Say 'No' to leasehold property

It goes against the grain to advise a client not to proceed with a property transaction, especially when the client has his or her heart set on purchasing the property.  However, as a responsible legal advisor we need to less afraid of saying ‘No’. 

Leasehold property is attracting a lot of negative press of late, and is the focus, as we know, of Government attention .  The temptation is to look at this as yet another ‘scare story, and one which, in time, will blow over. The reality is it is unlikely it will, and if anything, it is likely to get worse before we will see any improvement.  It's therefore dangerous, and potentially negligent, for conveyancers to stick their head in the sand and ignore the many warning signs appearing on a daily basis. 

Doubling rent review clauses and provision for rent increase at regular issues are presenting a major hurdle for those who are looking not only to buy, but also sell, leasehold properties. It was only yesterday that an estate agent called to enquire why we were advising a client to withdraw from a transaction when the agent was aware other properties in the same development had recently sold. 

It is now recognised that it will be more difficult to sell a leasehold property which has a doubling ground-rent charge that rises after 10 years. This doubling of ground rent may have an impact on the marketability and mortgageability of the lease when selling or buying with such a clause. Some lenders may not agree to offer a mortgage on a property with a doubling ground rent. Nationwide has formally started declining mortgage offers which include a doubling ground rent clause.

At present its a lottery as to whether a lender faced with one of these clauses with be prepared to lend. In the light of this, and the ever changing lender landscape, would it be sound advice to allow a client to purchase a property subject to a lease with one of these clauses? I would submit it would not, unless the lease could first be varied to remove the offending clause.  Some conveyancers looking to avoid the delay and cost of seeking a lease variation, advise clients to take out indemnity insurance.  I am not sure I agree with this because insurance only acts as a sticking plaster, and not as a cure. Furthermore, even if the lender is happy to accept insurance there is no guarantee that other lenders will be minded to accept the policy when it comes to sell/remortgage. Moreover, lender policy seems to be changing these days quicker than the wind. 

There is also a danger of some conveyancers becoming too fixated on what the clients lender is saying about the clause and ignoring in the process the best interests of the lay client.  It is unsafe to assume that just because the lender is happy to proceed, that the client will also be content to continue.  The client needs to be made aware of the dangers of purchasing a property with one of these causes in the lease, and in my mind advised not to proceed with the transaction. 

If the client disagrees then a letter setting out your advice should be sent and the client should be asked to confirm instructions in writing notwithstanding the advice. The client should be warned along that this type of rent review clause may:

• be costly to the client as the rent increase (although as it gets more expensive this won't be during the clients life time);

• stop a future buyer from getting a mortgage as mortgage lenders do not like doubling ground rent clauses (it might even prevent the client from re-mortgaging);

• cause an issue on sale as the buyer doesn't want to buy a property with ground rent that doubles; or

• reduce the property's value (the ground rent liability makes the property less valuable).

This represents a serious issue for conveyancers, and until Government makes these clauses illegal, conveyancers should be saying ‘No’ more often than I fear is happening at present.

David Pett - Solicitor  

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

Your obligations under the Criminal Finances Act 2017

The pages of legal journals, and other publications, are currently filled with information and guidance on GDPR and Anti Money Laundering, yet there is very little commentary on the far-reaching obligations imposed by the Criminal Finances Act 2017 (‘Act’). It received royal assent the 27th April last year, and contains some of the most far-reaching changes to anti-money laundering since the passing of the Proceeds of Crime Act 2002, as well as new powers designed to address the seizure of suspected criminal property.

Equally as important the Act has also created new offences in relation to the facilitation of tax evasion which will affect all companies, LLPs and partnerships, such as lawyers.

A company or LLLP or partnership can now be held to account for the actions of its directors, employees and others businesses with which it might contractually engage (“Associated Persons”) in relation to a failure to prevent facilitation of tax evasion – not only in relation to UK tax but also in relation to foreign tax evasion offences.  

This includes any specific statutory tax evasion offence or the common law offence of cheating the public revenue. There must also be an element of fraud or deliberate dishonest conduct, so liability would not arise, for example, through failure or even a refusal to complete a tax return or breach of other similar notice requirement offences. There need not be a conviction for a tax evasion offence.

There is a defence. Liability will not arise if the Associated Persons “demonstrate that it has put in place a system of reasonable prevention procedures that identifies and mitigates its tax evasion facilitation risks” (ss.45(2) and 46(3) of the Act).

