Lorraine Richardson provides a reminder of conflicts of interest in conveyancing, focusing on one of the key areas where risk can arise: acting for both the buyer and seller in a transaction
Lorraine Richardson is an experienced property solicitor, author and speaker, and managing director of property law training provider, Adapt Law Ltd (www.adaptlaw.co.uk)
Conveyancing solicitors have got more to worry about than conflicts, haven’t they? It might seem that way, but avoiding conflicts of interest is an ongoing professional duty. Also, I would suggest that the current upheaval makes conflicts more likely, and thus more of a risk for conveyancing firms.
Solicitors should be looking for conflicts of interest when they are acting for two or more clients in relation to the same matter. This article is written from the perspective of conflicts in conveyancing for solicitors. Licensed conveyancers are governed by a different conduct and conflicts regime.
Anyone considering conflicts of interest should remember that an actual conflict of interest is not the requirement. The purpose of the Code of Conduct is to avoid conflicts arising in the first place. This is why solicitors must always be looking out for a “significant risk” of a conflict. A significant risk is sufficient for the solicitor to decline to act. It may be a cliché, but prevention is better than cure: avoiding a conflict in the first place is far better than trying to clear up the mess if a conflict arises.
The reason that identifying a potential conflict and avoiding it is so important is because if a conflict between clients arises during the transaction and the solicitor concludes that they are unable to continue acting, they should inform the clients accordingly, and cease to act. The solicitor should also advise the affected clients to seek legal advice elsewhere.
When considering whether it is appropriate to act for the seller and buyer in the same transaction, some solicitors will apply the following criteria:
- the clients are established clients of the firm
- separate fee-earners act for the seller and buyer; and
- each fee-earner is based in a different office
These may look familiar. These criteria are, in fact, the exceptions to the prohibition for acting for seller and buyer which applied in the 2007 Solicitors’ Code of Conduct. They have not been applicable since 2011. While they might be helpful indicators when considering the overall risk of conflict, they are not in themselves exceptions which allow the firm to act.
I suggest that the starting point is that the firms do not act for the seller and buyer in the same transaction. The fee-earners involved should try to justify to themselves why they should act, and note their detailed considerations on the file. If the firm decides it can act in this situation, it should then obtain the informed consent in writing from all affected clients, to allow the firm to act.
But acting for the seller and the buyer in the same conveyancing transaction should be an exceptional event. It is necessary to ensure that it is in each client’s best interests for the firm to act. If a firm concludes that it should act for seller and buyer in the same transaction because it does not want to lose both sets of legal fees, this is a classic example of the firm putting its own interests above those of the clients.
It is fair to say that solicitors’ firms have vastly differing approaches to matters of conflicts of interest: some firms take conflicts of interest very seriously and have a clearly defined process to follow, while others give this little or no thought.
Whatever the attitude of the firm to conflicts, I suggest that all staff in a conveyancing team, of whatever experience, should be encouraged to trust their instincts in relation to conflicts and report any concerns to a more senior member of their team. ‘Knowing what you don’t know’ is a powerful risk management tool when it comes to conflicts.
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