panel conveyancer a much higher fee. Often the client is paying £100-£150 more for the searches than they would had they instructed the conveyancer direct.

Don’t get me wrong, providing commissions for referrals is disclosed ( and are not too excessive) by both the referrer and the conveyancer, there is nothing untoward about it – it’s a practice which has featured in most service industries for centuries. 

The real question is whether knowing how these arrangements work, can it be said that the panel conveyancer in accepting the client’s instruction is acting in the client’s best interests?  In other words should the panel conveyancer who will only be picking up a fraction of the fee quoted and payable by the client, be doing more to protect the client?

It is not unusual for a panel conveyancer to receive a £250 fee out of a fee quoted to the client of £1,000!

So what are the obligations on the panel conveyancer?

To begin with, I do understand why many conveyancers are attracted to the lure of a panel arrangement.  Most of those who work on these panels do so to ensure a continuous flow of work and comprise mainly of those large conveyance providers who are able to make money on the basis of volume transactions.   In the main they provide as I say above, a good service.

The big question however is, are some of these conveyancers failing their clients by not highlighting the details of these panels especially when it comes to presenting and explaining fees.

The regulatory and legislative framework

The starting point for those regulated by the Solicitors Regulation Authority is the SRA Code of Conduct 2011 ( The Council of Licensed Conveyancers' Handbook contains similar obligations), and in particular the ten mandatory Principles which include the  obligations to  act with integrity, not to allow one’s independence to be compromised and to act in the best interests of the each client.


The outcomes used to describe what is expected to achieve compliance with the Principles are helpful in understanding what is required of a panel conveyancer working within a ‘panel’ arrangement.

The relevant outcomes in this context are as follows:

  • To treat client’s fairly
  • To only enter into fee arrangements which can be considered suitable for the client’s needs and circumstances and take into account the client’s best interests.
  • To ensure clients are in a position to make informed decisions about the services they need, how their matter will be handles and the options available to them
  • To ensure clients receive the best possible information, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of their matter;
  • To properly account to clients for any financial benefit you receive as a result of your instructions
  • To ensure that one’s ability to act in the best interests of the client is not impaired by, inter alia, commercial relationships.
  • To ensure one’s  independence and professional judgement are not prejudiced by virtue of any arrangement with another person
  • To ensure clients' interests are protected regardless of the interests of an introducer or fee sharer or your interest in receiving referrals;
  • To clients are informed of any financial or other interest which an introducer has in referring the client
  • Whenever one recommends that a client uses a particular person or business, the recommendation is given in the best interests of the client and does not compromise one’s independence.
  • To ensure clients are fully informed of any financial or other interest which one may have in referring the client to another person or business.
  • To ensure clients are in a position to make informed decisions about how to pursue their matter.
  • To only put the client in touch with an unregulated business where the client has given informed consent.  


In looking at the conduct and assessing whether or not the Principles have been contravened The SRA set out examples of the type of behaviour expected and these are labelled as ‘indicative behaviours’. They include:
  • explaining any arrangements, such as fee sharing or referral arrangements, which are relevant to the client's instructions
  • clearly explaining fees and if and when they are likely to change
  • ensuring that disbursements included in your bill reflect the actual amount spent or to be spent on behalf of the client
  • any referral to a third party that can only offer products from one source is made only after the client has been informed of this limitation

It is clear from these requirements that a responsible conveyancer will be expected when working on a panel to be alert to the following:

