Posted by Andrew Chalk, Partner
Why choosing the best conveyancer is important- lessons to be learned from the Dreamvar Appeal (2018)
The recent appeal in Dreamvar (UK) Ltd v Mishcon de Reya  EWCA Civ 1082 (heard together with the appeal P&P Property Ltd v Owen White & Catlin LLP) highlights important considerations for property practitioners, professionals and in particular the public.
However, the judgement has led to some incorrect and potentially misleading commentary.
Conveyancers and those looking to embark on the purchase of a property need to be mindful of the following pitfalls and protections against identity fraud by a rogue seller:
- Both cases involved innocent buyers and innocent solicitors.
- The rogue sellers in both cases led reputable firms to believe they were acting for the genuine owners of the relevant properties. The transactions completed with the buyers’ solicitors releasing the purchase monies to the rogue sellers’ respective solicitors.
- The rogue sellers’ solicitors were held to be in breach of their undertakings given under paragraph 7(i) of the Law Society’s Solicitors Code for Completion. This particular section of the Code was construed to refer to genuine owners of the property rather than the identity of the clients. Therefore by proceeding to adopt the Code in the transactions, the solicitors gave an undertaking that they had the authority of the genuine owner.
- The rogue sellers’ solicitors were also held to be in breach of trust to the buyers.
- Even though in Dreamvar, the buyer’s solicitors were also found to be in breach of trust (as they were considered professional trustees), they were entitled to rely on the Code by virtue of the breach of the rogue seller’s solicitors undertaking. The buyer’s solicitors are therefore afforded an indemnity by a seller’s solicitor even if they are not afforded relief under s.61 of the Trustees Act 1925. Therefore, it appears that a Court’s discretion will rely solely on the facts of a case and means of the parties.
- Even if the Code was not adopted then, as a matter of principle, a warranty of authority can arise if a solicitor or estate agent holds themselves out as acting for a particular person.
Protection for buyers
Despite commentary to the contrary, the case reinforces the absolute protection that the Law Society’s Code for Completion provides to buyers and their conveyancers. Conveyancers should ensure that the Code is adopted in all conveyancing transactions or in the absence of such adoption, adequate undertakings are given to protect against a seller’s potential identity fraud.
Furthermore, the cases elevate risk for conveyancers in that, despite the indemnity under the Code, the buyer’s solicitors or conveyancers may still find themselves liable if the rogue seller’s solicitors have inadequate professional indemnity insurance to fully indemnify a buyer’s loss. It follows that insurance companies may react to this risk by offering bespoke indemnity policies to buyers. In addition, it may result in lenders revising instructions to their acting solicitors. How? That remains to be seen.
The cases demonstrate the risk that conveyancing transactions bring and the need to consider factors other than low prices, fixed fees, and quick turnaround times when buyers choose a conveyancer or firm to present them. The chosen conveyancer should be experienced as spotting potential fraud requires considerable skill and thought. Particular caution should be exercised in cases where there is undue pressure on a buyer to proceed quickly without reasonable cause and where there is pressure to choose a particular firm to deal with the transaction.
Know your seller and buyer client; make sure the firm acting for a seller is reputable and if in doubt, request insurance information to satisfy yourselves that your buyer client will be fully indemnified should a claim be necessary; take note of discrepancies in addresses and unoccupied properties. If you have any suspicions, report these to a supervisor or Senior Partner.
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