Earlier this year I was writing about possible plans to change the law to prevent gazumping. If you recall the suggested change would mean bringing forward the point at which a house sale/purchase is legally binding for both parties.
Now a recent Court of Appeal decision in respect of two cases about property fraud could mean radical reform of other areas of the UK’s conveyancing procedure.
The two cases of property fraud
The two cases were brought by property developers who had been defrauded in 2013/14 by individuals who had posed as vendors of property that they didn’t in fact own. In short, the Court of Appeal found the vendors’ solicitors liable for losses caused to the property buyers by the fraudsters, even where those advisers were not negligent.
In the first case, the fraudster claimed to live in Dubai, and the documents all came from Dubai, even though the property was in the UK. The fraudster’s solicitors conducted the standard Anti-Money-Laundering checks which came back as ‘referred’ but the solicitors accounted for this by the fact that the client lived in Dubai.
In the second case, the seller’s solicitors admitted that they had not performed the necessary checks on their client.
Both sets of purchasers had relied on the professionals involved amongst other things to ensure that what they paid for is what they received.
Court of Appeal decision
In the first case, the Court of Appeal found the solicitors for the fraudster were liable and in the second case, the solicitors for the purchaser and the vendor were found liable for a breach of trust, despite the absence of any negligence on their part. The Court of Appeal added that it is the vendor’s solicitors who are in the best position to carry out appropriate checks and the purchaser’s solicitors may be reliant on them to do so.
What does this mean for us, Joe Public?
The cases were both complicated by a number of factors, but the fact remains that the Court of Appeal decision may now lead to substantial reform of our conveyancing procedures.
Both solicitors were criticised for their poor standard of identity checks and the decision underlined just how responsible and liable solicitors for a vendor are when it comes to checking their client’s identity – as opposed to the responsibility falling to the purchaser’s solicitor.
From a buyer’s perspective, the result is good news as it affords them greater protection. But at what price? Professional negligence insurance premiums will undoubtedly rise to reflect the risk.
Professional advisors will now also need to review their policies and procedures and put in place robust anti-fraud and identity check procedures but will the cost of all this just be passed on to the client? Will the whole process just grind to a halt as exhaustive checks are carried out or will solicitors just refuse to act if they’re even the slightest bit worried?
Perhaps the government will now intervene at last in a conveyancing system that is struggling under the strain and has long since been in need of a radical overhaul. Whether it’s further case law or legislation that next shapes the conveyancing landscape remains to be seen and as always, I’ll be keeping a watching brief. But surely with pressure continuing to build, reform must be within the foreseeable future.
Graham Faulkner is Branch Director of EweMove Dorking
He’s bought and sold a lot of properties over the years and is also a portfolio landlord, as well as specialising in helping other landlords. Apart from his own experience and expertise, he can also recommend the right professionals, as tried and tested by him, to advise you.
Multi-award winning EweMove in Dorking is a residential property sales and lettings agency who pride themselves on being refreshingly different and standing out from the crowd. EweMove Dorking covers from Ockley to Oxshott.