Risk: Conveyancing – avoiding the pitfalls

In December 2022 the Scottish Legal Complaints Commission published its Annual Report for the year to 30 June 2022. It highlighted the top five areas of the law for service and standards complaints. Perhaps unsurprisingly, the most complained about sector was residential conveyancing, at 24% of the total.

However, it is not just residential conveyancers who are exposed to complaints or claims. In our role on the legal panel for the Master Policy, we are also seeing an increasing number of claims associated with commercial transactions.

Drawing on the conveyancing claims the professional negligence team at Brodies has dealt with, we outline below five common pitfalls for conveyancing solicitors and how best to avoid them.

Be clear about your instructions

This sounds simple, but one of the most common issues we see is where practitioners are claimed to have failed to understand or check their client’s instructions precisely.

As a starting point, conveyancers should have a clear understanding of who their client is, yet this is not always as simple as it seems. Take for instance scenarios involving trusts or pension funds, where the individual providing you with instructions will often not be the named client. It is crucial to be clear about who precisely is relying on the advice you are providing, as those are the people/entities to whom you most obviously may owe a duty of care.

Another complex area is who is to own the property on completion of the transaction. For instance, if there are multiple sources of funds, conveyancers need to ensure they have clear instructions on how ownership should be taken. In some circumstances, the property may need to be held by a trust or owned by a company, and there are often very specific instructions to take into account pertaining to what happens to the property on the owner’s death.

Conveyancers must also be clear about the scope of their instructions. For instance, they must be clear if they are not providing advice in relation to what they may regard as specialist areas like tax planning or environmental law, not only at the start of the transaction but on an ongoing basis, to avoid accidentally straying beyond intended scope in an effort to be helpful.

Strong communication with the client from the outset is key: and make use of file notes, checklists and forms to ensure the client’s instructions are clearly documented.

Much of this ought to be confirmed clearly in your letter of engagement at the outset. This should also make clear to the client who their point of contact is, how you intend to communicate with them and who you will take instructions from. If there is more than one client, all of them ought to be in no doubt as to who is regarded as the main point of contact.

Check the title

Complaints frequently arise because clients purchase a property, only to find out later that it is not quite what they understood they were buying. This can be for a number of reasons including:

• an assumption they have access rights the title doesn’t provide;
• a belief the property goes beyond that specified in the title; or
• the title contains a number of burdens and/or maintenance obligations they were not expecting.

Unfortunately, these issues can arise due to a lack of care by the conveyancer when examining the title or explaining the extent of the client’s title and/or any onerous conditions or obligations it may contain.

There are several effective steps which can be taken to reduce the risk of that happening. Check with the client that the title and any relevant plans match their understanding of the property as they have viewed it and the home report describes it, and confirm that they understand them and their implications.

Drafting a report on title for the client, even if it is time-consuming, helps to lay out any relevant title conditions, servitudes and findings from legal searches, while also giving them the opportunity to consider the information and raise any concerns they might have.

Keeping detailed records and file notes of information provided to the client, and their response confirming they understood, is of utmost importance and can be invaluable at a later date if a client decides to raise a claim or complaint, disputing the information or advice given.

Register deeds timeously

One of a conveyancer’s crucial responsibilities is to ensure that any registrable interest or rights over land are accurately registered in the Land Register within a specified period. Likewise, when a property is sold, it is their responsibility to ensure that any registered charges are discharged. Failure to fulfil either of these tasks could result in a claim or complaint. We have seen many claims arising from a purely administrative failure to register a deed leading to significant consequences, including buyers discovering sometime later that they don’t actually have title to the property they have paid for and are living in, or that a prior security has not been discharged and a lender has an ongoing interest.

One effective method to manage the signing and registration of deeds is to use checklists and reminders as you move through a transaction. These checklists could include referencing which documents need to be drafted and when, helping the conveyancer keep on top of deadlines to ensure deeds are signed and returned while keeping stress levels as low as possible. It also makes sense to have a post-settlement checklist or reminder system in place to ensure that deeds requiring registration are submitted to the Land Register and an updated title sheet obtained showing the correct details of the new proprietors and the removal or addition of charges.

Pay attention to searches

Several aspects of conveyancing have been standardised over recent years, particularly in residential conveyancing, which can make transactions seem routine. It is important to treat every case independently and consider exactly what legal searches and reports are required in each individual set of circumstances. This will depend on the property’s location and its current and future use, all of which should be established. For instance, some commercial properties will require types of environmental reports that would not need to be taken into consideration during a residential transaction.

It is important that care is taken to obtain all necessary searches and reports and that they are reviewed properly. Unfortunately, we have seen many examples where solicitors have been found negligent because, although they have obtained the relevant search, they have not followed up on an area of concern as diligently as they should or advised a client of the potential consequences of an entry.

Remain vigilant against cybercrime

Cybercrime is on the rise, and firms within the conveyancing sector are among the most targeted due to the large number of high-value transactions and transfers of funds that they carry out daily.

The Law Society of Scotland has noted that fraud committed through the interception of solicitor/client emails is a particular area of concern and is very much on the rise. There are a few steps which can be taken, however, to help reduce your firm’s susceptibility to fraud committed in this manner.

Perhaps the most important is to ensure that you make your client aware of the risks presented by this type of fraud and ask them from the outset to be vigilant when communicating with you via email. Your client should be reminded to check any emails received from your firm carefully and should know who to contact should they have any concerns. The differences between genuine emails and scam emails can be small and nuanced, such as one-letter differences in an email address or near facsimiles of branding or logos.

You can also look at installing a third-party secure email messaging system to minimise the risk of communications being intercepted or impersonated.

Another way to help minimise risk is to inform your client of your client account details via hard copy at the outset of the transaction and make them aware that these details will not change throughout its course. Likewise, if you require your client’s account details, you should consider taking these details in hard copy at the beginning of the transaction and make them aware that these are the details you will use should any funds have to be transferred to them, with any changes having to be agreed in advance by means other than email.

Conveyancing firms, like any others, should seriously consider obtaining specific cover for cyber risk while at the same time ensuring their systems are fully protected by all the required updates and patches for any software they use and that they have suitable firewalls and cyber protection in place.

What if things go wrong?

The key message for conveyancing solicitors is: to take due time and care with each and every transaction and not assume anything! Remember to discuss every aspect of the transaction with your client and record those discussions in writing.

The good news is that all firms in Scotland are indemnified under the Master Policy for professional indemnity insurance, organised by the Law Society of Scotland with Lockton appointed as its broker.

It is important that all solicitors notify claims, complaints, or circumstances which could give rise to claims or complaints as soon as possible. The maxim to follow is: “When in doubt, notify”.