  • Obtaining referrals from one source and becoming economically dependent on that source could be viewed, per se, as a situation where there is a real risk of the panel conveyancer’s independence being compromised.   Given this, a responsible panel conveyancer would need to demonstrate that on receiving the instruction, that the client has been made aware of the relationship with the panel manager, perhaps even to the extent of explaining the structure of the arrangement and the contractual requirement to only make use of the services such as searches supplied through the panel manger. 
  • Information on fees and how these are split should be make known to the client at the outset and should be clearly shown in the client’s bill.   The client should be told how much the broker/agent is receiving and how much of the quoted fee is to be paid to the panel manger. The panel conveyancer should insist on seeing what information on costs and the split between all interested parties has been given by the broker/agent and panel manager. The panel conveyancer should also be privy to what commercial arrangement exists between the introducer and the panel manager. The client should be told at the outset about the probability that the panel Manger will be making a profit from the sale of searches and provision of other services which the panel conveyancer is obliged to supply under the commercial arrangement with the panel manager.   
  • Some agents and other introducers who using the panel manager to engage a conveyancer make their selection not following extensive due diligence but on price. The reasoning here is that the less the lawyer is paid the more there is to share with the introducer and the panel manager.   For this reason some panel managers put pressure on the conveyancers to keep their prices low, particularly if they are looking for high volumes.   Knowing how this works panel conveyancers need to make sure that the client is happy to proceed with them and that the client’s expectations (based on a much higher fee than the conveyancer will receive for the work) can be safely met in full. It is important that the client’s interests are fully protected regardless of the interests of the introducer/panel manager.  
  • The close working proximity between the introducer, panel manger and panel conveyancer can create confusion for the client, and bearing in mind the financial connection between them, there is a strong case that the consent of the client to be part of that arrangement should be sought at the outset.  The reasoning behind this is that as the introducer and panel manager do not offer legal services they will be viewed as unregulated businesses.

The sanctions for proven contravention of the Principles can include firm closure and/or a requirement to refund to clients fees which the client would not have incurred had there been compliance.

This could lead to a business having to recompense all clients for which the business has acted in the past in connection which the arrangement.

Panel conveyancers also need to be aware of the requirements of the Consumer Credit Act 2015 as can be seen from below.

So what rights do clients have if they are involved in an arrangement of this type?

If there is a secret profit contained within the quote for the service irrespective of whether the panel conveyancer benefits from it, it is arguable that failure on the part of the panel conveyancer to make this clear to the client at the outset, or more specifically act to protect the client’s interests by ensuring there is complete transparency on fees, the client has various options which are not mutually exclusive.

The client can raise a complaint with the Legal Ombudsman who has the power to require the offending panel conveyancer to pay compensation up to a limit of £50,000 including compensation for emotional distress. The LeO is not very forgiving when it comes to dealing with a proven complaint of hidden fees and or failure to provide clear information on fees and how these are calculated. 

The client also has the right to report the conduct to the applicable regulatory body for investigation and this could give rise to disciplinary action if it is found the panel conveyancer has contravened any of the relevant principles of the Solicitors Code of Practice. 

A client can also challenge hidden fees and charges under the Consumer Rights Act 2015 as this legislation means that key terms of a contract, including price, may be assessed for fairness unless they are both prominent and transparent. 

Terms may be deemed unfair if:

•          they are contrary to the requirements of good faith - meaning they must be designed, negotiated and entered into with the consumer in a fair and open way

•         they cause a significant imbalance between the rights of the supplier and consumer to the detriment of the consumer

If the court decides that a term is unfair the client may be able to ignore the term or even cancel the contract without having to pay a cancellation fee.


Conclusion

It is clear conveyancing panels are unlikely to disappear and there will be conveyancers who will wish to continue to use the service they provide.   Commercially I can understand this and providing there is complete transparency as regards fees and clients are made aware of how the arrangement works, there should be no reason to doubt the longevity of this model.

However, there are inherent risks associated and conveyancers do need to considered these very carefully, especially given the severity of the sanctions that can be imposed. 

The safest course is to look to establish and work within much simpler referral networks where there is greater control over the relationship and where it is far easier to ensure the clients best interests are served and protected.

For the client the best option and 'no brainer' is to look to engage a conveyancer direct and not through an intermediary,  unless the client is happy to be guided by an introducer and is aware of the financial relationship, if any, which exists between the referring agent/broker and conveyancer.  

So where does this leave the panel manager?  Probably in a ‘win, win’ situation since even if there was a mass exodus of panel conveyancers it probably would not represent a major shift in direction for these companies to offer conveyancing services direct to clients through well-established networks of brokers, agents and lenders.  Many of these companies are well placed to become large providers of legal services in their own right.


