Law Society: Greater protection from fraudsters
The Law Society’s toughened up code for completion, which comes into force on 1 May, has divided opinion among conveyancers.
It has revised the code in the wake of the Court of Appeal’s Dreamvar ruling last year [1], in which it held that solicitors for both sellers and buyers could be liable for the losses suffered by clients where properties were sold by fraudsters.
Among other changes, the code defines sellers as “the person or persons who will be at the point of completion entitled to convey the legal and/or equitable title to the property”.
Under the code, the seller’s solicitor has to give an undertaking that he has authority “from the true owner of the title to the property named in the contract to receive the purchase money, and that such person is at the point of completion entitled to convey such title”.
Rob Hailstone, chief executive of the Bold Legal Group (BLG), said the problem was that sellers’ solicitors were reluctant to give a “100% guarantee” that they were acting for the genuine owner of the property.
Mr Hailstone, whose group includes 650 conveyancing firms, said: “Buyers have been asking for guarantees, but most firms have qualified that in some way…
“Lawyers have been calling for clarity. This might give them the clarity they need, but not what they want.”
One BLG member described the new code as “outrageous”, saying: “So we’ve got to police the purported sellers. How are we qualified or have the tools to do that?
“How can we undertake that the seller is not a fraudster? We can undertake that we have conducted certain checks and the Law Society can tell us what checks we must do but other than that everyone is at the mercy of a sophisticated fraudster. Why should we be the scapegoats?”
However, another conveyancer responded: “Seems perfectly reasonable to me and should make sellers solicitors carry out robust due diligence/ID checks against their selling clients…
“Yes, it is a further burden on the seller’s solicitors. However, the buyer’s solicitors are not in any position at all to be able to check the seller’s ID so they have to be able to rely upon the seller’s solicitors/legal advisors.”
Mr Hailstone said he had received a dozen responses since the society published its new code on Friday, and that opinion was fairly evenly split.
The Law Society said changes to the code would make it “even clearer” that the seller’s solicitor is acting in a genuine sale.
“This should provide innocent purchasers with greater protection from fraudsters – which is not only right but should help boost consumer confidence in the conveyancing process.”
Late last year, a specialist barrister who also sits on the Law Society’s land law and conveyancing committee, advised those acting for buyers to “think” rather than “automatically try to export the risk of identity fraud onto the seller’s conveyancer”.
Nic Taggart said [2] those acting for buyers were tending to “seek ways of cajoling conveyancers acting for sellers to give some sort of representation, warranty or undertaking” that they had carried out identity checks”.
He explained: “The reality is that such attempts are unlikely to be effective and may actually make the buyer’s conveyancer’s position worse when the request for a warranty or a clear representation goes unanswered.
“It will often be better not to ask than to ask and then get no good answer.”