Stage 1: Instruction

Question 1

what is conveyancing?

Answer 1

• the process of transferring ownership of property

Question 2

what is the Law Society (LS) Conveyancing Protocol?

Answer 2

optional. Designed to standardise the residential conveyancing process with instructions and templates (i.e. Form TA06 used by the seller to make enquiries of the buyer)

Question 3

what is the Law Society’s Conveyancing Quality Scheme (CQS)? why would a firm want to be part of this?

Answer 3

membership provides a recognised quality standard accreditation for residential conveyancing firms

if a firm wants to be on the panel of solicitors approved by residential mortgage lenders to act for lenders they must be part of the CQS

Question 4

what must a firm do to be part of the CQS?

Answer 4

o Firms must: comply with the Protocol, the Client Service Charter and mandatory training and enforcement procedures

Question 4

what are the first things a solicitor must do?

Answer 4

• Both solicitors must: check for COI, take instructions, identify any issues which may cause delay

Question 5

when can a solicitor not act?

Answer 5

when there is (or a significant risk) of an own or (client) conflict of interest

Question 6

re: conflict of interest

what is the SRA rule on this?

Answer 6

Solicitor cannot act where there is:
o An own conflict of interest or significant risk of this; or
o If there is a conflict of interest or a significant risk of such a conflict, unless:
 (6.2(a)) The clients have a substantially common interest; or
 (6.2(b)) The clients are competing for the same objective
AND, the following conditions are met:
 All clients have given informed consent;
 Effective information safeguards are put in place if necessary; and
 You are satisfied it is reasonable to act for all clients

Question 7

re: conflict of interest

can a solicitor act when there is an own conflict?

Answer 7

no, never.

Question 8

re: conflict of interest

can a solicitor act when there is a conflict of interest?

Answer 8

no, unless:
 (6.2(a)) The clients have a substantially common interest; or
 (6.2(b)) The clients are competing for the same objective
AND, the following conditions are met:
 All clients have given informed consent;
 Effective information safeguards are put in place if necessary; and
 You are satisfied it is reasonable to act for all clients

Question 9

re: conflict of interest

when might a COI arise?

Answer 9

if the solicitor is acting for more than one client

Question 10

re: conflict of interest

explain the position regarding acting for the buyer and seller

Answer 10

General rule - cannot act for both due to COI.
o 6.2(a) LS has held this does not apply to property transactions.
o 6.2(b) might be possible if parties are competing for the same objective i.e. father selling daughter their house

Question 11

re: conflict of interest

explain the position regarding acting for joint buyers

Answer 11

• Unlikely to be a COI, but might need to advise residential buyers about how to hold the equitable interest if they are not married/CP

Question 12

re: conflict of interest

explain the position regarding acting for borrower and lender

Answer 12

High risk of conflict where:
o The mortgage is not standard; or
o The mortgage is standard but an approved certificate of title is not used (approved certificate of title = created by the conveyancing solicitor to prove good and marketable title to the lender. Purpose is the reduce COI)

Even if there is a COI, the solicitor could act for both if 6.2(a) is satisfied

The solicitor must remember their duty of confidentiality to both clients

Question 13

re: conflict of interest

explain the position regarding acting for joint borrowers

Answer 13

• Unlikely to be a COI, but must be cautious if a mortgage is sought by one owner over a shared home for a business loan.

Question 14

re: conflict of interest

when is a solicitor act for the borrower and lender?

Answer 14

More likely in a standard residential mortgage. Less likely to act for both in a commercial mortgage due to the negotiation required.

High risk of conflict where:
o The mortgage is not standard; or
o The mortgage is standard but an approved certificate of title is not used (approved certificate of title = created by the conveyancing solicitor to prove good and marketable title to the lender. Purpose is the reduce COI)

• Even if there is a COI, the solicitor could act for both if 6.2(a) is satisfied

Question 15

re: conflict of interest

why must solicitors be cautious when acting for joint borrowers?

Answer 15

• If they default, the bank can enforce the security. The other owner may try to set aside the mortgage on the basis of undue influence. This will be successful if they can prove the lender had actual or constructive notice of the undue influence.
• Summary > solicitor can act for both owners in this situation if there is no breach of 6.2 and the Etridge Guidelines are followed

Question 16

re: conflict of interest

what are the solicitors’ obligations when acting for joint borrowers?

Answer 16

• Where the loan is not to the other owners’ advantage, the lender is ‘put on enquiry’. The solicitor acting for the borrower must then follow the Etridge Guidelines. This prevents any arguments of actual/constructive notice.
• after following the Etridge guidelines, if the solicitor thinks the transaction isn’t in the owner’s best interest they should give advice to that effect and refuse to act if they think they are being ‘grievously wronged’

Question 17

under the Etridge Guidelines, what steps should the solicitor take once they have the information from the lender?

Answer 17

The solicitor should then have an in-person discussion with the other owners and explain (using non-technical language):
o Why the solicitor is involved and that the lender will rely on the solicitor to counter any suggestion the spouse has been unduly influenced;
o The documents, consequences and seriousness of risks involved;
o The practical and legal implications of the transaction;
o That they have a choice and obtain confirmation if they are agreeable to the solicitor acting for them and the transaction proceeding

Question 17

under the Etridge Guidelines, what is the first thing that should happen?

Answer 17

With the contracting-owner’s consent, the lender should tell the solicitor:
o Purpose, amount and terms of the loan, current amount of indebtedness, amount of overdraft facility and give a copy of the written application

Question 18

re: Etridge Guidelines

what must the solicitor not do?

Answer 18

• The solicitor should not confirm to the lender that matters have been explained to the owner without express instructions from the owner to do this

Question 19

what information should be obtained when taking instructions? how may these be obtained?

Answer 19

Firms will have an internal checklist to take initial instructions to establish what has been agreed at the marketing stage i.e. names, address, price, tenure, deposit, anticipated completion date, property survey details, mortgage etc

Question 20

what must the solicitor always check with the seller when taking instructions?

Answer 20

• They will check the seller made an energy performance certificate available for prospective buyers. This should have been available asap after the property was first marketed and no later than 28 days after marketing.

Question 21

what is a contract race?

Answer 21

• This is a legitimate selling technique where the pre-contract package is sent to prospective buyers, they must all know they are engaged in the race.

Question 22

what is a solicitors obligation in relation to contract races?

Answer 22

the solicitor cannot disclose the race to prospective buyers without the client seller’s consent. If they refuse, the solicitor must cease to act immediately.