David Pett 

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877067 or via email at david@mjpconveyancing.com

Quote, Unquote


Buying or selling a house can be stressful, time-consuming and expensive at the best of times, but make a wrong decision with your conveyancer and the process becomes a lot worse… 


It all starts with a quote writes Will Clayton, New Business Adviser with MJP Conveyancing. 

In an extremely competitive and sometimes rather murky market place, finding an accurate online quote, understanding it and recognising which quote represents the best value for money is a treacherous business.

To this end, we have some advice on exactly what you should expect from an online quote and some of the common pitfalls that befall first-time buyers and experienced property investors alike when looking for an online quote.

What should my quote include?

  • Searches – whether you are purchasing with a mortgage or without, it is always important to gather as much information as possible about the property you are buying.  All firms will charge for the cost of the searches, alongside an administrative fee for reporting to you on their legal content. Always check that they have been included on your purchase quote! Contrary to popular belief, Chancel Searches are no longer required by major high street lenders and so don’t necessarily need to be included on your quote. A standard search pack should include the environmental, water & drainage and local authority searches.
  • Land Registry Fees – The Land Registry charges a fee in order to register your ownership of a property based on its value. However, for first-time registrations the Land Registry doubles its fee – so, for those of you buying a New Build, it is important to remember that you should be charged at a higher rate. Many companies will not include the higher rate in their initial quote.
  • Additional Fees – The more work involved in a property transaction, the more your conveyancer will charge for their time. So, it is important to provide as much information as possible when requesting a quote to ensure you are being given the full fee. New Builds, Shared Ownership properties, leaseholds and Help to Buy Schemes will all garner higher fees due to the increased workload. Most firms will also charge for additional administrative procedures; purchasing with a Help to Buy ISAreceiving a gift to help fund your purchase and Declarations of Trust will also carry additional charges. Making your conveyancer aware of these elements before you accept the quote will allow you to assess the full cost of your transaction and plan accordingly. Ask the right questions and you can avoid those dreaded ‘hidden fees!’
  • Third-party fees – SRA-regulated solicitors should break down their costs fully to show exactly what fees they are charging and what fees they are paying to third parties (for example, to search providers). Some firms will try to hide fees within their disbursements. If you feel your quote is unclear, ask the solicitor to break down their quote fully for you. Transparency should be the norm, not the exception!

  
How to choose the right conveyancer?

  • Speak to someone. Many people obtain quotes online and simply choose the cheapest quote they can find. As shown above, the initial quote you receive may not always be accurate. Call a firm you are interested in, tell them as much about your transaction as you can and ask them to generate you a bespoke quote on that basis. Obtain in writing their assurances that their fees are fixed and that the quote you have received is accurate.
  • Do your research. If a quote seems too good (or cheap) to be true, it probably is. Aside from the tips above, check what their existing clients have said about a firm. A 1* Review does not necessarily render a firm useless, but a string of 1* reviews will normally give you a good indication of the service you are going to receive. There is usually a balance to strike between cheap and value for money; lots of positive reviews can help you to separate an online ‘factory’ conveyancer from an efficient and cost-effective firm.

This is not a definitive guide but it will certainly help you judge whether a quote is accurate and help you to assess its value; do your homework, ask the right questions and you will save time, hassle and unnecessary expense further down the line!

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877067 or via email at william.clayton@mjpconveyancing.com

Wednesday, 14 December 2016

The New Build Ticking Time Bomb

Most large developers of new build property actively look to steer buyers in the direction of a ‘friendly’ conveyancer.  This step is taken for several reasons mainly to do with the developer’s desire to exercise a degree of control over the buyer’s solicitor.  The influence exercised is discreet but there is no getting away from the fact is exists and raises serious professional issues in relation to conflict of interest and independence.  I wonder how many of these conveyancing firms report this situation in accordance with Chapter 10 (Solicitors Code 2011) obligations and or in accordance with COLP reporting requirements.

This situation has come more into focus with the recent uncovering of failures on the part of some of these firms to advise fully on the mechanics and long term consequences of rent review clauses contained in leases.  It is claimed that this failure is widespread and could result in a wave of professional negligence claims.

