Tuesday, 24 December 2013

The reason Why Professional Indemnity insurers are Asking About 'Right to Buy' Transactions

Did you spot the following question on your Professional Indemnity Insurance renewal form for 2014?

In the last 10 years have you carried out any “right to buy” conveyancing transactions? If yes provide full details on page 10 including total number of transactions each year, number from referrals (e.g. brokers or marketing professionals and number of direct approaches).

Did you ask the question as to why it was there? 

Many firms will soon find out the reason why as solicitors face thousands of claims for professional negligence over their involvement in ‘right to buy’ work.

The Master of the Rolls has recently published a new Practice Direction supplementing the Civil Procedure Rules 1998 concerning Right to Buy claims. The new Direction provides for the transfer of existing and new claims to the Chancery Division and the appointment of a designed judge, Mr Justice Sales, for the purpose of further case management and trial or trial of issues arising from such claims. Read the Direction in full here (pdf).

Manchester law firm Tandem Law – which alone has around 6,000 cases on its books – is named in the practice direction as being responsible for maintaining a list of all claims.

These claims against the mortgage broker and/or solicitor will be for relatively small sums of a few thousand pounds. The larger claims against solicitors accuse them of failing to advise clients properly, both in terms of conveyancing and mortgage issues, with the close relationship between some mortgage providers and solicitors under particular scrutiny.  

On their website Tandem Law give some example of poor advice relating to council house purchases including:
  • Overcharging for professional fees 
  • A dereliction of duty of care towards the borrower, including not carrying out the required checks that are a standard part of the conveyancing process
  • An adviser failing to explain the additional living costs, such as buildings insurance, associated with being a homeowner
Mike Fong, Head of Technical and Legal Practice at Tandem Law, says, "Thousands of people, right across the UK instructed their solicitors to help them achieve their dream of buying their own homes - and those solicitors failed their clients."

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