Professional Practice updates - September 2015

Alternative Dispute Resolution (ADR) Regulations come into effect on 1 October 2015.

The Regulations have been laid before Parliament to implement the ADR/EDR Directive 2013/11/EU. The objective of the Directive is to promote ADR as a means of redress for consumers in relation to unsatisfactory goods or services, particularly in relation to online sales in the EU.

The Regulations require the appointment of a “competent authority” that will be responsible for monitoring and evaluating “ADR entities” which are organisations who will undertake dispute resolution work.

There are currently no “ADR Entities” appointed in Scotland for Scottish Legal Services.

Responsibility for identifying an ADR entity rests with the Department for Business, Innovation and Skills (BIS). The Regulations are a consumer issue which means they are reserved to the UK Government and the Scottish Government has no power to force an organisation to become an entity.

What do solicitors need to do?

Firms should either:

• Implement the Regulations and inform clients about any ADR entities and processes which the firm are prepared to use. (These should be referred to in letters of engagement and on the firm’s website.)

or

• If firms choose not to adopt an ADR process, they still require to account for and share information about the terms of the Regulations with their clients.

Here is some sample text which could be used in the letter of engagement and on the firm’s website:

“We recognise that Alternative Dispute Resolution Regulations have implemented ADR/EDR Directive 2013/11/EU to promote alternative dispute resolution as a means of redress for consumers in relation to unsatisfactory services.  We have however chosen not to adopt an ADR process and if you have any concerns about the services you receive from this firm you should contact the firm’s Client Relations Manager.”

Firms should update their letters of engagement in time for the regulations coming into effect on 1 October 2015.

Solicitors may also wish to share information about the Regulations with their own clients who may themselves become subject to the Regulations where goods or services are being provided to a consumer.

View further information on alternative dispute resolution.

If you have any queries in relation to this, please do not hesitate to get in touch with the Professional Practice team.

Following the introduction of LMS to manage its panel, the Law Society of Scotland has engaged with Virgin Money to discuss their decision to levy a £10 charge on each transaction at settlement which would be collected via the client’s solicitor for the purpose of financing its panel management requirements. To assist our members, the Society queried whether this charge could be levied on the client at the time of collecting the arrangement fee. Virgin Money advise that the fee is only chargeable where the transaction concludes successfully. They explained that, because the majority of cases are introduced to them via intermediaries, they are therefore not in direct contact with borrowers until the mortgage completes. As a result of not having that direct contact, they advise they would experience difficulties in returning the charge in the approximately 10% of cases where the matter does not complete, and so they have elected to charge this at settlement via the borrower’s solicitor.

Following extensive consultation, the Scottish New Build Standard Clauses (2015 Edition), negotiated between Alan Minty, of Gillespie Macandrew, and Ross MacKay, Convener of the Society’s Property Law Committee, have now been registered in the Books of Council and Session. These can be used to assist both sellers and purchasers in negotiations where the seller is a builder selling a new-build property.

To reflect commercial requirements, these are necessarily weighted in favour of the builder, but, notwithstanding this, they are intended to reflect an appropriately balanced position which will hopefully facilitate those selling on behalf of, or buying from, a builder. A pdf of the Extract Registered Minute of Agreement, a Word copy of the clauses, a client guide and practitioners’ guide can be found under advice and information in Section F, Division C of our Rules and Guidance on 1 October 2015.