For liability to arise (according to the HMRC Practice Notes) there needs to be a deliberate and dishonest action to facilitate the evasion. This suggests that boa fide advice on, for example, a tax avoidance scheme, should not present a risk, though where the SRA has issued a warning notice about a particular arrangement, the line between potential liability under the Act and not, may prove, in my view, be less clear.  

Liability under the Act will not arise simply because a client is known to be committing tax evasion.  For the offence to be committed the adviser must be seen, as mentioned above, to be taking “deliberate and dishonest action” to facilitate the evasion. This would suggest that there is not a need to report a client for suspected tax evasion. Indeed, it is worth stressing that, since legal professional privilege applies to this offence no liability will arise for the firm under the Act if it fails to report tax evasion by the client where it knows that evasion is taking place.

Great care should however be exercised here, since if it is known the client is committing tax evasion and funds from that client are to be used say, to purchase a property, the tax evasion will mean the funds are criminally tainted, and to receive those funds into your client account would clearly amount to money laundering.  The tax evasion would clearly in these circumstances need to be reported to the NCA since failure to do so could constitute a criminal office under the anti-money laundering legislation.

The Act does not restrict the ability of a client to seek advice as to how legally to minimise tax liabilities.  It is to prevent the unlawful evasion of tax.  Thus, there is nothing to prevent a solicitor from defending criminal charges of tax evasion or providing advice to the client on how they may regularise their tax position through legal means. Similarly, a firm cannot be held to be liable if their advice to a client to cease tax evasion goes unheeded, though do keep in mind here your AML obligations.

So, what should we be doing to comply with the Act?

To begin with, there should be an immediate evaluation undertaken to assess the risk areas within the business.  In Conveyancing, the areas of risk center around tax advice on capital gains tax and stamp duty. The risk is heightened where the turnover of clients is high, and in offices where work is undertaken by individual case handlers rather than teams. If clients are referred on to outside advisors, for example to seek advice on Wills, this would also be viewed as a risk area. The HRMC Guidance notes are helpful in identifying both low and high-risk areas, and is a good starting point when putting together a risk assessment. Your AML risk assessment will also assist.

Once you have identified the areas of risk you can then look to form a policy on detection and prevention measures and controls.  How are staff vetted when they join?  Do you obtain references and carry out back ground checks? In my firm we undertake criminal background checks.   How do you carry ongoing monitoring and supervision of staff and third-party contractors?  Are files reviewed regularly?  Making sure there are good accounting protocols is a must.  How are transfers of money out of the office approved.  In this office no transfer is made without ensuring adequate source of funds and wealth checks are made and a director has paperwork to enable bank details can be checked before funds are sent out.  This helps to mitigate the risk of funds being transferred out to an account established by, for example, an employee.

One area of major risk of collusion is where the business acts for a family member or friend of an employee or the employee.  Stricter monitoring in these circumstances should be implemented, and a policy on who can work on those files should be formed and implemented.

As for third party contractors, make sure contracts are reviewed, that you formulate and issue a statement of your stance on tax evasion, and that you seek details of the business’s policy on the Act.  There is good argument to suggest that unless the contractor has a workable policy you should consider terminating the contract.

Putting together a policy is the first step.  Making sure you can demonstrate the implementation of the policy is the next step, and perhaps for establishing the defence to liability if required, is the most important one to take.  Organise staff training, create and maintain monitoring records, ask external file reviewers to include checks within the review.  Also review the risk assessment and policy regularly.

In short, do what you can to demonstrate that you are taking the obligations seriously, and that you are implementing adequate controls to detect signs of dishonesty within the work place.  Including a statement of your intent on your website and in your terms and conditions is also advisable.

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

Recruitment - The ‘I Generation’ ticking bomb

Much is made of the ‘I generation’ and of how the future of recruitment and career progression is set for a major change.  

I am not convinced that this general concern is any different from the observations made by my parents when I first entered the job market, though in recent years I have started to form the view that this evolutionary juncture may prove to be more defining than those previously witnessed.

So where do I start in the evaluation? And how do I express myself in a way which does not make me sound like my father.   A difficult one, and probably in truth it may be best to reflect on the landscape which existed when I took my first steps towards qualifying as a solicitor. 

Life back then (yes that well used cliché) was, it is fair to say, different.  There was less competition and more importantly less pressure on those looking to pursue a career in the law to leave school and immediately head off to university.   Unlike today, there was no set route mapped out with an inbuilt expectation to pursue it.  Instead, taking a lead from my father who had to take on three jobs to make ends meet and to provide for his family, I was left with no illusion that to succeed in life there was only one option - the need to work and to work hard. 

