Checking Title report whose responsibility is it?

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Property nightmare raises worries over conveyancing standards – The Times

Several homeowners in Cumbria are facing a legal quagmire after it emerged that they are likely to be living in flats that they have not technically bought.

Chris Meyer, a Carlisle businessman, unearthed the problem when he decided to move from his three-bedroom flat to a bigger house.

His tale of woe has highlighted what lawyers describe as increasing problems over residential conveyancing matters in the wake of the 2008 financial crisis.

Mr Meyer was on the verge of completing the deal for what he described as his dream home after finally selling his flat, which had been on the market for three years. That was until the solicitor for the prospective buyer of his flat contacted him to say that due to an administrative gaffe, he and several of his neighbours had unwittingly been living in the wrong flats.

In Mr Meyer’s case, the lawyer informed him that technically his flat was owned by his next-door neighbour. As many as 10 of the 15 flats in the building are understood to be affected, with lawyers saying that none of the properties can be sold without written agreement of all the parties involved.

Burnetts, the Carlisle law firm that acted for Mr Meyer when he bought the flat, strongly denied that it acted negligently and said it was its client’s responsibility to check the relevant documents. Nick Gutteridge, the firm’s managing partner, said: “Responsibility for checking the title report was with Mr Meyer. Although this is not a situation of our making, we have gone above and beyond in helping Mr Meyer to rectify the issue, including liaising with other property owners and their lenders.”

The details of the Carlisle conundrum will have to be chewed over by the lawyers involved, but on a separate note, Rob Hailstone, an independent solicitor specialising in property, pointed out that incidents of residential conveyancing negligence are on the rise owing to the fact that “there just aren’t as many good property lawyers as there used to be”.

He blamed the 2008 financial crisis and the downturn in the property market for the dearth of experts. “Many firms made conveyancers redundant and have not rebuilt those practices since,” he said.

Another problem is that lawyers now act remotely. “Conveyancing specialists used to visit properties before the deal was closed to check that the records were accurate,” Mr Hailstone said. “Most don’t do that any more.”

Selling off The Land Registry

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Society President Jonathan Smithers said: “It’s no surprise to us that concern over the idea of selling off the Land Registry is growing – we’re talking about a vital piece of the national infrastructure,

“Whatever the political and ideological debates around privatisation, the Land Registry is not a commercial operation which can be easily privatised.  Placing the Land Registry in private hands presents unique challenges and risks, which would have to be addressed should any form of sale proceed.”

Major concerns raised by the Law Society in its submission to government included:

  • The vital role that public trust and confidence in the Registry plays in the smooth operation of the property market;
  • Privatisation could hinder efforts to combat the laundering of illicit funds through the property market in England and Wales;
  • The risk of fee increases to generate profits for private owners, at the expense of property buyers;
  • The loss of the potentially huge future value of the information held by the Registry; and
  • The great difficulties in ensuring a newly privatised natural monopoly couldn’t act in anti-competitive ways.

Jonathan Smithers continued: “Last week a debate in the House of Commons made it clear that these concerns are felt across the political spectrum.

“If these widely-held concerns are not carefully addressed, we fear that the public will be the real loser from any sale.

“With so many problems, costs and risks to the public to be carefully managed, it’s pleasing to hear the government say that they intend to listen to concerns raised during this consultation.

“Decisions on the future of the Land Registry should place the public interest in this vital institution first.”

Veyo salaries were an average of £74,300

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Staff at failed e-conveyancing project paid average £74k

Staff at the Law Society’s failed e-conveyancing business were paid average salaries of nearly £75,000 annually, final account figures for Veyo revealed.

For the year ending October 31, 2015, the ten staff involved with the business were paid a total of £743,000. Ultimately, Veyo went down with losses of more than £11.4 million, most of which was borne by the body that represents solicitors in England and Wales.

The project, which collapsed just six months after launch, has been highly criticised by conveyancing specialist solicitors. Its board of directors included several prominent names from the society’s Chancery Lane headquarters, including the current president, Jonathan Smithers, and the chief executive, Catherine Dixon.

Also driving the project were the former chief executive Des Hudson, who resigned as Veyo chairman four months before the plug was pulled, and Nigel Spencer, another former senior Law Society executive.

Law Society officials were contrite when Veyo sank in December 2015. A spokeswoman told The Times at the time that the organisation was “sorry” for the failure. However, society chiefs did not accept that they were lax in project management and financial controls. “They took steps to reduce operating costs and to ensure that more conveyancing experts were involved in looking at the product’s functionality and usability,” the spokeswoman added.

Recent Judgment Purrunsing v A’Court & Co

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 In a recent High Court decision, the Court in Purrunsing v A’Court & Co & House Owners Conveyancers Limited (2016 EWHC 789 Ch) carefully examined the share of responsibility for a fraudulent property transaction where the solicitors were the ‘innocent bystanders’.

The Facts – Mr Dawson engaged the services of a solicitor, to sell his property at 35 Merton Hall for £440,000.  It transpired that the client was not the real Mr Dawson, but a fraudster.  His solicitor carried out client due diligence and inspected a passport which identified the fraudster as Mr Dawson.  There was no suggestion that the solicitor ought to have known that the passport was in fact a forgery.  The solicitor also obtained copies of two utility bills and a bank statement addressed to Mr Dawson at an address in Maidenhead.  However, the address for service given by the Land Registry on the Office Copy Entries for the property was an address in Cambridge.   The solicitor did not act on this discrepancy.

