Life after Dreamvar and P & P Property Limited court ruling
With the numerous comments and articles that are circulating online about the court ruling, it appears that there is nothing new to say about these definitive cases.
But now what? The consumer is quite rightly the ultimate winner as a consequence of the recent Court of Appeal decision and they should be protected if they are innocent victims of fraud. Unfortunately, the consumer may also indirectly suffer as a consequence of the decision due to higher conveyancing fees and also delays in the transaction because of the conveyancers’ uncertainty in dealing with identity issues.
Is the conveyancing process going to slowly grind to a halt as conveyancers become petrified at the prospect of being potentially liable for breach of trust, breach of warranty, breach of undertaking or for being negligent? Despite acting honestly and not being negligent, conveyancers potentially now find themselves having to compensate an innocent victim in a fraudulent transaction. The consensus of opinion seems to be that insurers’ premiums will increase which may result in the increase of conveyancing fees. Such fees may rise anyway given the amount of time that may be spent verifying the buyer’s or seller’s identity.
A buyer’s conveyancer will now ask the seller’s conveyancer to warrant the identity of the seller. The seller’s conveyancer will resist such a request and there will be an impasse. The clients become increasingly frustrated and the process starts to crack.
Conveyancers acting for sellers need to take greater care in satisfying themselves about their client’s identity. This is particularly relevant in the high risk matters eg. properties without a mortgage and where the seller does not reside. Warning bells should also ring if there is immense pressure to exchange and complete very quickly. Seller’s solicitors should check the address for service shown in the Land Registry Title. However, not everybody updates their new address for service with Land Registry when they move to a new residence. If the seller lives abroad, this brings more challenges which is why the seller’s conveyancer in such instances needs to be extremely vigilant and cautious. Conveyancers also need to be brave to advise a client not to proceed and also for themselves to refuse to proceed if there is continued doubt and uncertainty about a party’s identity.
So where do we go from here? Practitioners are probably scrambling to look at their retainer letters and Terms and Conditions and contemplating if they are able to amend them to avoid liability in matters that involve fraudulent identity. Will there be robust indemnity insurance policies offered to tackle identity fraud? Will we have to look to the ever developing world of technology? There are opinions in circulation that blockchain technology may assist conveyancing but conversely there are opinions that blockchain technology may in fact kill the conveyancing process as we know it. Other stakeholders in the conveyancing process need to be consulted and engage in a general review. Banks should make it much harder for funds to be transferred to the fraudster’s accounts.
It remains to be seen if the Court of Appeal decision or part of it will be appealed to the Supreme Court but until then we await detailed guidance from the Law Society and the CLC. It is understood that the Law Society’s Code for Completion by Post may be amended. How long will this take and what are practitioners to do in the meantime? The simple answer is to proceed with extreme caution.
Donall Murphy, Partner at London firm Russell-Cooke
Kindly shared by Russell-Cooke Solicitors