My performance at school was not spectacular, although I did attend a further education establishment and attained a diploma in business studies.   Finding a job was not easy and I attended endless interviews.  I was eventually offered a job as a clerk in a firm of solicitors on a salary which compared to salary structures these days would have clearly fell well below the minimum wage.

Money was not however important – it was a job and one which I hoped would provide me with an opportunity to gain experience.  I knew that to do well I needed to prove that I was worth investing in and I can recall getting in early, staying late and also working at the weekends. This was not by any means unusual.

It wasn’t the most glamorous of jobs.  It was however a job and I was grateful to my then employer for taking me on.   I knew then as I did when moving from that first employer to my next that I needed to work hard, I needed to impress and that nothing would come my way unless I put in the hours and showed an appetite to succeed.

It was evident that no one owed me anything and that to progress in life I needed to make my own way.  

By going that extra mile it was evident that doors would eventually open and opportunities would arise.  It was all within my own control.  So what has changed?

Employing and working with young people and indeed having children of my own it is clear that there has been a major shift in attitude and expectation.  This I believe is fuelled by increased peer pressure which has become far more transparent due to social media as well as repeated failings of government with the formation of education policy.

In reporting on this I am generalising, as I know there still exist self-motivated individuals who exhibit that fast becoming rare attribute of a work ethic.   In the main however I am coming across more and more of the ‘I Generation’ who have become programmed to expect not only a right to a job but to be paid a totally unrealistic starting salary.

I say ‘programmed’ as I do believe that most young people have convinced themselves that to be able to achieve success there is a particular path to follow and once completed a job and a high salary will automatically follow.  

The situation has not been helped by previous Governments creating more and more university places and reducing the past reliance on apprenticeships and other schemes which provide an alternative option to university.   I know this is changing but it has in my view come far too late in the day to have any positive impact in the current employment market.

A large number of those looking for work and those who have been lucky enough to secure their first job seem to have an unreasonable expectation, commonly centering on working hours and remuneration.  I remain amazed that having worked hard at school and university I still come across a complete lack of commitment and drive.  I tell all of my staff that I am not interested in a ‘9 to 5’ mentality and that I expect them all to put in the ‘extra effort’.  I say I need to be impressed and that the more effort and I see the more I will wish to reward accordingly. 

It is not unusual to find within workplaces that some young people are only minded to do ‘extra’ hours if they get paid overtime.  Others claim that simply because they have a degree they should be paid more. Constant moaning about what they don’t have as opposed to what they do have is not an unusual feature of most work places.  The difficulty is that due to how they have been programmed and with the unrealistic expectation set by prolonged exposure to social media and the like, a vast number of the ‘first time’ employees do not see anything wrong with this approach.  

Some may call this confidence, whilst others see it as arrogance and a misplaced perception of their value.  Interestingly my wife made an observation on this when we were recently watching an episode of the BBC’s Voice.  As part of the contest those chosen to go through to the ‘next round’ are asked to perform a song which is chosen by the coach.  It was noticeable that when the younger contestants were told of the coach’s song choice, rather than being guided by the professional and being grateful for the ‘break’ almost all of them pushed back and challenged the song choice.

The feedback I hear is some young people lack motivation because financial necessity is such many of them are taking on jobs which are outside their first career choice.  I do get this, but surely if you choose to take a job you should do all you can to make the most of the opportunity and to use it as a solid building block for future opportunities.

So where will all this lead?

The risk as I see it is that without an attachment and with unreasonable expectations employers will begin to see less productivity and a dwindling return in the investment made in training.  Indeed it is for this very reason I have recently changed my view on training contracts.  With a contracting employment market in conveyancing I took the view when establishing the business that I would look to ‘grow my own’ and to look for training contract candidates.  My experience has not however been good and despite my best efforts a number of those who I decided to invest in decided at the end of the contract to ‘move on’.   This has led me to look at other options (such as apprenticeships), which is a shame as I have always been keen to provide training opportunities for those looking to become a solicitor.

I do consider we are on a slippery slope and one which it will be very difficult to exit without a major shift of mind set on the part of new entrants to what has become a very interesting ( to say the least) employment market.