Many buyers of leasehold new build property have been unaware that the ground rent on new-build leasehold properties purchased can escalate dramatically in the future.  This is where the lease provides for the rent to be double every 10 years, for example.   Some developers have changed their approach and have linked the rise in ground rent to the retail price index which is a much fairer and less onerous mechanism. 

In a statement issued by one of the large developers Taylor Wimpey it is stated:

“We reviewed the mechanism for ground rent increases in 2011 and decided that the RPI was a more appropriate measure going forward. All Taylor Wimpey homes on developments commenced after 2011 have been sold with ground rent increases linked to the RPI. All purchasers have independent legal advice.

“Until recently, we hadn’t been aware of the concern of some customers and homeowners regarding these pre-RPI clauses and the difficulties that they are currently experiencing in selling or mortgaging their homes. Having heard the cases described and in order to establish the facts, we are undertaking a review.”

A conveyancer acting for the buyer owes both the buyer and if the buyer is purchasing with a mortgage, the lender a duty of care which would require that conveyancer to bring to the buyer’s and lender’s attention any part of the lease which could be viewed as onerous and which could materially affect the value of the property.

In addition to this the Consumer Rights Act (2015), gives home owners the opportunity to seek legal redress against solicitors where they can prove they were not given adequate information to make an informed decision.

Many of the ‘friendly’ conveyancers concerned are financially dependent on this type of ‘referral’ and it must be questioned whether the advice they provide to buyers is completely independent. Some cannot afford to lose this source of work and often hesitant to do anything which could be seen by the developer as ‘hindering’ the progress of the transaction. The degree to which this may have contributed to the failure to properly advice has yet to be investigated but it is clear that given the spate of professional negligence claims it will not be too long before this well-established practice within the industry is fully exposed.

It will also be interesting to see how the role of the developer’s selling agent will be viewed and considered.  Many of these agents are paid on a commission basis and are often very ‘pushy’.  There have been examples quoted of an agent ‘selling’ the property on the basis of a monthly ground rent figure rather than a yearly figure resulting in a misleading picture of the true cost of the purchase.  It will be also interesting to see whether a Court could look to apportion some or all of this liability in the developer’s direction if it could be shown that the relationship between the developer and the ‘recommended’ solicitor was so close that it amounted to an ‘agency arrangement’.

Cosy arrangements of this type must come to an end ( as they do not serve the buyer’s best interests)  and it seems the bubble enjoyed by many may be on the verge of bursting soon.

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877067 or via email at david@mjpconveyancing.com

Wednesday, 12 October 2016

The practical implications of P&P Property Limited v (1) Owen White and Catlin LLP (2) Crownvent Limited t/a Winkworth [2016] EWHC 2276 (Ch).


What should you do, and what exposure do you have when you act for a seller only to find after the transaction has completed that the seller is not the owner of the property but a fraudster?  

This was the very situation which a seller’s solicitor and estate agent faced in P&P Property Limited v (1) Owen White and Catlin LLP (2) Crownvent Limited t/a Winkworth [2016] EWHC 2276 (Ch).

Facts

An impostor posing as the real owner of the property instructed Winkworth to market the property and the First Defendant (‘OWC’) to undertake the conveyancing.  The impostor claimed he was living in Dubai and was looking for a speedy sale.   OWC carried out the usual identity checks (in robotic form only) and the sale proceeded with the purchaser P&P Property paying 1.03 million for the unoccupied property.

Upon completion the net sale proceeds were passed on to the purchaser. Subsequently the true owner when walking past his property was alerted when he saw builders ripping out the kitchen of the property. By this time the impostor had vanished with all of the net sale proceeds (£927,000).

The Claim

The purchaser who purchased from the impostor was not of course happy and decided after the fraud came to light to bring a claim against the seller’s solicitors and also the estate agent for breach of warranty of authority and breach of duty.

There was a separate claim brought against the seller’s solicitors for breach of trust relying on the fact the misappropriated funds passed through the hands of the seller’s solicitors.

Breach of warranty claim

The judge found that if a client appoints a solicitor the only warranty that a third party dealing with that solicitor can rely on is that the solicitor has authority to act on behalf of the client.  There is no implied warranty that the solicitor can vouch for the client’s authenticity as the owner of the property to be sold. 

