Can a conveyancer act for both a buyer and seller?

Conflicts of interest, as outlined within the SRA handbook is an important issue that we as conveyancers must consider at the forefront of every undertaking of instruction by potential clients to a transaction. The SRA handbook outlines two different types of conflict which shall be detailed below. 

Georgie Harrington, trainee solicitor with MJP Conveyancing will seek to discuss the contentious topic of acting for both the buyer and seller to a conveyancing transaction, a matter that holds a very high risk of conflict within a firm. Investigating the potential difficulties and whether it is ever considered good practice.

‘Conflict’ for the purposes of our understanding, is something that compromises your, or your firm’s, ability to act in the best interests of each of the clients. For example, one is not able to recommend the best course of action for one client if it in turn prejudices, or has the potential to, affect the interests of the other client to the firm.

The two types of Conflicts of Interests:

The first type of conflict is that of an ‘Own Interest Conflict’. The nature of this conflict arises where your duty to act in the best interests of any client conflicts with your own interests. This could include a financial or personal interest for example. The second type of conflict arising more commonly in the practice of conveyancing is the ‘Client Conflict’ held in Outcome 3.5. 

This is whereby the solicitor owes separate duties to act in the best interests of two or more client’s in relation to the same or related matters and these duties conflict or there is a significant risk of the duties conflicting.

Acting for the Buyer and Seller:

A common client conflict within the conveyancing field occurs from the scenario where a conveyancer to the firm takes instruction to act for both the buyer and the seller of a property.

The SRA does not make these circumstances impossible under the rules; we know this because of the existing exceptions contained in Outcomes 3.6 and 7.

Examples include where the transfer of land is a gift between the parties or it is between family members or such like. There may be such a close connection between the parties to enable their interests to so closely relate it would be disproportionate to instruct a further solicitor on the matter. Chapter 14 of the Code explains that a ‘substantial common interest’ between the clients must be clear and the achievable outcome evident, with the conflict being secondary to the common interest. Of course here, the clients must first be agreeable and aware of the risks involved. Furthermore, a situation may exist where the parties know the solicitor well and do not want for anyone else to act on their behalf. With all this in mind, it is ultimately down to the acting solicitor to decide whether a client conflict is likely to arise, the significance of the common interest if any, and whether it is reasonable in taking the risk. This in turn raises the question ‘at what point is it reasonable to undertake the risk based purely on the understanding that the client’s share a common interest?’

In light of making this decision, the solicitor must take into consideration certain factors such as the likelihood of making negotiations between the two parties and whether this would create an imbalance between the interests. For example, where negotiation of price comes into question, there is a significant risk that negotiation will not benefit the best financial interests of at least one of the client’s. As we well know, negotiations are simply not limited to that of monetary requirements. The parties to a transaction are often faced with the discussion of insurance policies, what fixtures and fittings are to be included in the sale price, agreeable completion dates and so on. Moreover, the solicitor must consider any situations, necessary action or advice that would put one of the parties in a vulnerable position. For example where there is an existing exchange or completion deadline or where a survey flags up an important issue, the solicitor is obliged to advise on what is most beneficial under such circumstances. This advice may not be effective as it is simply conflicting or may in turn expose one client to vulnerability.

A firm, in compliance with the Outcomes to the SRA must consider and put in place such behaviours that will limit the risks of a conflict arising. Adhering to these behaviours will evidence that a solicitor has complied with the overlying Principles to the Code of Conduct. If subsequent to entering into the client-solicitor relationship with both the parties, a conflict or risk of such arises or even where the existing conflict becomes relevant, the acting solicitor is obliged to cease to act for one of the parties. He may continue to act for the other party to the transaction if this does not affect the confidentiality of the former party.

In consideration of the above, whilst the SRA Code of Conduct enables the possibility to act for the buyer and seller of a property, the practice is not one to be recommended. In circumstances it may be considered desirable for the practicality of the prospective clients, however in balance of this against the capability of a conflict to arise, I determine it trifling. Be it better for a firm to comply with behaviours and practices to avoid these conflicts than to enter into an agreement where the risk is so dependent upon matters out of our hands

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Buying a property without a survey is bonkers!