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 davidp@mjpconveyancing.com

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:

‘….that the fact that paragraph 3 provides that the seller's solicitor is not required "to investigate or take responsibility for any breach of the seller's contractual obligations" is, in substance, inconsistent with the vendor's solicitor being liable, as the purchaser's agent, for breach of trust in releasing the money in the event that completion does not occur because the seller does not have title. One of the seller's obligations is to provide a genuine transfer of title. If the vendor's solicitor is liable for breach of trust merely because no genuine transfer is provided it would effectively be taking responsibility for what paragraph 3 says it is not. The extent of the vendor's solicitor's obligations on completion are governed by the express undertakings that it provides in accordance with the Code. In my view, in the light of the guidance in cases such as Mothew [Bristol and West Building Society v Mothew [1998] Ch 1] , in these circumstances it would be wrong to construe the Code so as to give rise to a breach of trust or, as a result, as an effective guarantee of title.

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

Volume Conveyancers have not lost the plot - just plotting for the future

The Law Society Gazette under an emotive heading of ‘Ombudsman warns of dangers from ‘conveyancing factories’ recently reported in response to the release of a report from the Legal Ombudsman entitled ‘Losing the Plot – residential conveyancing complaints and their causes’ that ‘conveyancing factories’ pose a potential risk for house buyers.

In the article Adam Sampson, the ombudsman, says:

‘increasingly commoditised automated and competitive’ conveyancing market has resulted in traditional high street firms evolving or being displaced into ‘conveyancing factories’.

The report acknowledges that such innovative services can be helpful, but warns they are ‘not without risk’. It voices concern that by focusing exclusively on volume, some firms risk failing to provide a reasonable service.

A very general ( and perhaps unfair and misleading) finding, and one which it would be unreasonable for a consumer to rely on without further investigation.

To begin with there is an issue of definition. What constitutes a 'volume conveyancer'? Presumably, by definition, it is a conveyancer that conducts over a certain number of transactions each year?  If this correct what is the number of transactions an organisation should be handling before it falls into this category and becomes condemned without sentencing?

The biggest mistake critics make when judging a ‘volume conveyancer’ is to jump to the conclusion that due to the size of the organisation it is inevitable that client service will be poor and or that the quality of work produced will be inferior.

In life and in so many different areas of the service industry there are small and large organisations and with both there are good and bad businesses. It is disingenuous and slightly condescending for some professionals to view all large conveyancing providers with the same label.  

I accept there are some poor examples of how conveyancing services should be delivered but it is clearly not the case that these are in the main tied solely to the larger organisations.  The fact is that there are a large number of the smaller providers who quite simply should not be allowed anywhere near a contract for sale.

Equally just because a larger conveyancer is able due to efficiencies of scale and the use of technology  charge the consumer less for the service, it does not follow that the service delivered will be any less inferior than the service provided by a smaller and more traditional organisation.  

Many larger providers have both the resources and expertise to invest in staff training and the establishment of technology to make sure that the consumer experience is enhanced.  These are organisations that depend on consistent and positive consumer feedback to survive and grow.  

They also specialise in conveyancing and are probably a far better and indeed safer choice for the consumer than the small firm who might only do the occasional conveyance. 

It is wrong and perhaps small minded to criticise these businesses ( many of which receive awards for outstanding client services ) solely on the basis of size and the drive many possess to use technology to deliver a cost effective and highly satisfactory service to the end user.

My message to the consumer is not to attach too much weight to this report.  Instead consumers should undertake research.  Look for reviews and testimonials and remember do not be suspicious per se about an organisation that offers a competitive price and the facility to interact and experience an enhanced level of communication through the use of cutting edge technology.  Just because a business has a non-traditional approach to conveyancing does not mean that it should be viewed differently or less favourably.

Remember also that the scare mongers out there would like consumers to believe that all large conveyance providers  are bad because it suits their interests.  They are worried about the forward looking businesses and how they are using technology and processes to introduce efficiencies to reduce fees for the consumer but to still operate with a healthy profit. It is the large providers out there who are leading the way to improve what is a very archaic system for the purchase and sale of property.

Finally it is worth keeping in mind the words of Law Society chief executive Desmond Hudson when he says the volume of complaints should be put in perspective. 'There are, on average, more than 675,000 property transactions a year. We are talking about 1,300 complaints on conveyancing to the LeO in a year. My point is that the vast majority of solicitors do a good job when it comes to conveyancing'.

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

Conveyancers Duped by Million Pound Property Fraud - Was it Avoidable?