The judge found:

‘The basic representation is only that the agent has authority to act for another, a matter which arises between him and his principal and is something which is usually peculiarly within his own knowledge. An agent does not, simply by acting as agent, represent that his principal will perform the contract or is solvent or make any other representation as to the principal's attributes or characteristics. The court should not imply a warranty of authority which has an effect going beyond the basic representation, save where it is clear that the necessary promise is properly to be implied. This is particularly so in relation to professionals, including solicitors, who do not normally undertake an unqualified obligation.’

To extend the warranty to this level would in the view of the Judge Robert Dicker QC constitute a guarantee that the client was the registered proprietor of the property and essentially create a strict liability for any loss arising if as in the present case the client was found to be an impostor. The judge found that such warranty was also entirely inconsistent with the practice adopted amongst conveyancing solicitors and out of line with the Law Society Code for Completion by Post (2011).

The judge also found on the facts of this case that there was not in breach of warranty on the part of the estate agent but did not rule out the possibility that in certain circumstances a claim could be well founded.

Breach of Duty of Care

Again the Judge found in favour of both Defendants.

On the facts (and more particularly in the absence of evidence to show a breach of warranty of authority) there was no evidence that the Defendants had accepted responsibility to ensure that the client was the true owner or that the impostor was not who he claimed to be.  

The judge also found:

‘The imposition of such a duty of care on the part of Owen White to take reasonable care to ensure that Mr Harper was the true owner of the Property, would also, in my view, be inconsistent with the detailed rights and obligations set out in the Law Society's Code for Completion by Post, which I consider further later in this judgment’.

In terms of the claim against Winkworth the judge found:

‘I accept Mr Polycarpou's evidence [purchaser’s solicitors]  that he expected Winkworth to have carried out their client due diligence and anti-money laundering checks and relied on them to have done so. However, reliance on its own is not sufficient to establish a duty of care on the part of Winkworth.

On the basis of the test derived from Hedley Byrne v Heller, it is also necessary to establish, amongst other things, the necessary objective assumption of responsibility by Winkworth and, in this respect, the primary focus is on statements or conduct which crossed the line between them.

Nothing was said by Winkworth about the steps taken in relation to its client due diligence and anti-money laundering obligations. Mr Polycarpou did not ask and Mr Hunt did not volunteer anything in this respect. The furthest that the evidence went was that Mr Hunt appreciated that Mr Polycarpou would have expected both Winkworth and Owen White to have carried out their respective money laundering checks before marketing the property.

Assessing the relevant evidence as a whole, there was, in my view, no communication or conduct which crossed the line such that, in this particular case, objectively Winkworth are to be taken also to have assumed responsibility to P&P Property for taking reasonable care when carrying out their client due diligence to ensure that their client was the true owner’.


Breach of Trust

The Claimant claimed that OWC held the funds that it received from the purchaser on trust, that no valid completion took place and that the completion monies were therefore paid out in breach of trust.
The judge found in favour of OWC relying on paragraph 3 of the Law Society Code for Completion by Post (2011 edition) (the "Code")

This provides:

‘’In complying with the terms of the code, the seller's solicitor acts on completion as the buyer's solicitor's agent without fee or disbursement but this obligation does not require the seller's solicitor to investigate or take responsibility for any breach of the seller's contractual obligations and is expressly limited to completion pursuant to paragraphs 10 to 12".

The Judge found:


In short the judge found that it would be inconsistent with the terms of the code to hold that a breach of trust occurred by reason of the seller releasing the completion funds to the purchaser when it was argued that the seller was not in a position to provide a genuine transfer of title.  Essentially the judge took the view that paragraph 3 specifically excludes the sellers solicitor from liability for any breach of contract on the part of the seller.

Sellers Solicitors Conduct

Helpfully the judge took the time to consider whether the sellers solicitors would have been able to avail themselves of the Section 61 of the Trustee Act 1925 relief had he found that a breach of trust had occurred.