When it comes to a conveyancing transaction where the Buyer is reliant on a mortgage there is a common misunderstanding the lender carries out a detailed survey.

There are, writes Michael Riches, Trainee with MJP Conveyancing,  three “levels” of surveys that are available to a Buyer, which are: Valuation Report, Homebuyers Survey, Full Structural Survey.

Valuation Report

This is the survey the lender carries out when they are considering a mortgage offer. It is a mandatory requirement for any Buyer reliant on a mortgage. The lender will instruct a surveyor, at the Buyers expense, to report to them on the value of the property. The purpose of the survey is to advise the lender whether the property will make a suitable return should the Buyer default on the mortgage. The report does not comment on the structural soundness or any defects the property may have. It is merely a report on the current market value of the property.

Homebuyers Report

A homebuyers report will comment on the quality of the property. It is a survey more suited to newer properties, by which we mean properties less than 70 years old. The purpose of this survey is to point out to the Buyer any areas of concern such as damp or woodworm and indicate a cost of repair. When instructing a surveyor for their Valuation Report most lenders will offer, at an additional charge, to have their surveyor carry out this survey.

Full Structural Survey

This is a more comprehensive report and as such is time-consuming and costly to the Buyer. It is a survey more suited to older properties, which may have timber frames, thatched roofing or are listed. It would also be the more appropriate survey for any Buyer considering having significant works carried out on the property. As the name suggests it will comment on the structure, major and minor faults and any areas of concern.

After reading the above definitions and what each survey contains it may surprise you to know that only 20% of all Buyers will carry out an additional survey to the mandatory Valuation Report conducted by the lender’s surveyor. There is a common myth that the Valuation Report will be sufficient and provide all the detail a Buyer will require to make an informed decision about the purchase of a property. This is simply not the case.

In the world of conveyancing there is a latin adage Caveat Emptor, which means “Let the Buyer beware”. The seller has a limited duty to disclose latent defects in the property. Therefore it is the Buyer’s responsibility to investigate the property as much as they can. This is a very simplified and edited explanation of the principle to illustrate the importance of surveys. The survey will advise the Buyer of any concerns which can then be duly forwarded to the Seller during pre-contract enquiries. This

may then result in the defect being corrected, a re-negotiated purchase price or indeed neither of these.

It is for these reasons that when asked the question “Do I need a survey?”, any conveyance will answer “Yes!”.

The logical follow-up question would be “Which surveyor should I use?”.

You may be able to use the same surveyor the lender uses to carry out their valuation report. However, it is important when buying a property to make your own investigations in the first instance. A Buyer should always visit the property and inspect as much as possible. By doing this you may find areas of concern that you can ask the surveyor to pay particular attention to. This is an important step.

The main purpose of any survey is to advise the Buyer but it is also to protect the Buyer. By viewing and inspecting the property you will be able to give specific clear instructions to the surveyor on areas of concern to you. This means the surveyor is duty bound to investigate those particular areas as well as conduct a general survey of the property. If a surveyor fails in this duty and a fault is found after completion, then this may give rise to a claim of negligence against the surveyor. If you fail to give clear instructions and the surveyor only conducts a general survey, the report will usually contain caveats to cover the surveyor should any future defect arise.

If you do not want to use the lender’s surveyor then you can instruct an independent surveyor. Most surveyors will be regulated by the Royal Institute of Chartered Surveyors and you will be able to find a local surveyor on their website http://www.rics.org/uk/ . Using a local surveyor will have the benefit of knowledge of the local market values.

When looking to purchase a property the main focus of the transaction should be geared towards finding out as much about that property as possible. When you are buying a property you are making a big investment. Therefore it is important to understand what you are buying, whether it is worth the money you are paying for it and whether there are likely to be any significant expenses in the future. Surveys are one way of achieving this.

MJP Conveyancing  are solicitors who provide conveyancing services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk