Are conveyancers moving closer to a 'strict liability' regime for property related fraud?

Are conveyancers now looking to be held strictly liable for all identity related fraud stemming from conveyancing transactions?

Though we might not be there quite yet, it seems we have moved one step closer with the news that solicitors Mishcon de Reya have been found liable for breach of trust after its client was duped into buying a London property from a tenant posing as the owner.

I have not seen the transcript of the judgment but from what I have read it seems the claimant, the purchaser client, was left out of pocket to the tune of £1m when it came to light that the seller was not the legal owner of the property, but rather the tenant purporting to be the owner.

The deputy High Court judge David Railton QC found in favour of the claimant in action brought against Mishcon de Reya based on a breach of trust.   The judge found that Mishcon, presumably as the trustee of its client’s money, should have obtained an ‘undertaking’ from the sellers solicitors that it had taken all reasonable steps to establish its clients identity.

This differs from the cause of action in the similar case of P&P Property Ltd v Owen White & Catlin LLP & Anor, where the buyer failed in claims for breach of warranty of authority and negligence against its solicitors and estate agent.

The decision must be viewed as extremely worrying for conveyancers and, though it is likely to be appealed, it has clearly left practitioners in a state of flux.

Until clarity arrives what should a prudent conveyancer do?

Acting for the seller

To begin with, it will be important to always check the title documentation carefully and to identify transactions where the seller is shown to be living at a different address than the property address.  Practitioners should also be alert to situations where the correspondence address for the seller is different from that shown on the title document for the property or the seller’s correspondence address.

I would suggest these transactions once identified should be brought to the attention of the compliance officer/partner/director and marked as a high risk transaction.

I also suggest an added level of client ID checking is undertaken.  There is a need to make sure the client can show that he or she is connected to the ownership of the property.  In our office we now ask in these situations for the client to provide us with details of the solicitors who acted on the purchase of the property and to provide documentation relating to the instruction of those solicitors if available.   Our reasoning is that an imposter is unlikely to know the identity of the solicitors who acted.  It will also be open to us to contact those solicitors and make appropriate inquiries if necessary.

If we were asked for an ‘undertaking’ or a warranty as to true identity of a client, the best advise will always be to say ‘no’ irrespective of  the Mishcon de Reya decision.  All that one should say, is that we have undertaken those checks which are required of us by legislation and professional regulation.  It is clearly down to those who set these rules and requirements to issue further guidance and all one can do in the meantime is to follow and abide by what is currently in place.

Acting for the buyer

As above, when checking title and identify, those cases which could present the potential for fraud should be brought to the attention of the compliance officer, partner or director.

You can always ask the sellers solicitors to warrant that the seller is the true owner of the property or to provide an ‘undertaking’, though as I say above, I expect the seller’s solicitor will not be minded to assist.

You could also ask in the additional enquires for evidence linking the seller to the property to be produced  - e.g. stamp duty return when the property was purchased or some other document only the true owner could produce.   I suspect the seller’s solicitors may argue that this is not an appropriate enquiry to raise and refuse to answer.

What happens if the seller is not prepared to play ball?

The buyer client should be informed of the risk and advised in very strong terms not to proceed with the transaction without first seeing evidence of this type.  If the client says notwithstanding this advice he or she still wishes to proceed then a written disclaimer should be sought from the client.

Conclusion

The judge in Mishcon de Reya decision is reported to have said that it was only fair for the claimant to make a recovery, as in his view, by finding in favour of the claimant this was the only ‘practical remedy’ in the light of the fact that the defendant had insurance.   This reminds me of the days of Lord Denning when decisions were based not on the law and good practice, but rather on the equity of the situation.    This is all well and good but its consequences are far reaching for the high street conveyancer and will surely leave a lot of us thinking is it really worth running and taking responsibility for all of these ever increasing risks when the fee we able to charge is often much less than that charged by the lender, the broker, the panel manager, and the estate agent. 

One simple solution to all of this uncertainty and exposure is to provide an alternative to the holding of client money.  Surely this decision cries out for serious consideration to be given to moving the management of client funds away from the conveyancer to a regulated and centralised third party. 

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

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

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 ISA,  receiving 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