Section 61 provides:

"If it appears to the court that a trustee, whether appointed by the court or otherwise, is or may be personally liable for any breach of trust … but has acted honestly and reasonably and ought fairly to be excused for the breach of trust … then the court may relieve him either wholly or partly from personal liability for the same."

The judge it is safe to say was not impressed with the seller’s solicitors and found that if there had been a breach Section 61 relief would not have been available.

In short the judge found there were sufficient ‘red flags’ to alert the seller’s solicitors and to cause at the very least the seller’s solicitors to raise further questions.
The ‘red flags’ (and there were many) in this case included:

Unoccupied property
‘Seller’ living abroad
No legal charge
Relatively high value
Impatient client
Discrepancies between signatures
Lack of a correspondence address or evidence as to where the ‘seller’ was in fact living and working or how long he had been there.
Failure to pick up form the ‘seller’s’ bank statements when presented the fact that most of the items within it appeared to be London based.
Failed electronic identity check.

The judge concluded:

‘The fraud was plainly a sophisticated one which appears to have carried out with some expertise. However, in my view, it is plainly possible that, despite the obvious sophistication of the fraud, further questions would have revealed the true position or discouraged Mr Harper from proceeding further and, even if they did not, they would have increased the prospect of that occurring’.

Practical Implications

This case is unremarkable and should not lead in my opinion to any significant change in practice.
Upon acting for a seller it is important to keep in mind both statutory and professional obligations particularly the widely known obligation a conveyancer has to be alert to indicators of money laundering and/or fraud and to identify and action ‘red flags’ as and when these arise.  To simply ignore and do nothing is not advisable and could leave you exposed to liability.

It is clear that a responsible and alert practitioner given these circumstances should have spotted that there was something not quite right about the transaction.  It should be clear by now that if you are acting on a sale where there is no mortgage, the property is empty and the ‘seller’ purports to be living abroad, further inquiries should be made.  In this case the seller’s solicitors should have never allowed this transaction to proceed.  There were clear warnings and to argue as the seller’s solicitors did that she did not consider it was appropriate to raise a large number of questions with her client simply is not an acceptable argument.  If in doubt the seller’s solicitors should have terminated the retainer. 

What more you might ask could the seller’s solicitors have done? In this case I do take the view that further evidence to link the seller to this property could have been sought.  I do not consider it is unreasonable given the large number of red flags to have asked the client to provide details of who acted for the ‘seller’ on the purchase of the property and to contact those solicitors to seek verification of identity.  I know some may argue this is a step too far and probably in the majority of cases it is but as I say the alarm bells were constantly ringing in this case.

If acting for a purchaser and it is noted from the Seller Information Form that the property is empty and there is an alternative address for the seller shown (which in this case the seller’s solicitors failed to investigate) then I do consider that the seller’s solicitors should be asked about the checks undertaken to ensure the seller is in fact the registered owner.  In other words to ask for a warranty.  If this is refused then perhaps insurance should be considered or the buyer should be warned of the risk of fraud.  

Summary

In this case the I am of the view OWC was lucky to have come away untouched.  The prominence given to the Law Society Code surprised me and was clearly and cleverly used by the judge to find for the sellers solicitors which overall I agree was the most just decision to reach.


The underlying message however is that a conveyancer whether acting for a seller or purchaser needs to be alert at all times and if there are red flags of the type which appeared in this case, and which do not disappear on further investigation, not to be reluctant to report these matters to the National Crime Agency, and ultimately to pull out of a retainer.  


MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877067 or via email at davidp@mjpconveyancing.com

Thursday, 18 August 2016

Conveyancing Panels - Marketing heaven or unwanted slavery?


Love them or hate them conveyancing panels continue to remain a predominant feature within the conveyancing industry.   The majority of these work on a model whereby a company operates and manages an electronic platform on which it allows third party associates such as a broker or an estate agent or lender to introduce a client to a solicitor who has become a member of the conveyancing panel.


The panel manager allows the broker or agent or lender to access a national network of conveyancers and provides the broker or agent to make a financial gain from steering the client to one of the panel’s chosen conveyancing firms.  This means that in addition to raising a commission for the work the broker or agent has undertaken, the third party is able to make some extra money through making the referral.  In many cases the client is oblivious to such an arrangement often following the agents/brokers recommendation  blindly.