The news of a property fraud reported in the Daily Mail (http://www.dailymail.co.uk/news/article-3356929/The-thieves-stole-wife-s-house-sold-1-3million.html ) at the weekend should send a chill down the back of all conveyancers across the land. 

A young woman — who paid the full amount with no mortgage — had been duped into handing over £1.35 million to the a person purporting to be the legal owner of the property. 

The money was last seen on its way to a bank in Dubai.

The real owner was totally oblivious to the fraud until the Land Registry smelling a rat declined to register the property in the name of the young woman. 

There were two primary fraudsters.  One who took out a rental agreement on the property before the property was placed on the market, and the other who stole the identity of the real owner.  Between them they were able to fool the letting agent, the selling agent and both the selling and buying conveyancers. 

This was a fraud perpetrated at the highest level.  

So what could have been done to prevent it?  Probably not very much given the sophistication of the perpetrators. 

The question of whether negligence lies with either the seller or the buyer’s conveyancers must also be a vexed issue. 

So what lessons as conveyancers can we learn from these circumstances?

From a sale perspective there was nothing on the surface which would have alerted the seller’s conveyancer.  The ID supplied for the registered owner, that is the seller, was fake but unless it was obviously fake there was not much more one could expect the seller to do to identify the fraudulent  activity. 

Interestingly, had the seller made use of the Land Registry Alert procedure there is a possibility that the true owner would have been alerted about the proposed sale when the purchaser  undertook the OS1 search before exchange. Clearly conveyancers should all be advising buyer clients, especially the Buy To Let clients, to register for this type of alert. Failure to do so may in the future be viewed as a negligent omission. 

So what additional checks or alert factors should conveyancers as result of this incident consider?

Property of high value with no mortgage are at highest risk especially if they are rental properties. Conveyancers dealing with this type of property should perhaps check on the internet to see whether the property has been advertised for let recently.  In this case the fraudster tenant had only just taken out a rental agreement and had, which is unusual, paid the rent in cash. 

If instructed on this type property perhaps conveyancers should also look at the ID documents more closely and always arrange for the file to be referred to a senior member of staff for a second review. 

Suspicion should be heightened if the registered proprietor is abroad and there is a third party purporting to act for the owner. In this case the property had been put on the market purportedly on behalf of the owner by the person who had taken out the rental agreement.  Its unknown whether this was known to the seller’s conveyancer. 

Another alert factor is the instruction for the sale proceeds to be transferred to an account based outside of the Country.  If a conveyancer is instructed to transfer any funds abroad following a sale, there is now, I would suggest a strong, good argument  to pause and to take a more detailed look at the circumstances.  At the very least, the transfer should be referred to a Partner or other senior colleague for checking. 

So in short conveyancers acting in transactions of this type should keep a close eye on transactions involving:

• Property with high value with no mortgage of other charge 

• Property where the seller is shown as living at an address which is different from that of the property

• A seller looking to sell through an intermediary

• The transfer of funds to an account held abroad.

From a buyer's perspective perhaps there is now a case to consider raising some extra enquiries when it can be seen from the Land Registry Document that the property to be purchased is held by a registered  proprietor who is not in occupation and or which is occupied by a tenant.

Questions of this type which conveyancers may wish to  consider include:

1 Please produce from the letting agent references for the tenant and confirmation on how the rent has been paid i.e whether in cash or by cheque as well as confirmation that all standard money laundering and identity checks have been carried out on the tenant.

2 Please confirm the date on which the tenant took up occupation.

3 Please confirm that the funds to be transferred on completion are to be paid into a bank account held in the UK.  If the funds are to be paid into an account abroad please confirm that these will be held by you for 48 hours before the funds are remitted ( the reasoning here is that if the buyer turns up on completion to find the property occupied without vacant possession ) there may be some time available to prevent the funds from being remitted.  In the present case this would not have helped as the property was vacant at the time of completion.  If the buyer’s conveyancer  had known that the tenancy agreement was only granted prior to the marketing of the property and was now being sold with vacant possession then this may have rung some alarm bells. 

I am not sure whether these questions will find favour with the sellers solicitors but at the very least they may put the sellers solicitors on notice that the transaction is a high risk one and as a consequence raise the level of vigilance.

At the end of the day detection of fraud to a large extent is based on instinct and more often luck.   All practitioners can do is to ensure all the standard checks are carried out and that staff are trained on what to look out for and to remain vigilant throughout 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 david@mjpconveyancing.com