The Seller’s Solicitor  – The judgment confirms that it is well established that (in general) a seller’s solicitor does not owe a duty of care to a purchaser, but says it is an “absolute obligation not to release the purchase money before completion”. The vendor’s solicitor is a trustee of the purchase money and parting with it before completion is a breach of trust. In the event of a fraudulent transaction, where there is no completion (i.e. no registration of the new owner) then the vendor’s solicitor is liable to the purchaser for the money paid away.  There will be very few situations where the seller’s solicitor will be excused this liability.

The Buyer’s solicitor – The buyer’s solicitor on the other hand is in a much more unfortunate position.  He had made  a number of enquiries of the vendor’s solicitor over the course of the transaction including checking whether the vendor’s solicitors were familiar with the seller.  As can happen on many transactions the vendor’s solicitor confirmed he had no personal knowledge of the vendor prior to the transaction but they had met him in person, seen his passport and utility bills showing his UK address.

The judgment held that these responses were not good enough for the buyer’s solicitor to have relied upon them. The buyer’s solicitor said that he had trusted the vendor’s solicitor to have carried out due diligence and ID checks but the athe buyer’s solicitor ought to have queried the circumstances of the seller’s solicitor’s involvement and the nature of the transaction in greater detail.

The Decision – The buyer’s solicitor was held to have acted honestly but not reasonably and was held jointly liable with the vendor’s solicitor.

The Yorkshire Building Society now require CQS

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The Yorkshire Building Society now require CQS accreditation to remain on their panel.

Veyo report released by Law Society

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Extract from Legal Futures

Law Society has made available a summary put together by OC&C of five core principles which should be observed for all future commercial ventures:

  • Understand risks and plan accordingly. This included understanding customer needs based on robust evidence and avoiding “single large investments”;
  • Establish clear and robust governance structures. This included ensuring that those providing governance have the appropriate skills and are “not just purely representing the Law Society’s interests”;
  • Install a capable team with the required skills;
  • Execute effectively and communication regularly. This included ensuring greater transparency to the society’s council and to members; and
  • Follow a clear process for product development.

Rob Hailstone, who runs the Bold Legal Group and has been one of the most outspoken critics of Veyo, said there were still a number of unanswered questions, such as how the market had in fact changed so as to justify the end of Veyo, adding: “There must be something to show for £7m plus – why can’t the source code be obtained from Mastek?”

He continued: “The findings from this fiasco should not just end up producing a pretty standard ‘guidance for commercial ventures’; it should be a wake-up call for the Law Society generally about how it conducts and runs its business (including CQS)…

Flood Re to come into effect from 4th April 2016

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The Law Society has published a very helpful note concerning the introduction of Flood Re.

Flood Re, a new scheme designed jointly by government and insurers that intends to provide people living in flood-prone areas with lower insurance premiums, will come into effect on 4 April 2016.

The introduction of Flood Re is intended to ensure homeowners whose properties are at high flood risk can obtain affordable flood insurance with cover at a set price. However, certain categories of properties will beexcluded from the scheme, including many leasehold flats, small and medium-sized businesses, buy-to-let properties and all properties built after 1 January 2009. The Flood Re regulations set out in some detail those properties that will not be covered by the Flood Re Scheme.

Land Registry portal changes

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Land Registry progress-of-your-applications-online-from-14-march/

When Application Enquiry launches, customers will be able to find secure, accurate information about applications with a user-friendly search; and find more detail than ever before including the:

  • progress status, such as: received, priority protected, in progress or delayed
  • reason an application has been delayed where applicable
  • full priority period for Official Searches.

Customers will also be able to save these as a pdf

Mortgage Credit Directive

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Implementation

The UK is required to implement the MCD requirements by 21 March 2016. This requires the UK government to make changes to mortgage regulation in order to meet the requirements set out in the MCD.

Under the Financial Services and Markets Act 2000 (FSMA), the Financial Conduct Authority (FCA), the independent regulator, has the authority to put in place, supervise and enforce a range of rules to ensure that firms act responsibly in their mortgage activities.

Amendments to CML Handbook

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Amendments to the CML handbook

As of 1 February 2016, an amendment has been made to clause 10 of the Council of Mortgage Lenders’ (CML) Handbook.

The amendment adds the wording in bold below into clause 10.2:

10.2 We shall treat the submission by you of the certificate of title as confirmation that the borrower has chosen to proceed with our mortgage offer and as a request for us to release the mortgage advance to you. Check part 2 to see if the mortgage advance will be paid electronically or by cheque and the minimum number of days notice we require.

The CML says:

‘The amendment is designed to reflect the introduction of a requirement, as the result of the Mortgage Credit Directive, for mortgage customers to have a ‘reflection period’, of at least seven days before accepting a mortgage offer. Recital 23 and Article 14(6) of the directive set this out. The customer can bring that reflection period to an end earlier, by accepting the mortgage offer.

‘The wording intends to clarify that, in cases where the mortgage lender does not already require a formal acceptance from the borrower, that the current practice of the conduct of borrower in drawing down the loan, acts as acceptance of the mortgage offer, and creates the contract. This in turn, in cases where the draw-down happens before the end of the reflection period, confirms that the customer has brought the reflection period to an end by their conduct, which Recital 23 expressly allows for.

‘Lenders will explain the concept of the reflection period in information provided to prospective borrowers, for example, in the mortgage illustration, mortgage offer and mortgage terms and conditions. Many lenders are either allowing a 10 day reflection period (to account for postage time) or aligning the reflection period with the existing offer expiry date (which can be up to six months).’