In addition to this the panel manager is also able to secure a slice of the cake for managing and allowing the third party to access via online software a network of preferred conveyancers.

So what does this mean for the consumer?

For the consumer it will normally mean higher prices since when receiving a quote for conveyancing services from the agent or broker it is in the majority of cases probable that the consumer will be paying a higher price than that had the consumer gone direct to the conveyancer.  The consumer is in these cases paying the broker’s commission, the panel’s management fee and also a higher fee for searches and other incidentals. 

Here is how it works.  The consumer is encouraged to use a solicitor which the broker is able to access through the panel.  The consumer is quoted a fee of say £800 plus VAT.  The consumer accepts and the panel solicitor who invariably will not be local, is instructed.  On completion the client pays the £800  to the panel solicitor.  Out of the £800 paid by the client the solicitor will be required to pay the panel manager company £500, which the panel manager will then share with the broker/agent/lender for making the referral.   The net effect of this is that the consumer has paid 100% more than he or she would have paid if she had gone to the solicitor direct.

On top of this the consumer will also be paying more for identity checks and searches.  This is because the panel manager has arrangements with the third party suppliers of these services under which the panel manager will receive a cut of the fee paid bu the consumer for those services.

In addition to higher prices, the consumer is often introduced to a conveyancing company out of the area and one which may not have the best of reputation.   It must be kept in mind that many of the panel solicitors will be forced due to the low amount of the fee it retains to facilitate the work with the minimum of resources.  The client is expecting a £800 service whereas the conveyancer may be only due to the low return be able to offer a service more commensurate  with the low legal fee retained.

The question to which this gives rise is whether the broker or agent is acting in the best interests of the consumer in not in some cases making it clear that the client may be paying more for their conveyancing services.  Don’t get me wrong as there are some brokers and agents are up front about the arrangement  and do offer to set off the commission received against their fees.

So how does this work for the conveyancer.

The upside is that the conveyancer receives work on a regular basis and has no direct marketing costs to pay.  The conveyancer only pays for the ‘lead’ on completion so this helps with cash flow.  Providing the conveyancer discloses the introduction fee there is no professional objection to the arrangement per se.  The problem lies more with the restraints the Panel Manager may apply.   Most Panel Managers have ‘pet’ suppliers such as search companies and insist that as a condition of panel membership the panel solicitor must purchase the searches from that supplier.  This extends to money laundering checks, indemnity insurance and solicitor account checkers.  This means the conveyancer is deprived of the freedom to choose and work with his or her own preferred supplier.  It also means that the client is often paying more for these items given the Panel Manager is receiving a slice of the charge from the suppliers of these services. At the end of the day the conveyancer is left with a small fee for the work and left with no opportunity to share in the financial benefits of third party arrangements.

Panel work for some conveyancers clearly works and provides savings on marketing costs.  Balancing this however with the shortcomings of the arrangement one is forced to raise questions about the economics of undertaking 'Panel' work.  There is also the question of whether the sharing of fees both legal and those hidden in the supply of third party searches has now reached a level whereby the panel solicitor may be so compromised that a conflict of interest should be considered and indeed acted upon.

So what has gone wrong? 

The decision of accepting and working for a client on a reduced fee was when considering the high cost of marketing is per se a reasonable one to take.  The problem now is that the some panel mangers have become too greedy by looking to reduce fees further ( so as to increase their slice of the cake ) and to also prevent the conveyancer from operating any commercial third party relationships other than those permitted by the panel manager.   There is now a major imbalance between looking after the interests of the client and the panel conveyancer and meeting the financial demands of the panel manager’s shareholders. To the extent some panel managers are witnessing a mass drop in the number of conveyancing firms willing to participate in their schemes.

So what can conveyancing firms do?

The model operated is not unique, nor difficult to establish. Its open to conveyancers to look to set up their own networks and third party relationships.  Surely this must be a more preferable option to the slavery some panel managers now expect from their panel solicitors.

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877067 or via email at davidp@mjpconveyancing.com