#4871 - Acting For Lender And Buyer - Property Law and Practice

Solicitors Code of Conduct - PCR - Acting for joint buyers or sellers (normally in residential property) 1) What is the PCR issue? Law Outcome(1.2) - You provide services to your clients in a manner which protects their interests in their mater, subject to the proper administration of justice Principle 4 - Best interest of clients 2) Why is it an issue on these facts? Issue / application 1) You have received instructions from only one party to the transaction (E.g. One partner in the transaction) and they are purchasing the property jointly 2) You have received instructions from only one of two partners, and one of them will be a non-owning occupier. 3) Application, analysis and advice Law O(1.2) - You provide services to your clients in a manner which protects their interests in their mater, subject to the proper administration of justice O(1.5) - The service you provide to the clients must be competent and take account of the clients needs and circumstances O(1.12) - The clients should be in a position to make an informed decision about the services they need, how their matter will be handled and the option available to them IB(1.25) - You will not have achieved the outcomes if you act for a client when instructions have been given by someone else, or by only one client when you act jointly for others. This is unless you are satisfied that the person providing the instructions has the authority to do so on behalf of all the clients Issue / application 1) To comply with IB(1.25) Will need to advise the party that you have seen (A), that to act for both parties and represent them, you'll need to have an initial meeting with the other party (B). At this meeting B can give permission for A to act on his behalf and you can then continue having contact only with A. 2) If the property is being purchased in the name of only one of the partners in a couple, it may be necessary to register Matrimonial Home Rights of a non-owning spouse under s.30 and s.31 Family Law Act 1996. * This gives the non-owning spouse a right not to be evicted and a right to re-enter. * If the property is registered, a Notice in the Charges Register must be entered to protect the rights 4) Conclusion / advice Would have to speak to both parties at least once in order to gain proper instructions. Would gain authority for instructing party from non-instructing party. PCR - Acting for the buyer and the lender where buyer instructs you to withhold information from lender (commercial and residential) 1) What is the PCR issue? Law O(3.5) - Not acting if client conflict You do not act if there is a client conflict, or a significant risk of a client conflict, unless the circumstances set out in O3.6 or O3.7 apply. Chapter 14 - Defines 'client conflict' Any situation where you owe separate duties to act in the best interests of two or more clients in relation to the same or related matter and those duties conflict, or there is a significant risk that those duties will conflict O(4.1) - Keeping the client's information confidential This may be difficult due to the information that you have on the borrower that would be material for the lender O(4.2) - Disclosing the all material information to the client that you have personal knowledge of Under a duty to disclose to the lender the material information that the borrower has told you Principle 1 - Duty to uphold the law You do not act if a client has asked you to do something contrary to the law Principle 2 -Duty to act with integrity You do not act if, by acting upon your clients instructions, it will be contrary to your integrity Principle 4 - Best interest of clients Will not be acting in the best interests of your client (the lender) if you are withholding material information from them 2) Why is it an issue on these facts? Issue / application As you owe all these duties to the lender, can you still act for both parties if you cannot disclose this material information Issue / application May be in breach of duties to both parties by continuing to act for both 3) Application, analysis and advice Issue / application P(1) and P(2) - Could constitute mortgage fraud if you misled the mortgage lender P(1) and P(2) - If ceased to act for lender and lender appointed new firm, would have to act with integrity and not mislead the new solicitors so would have to stop acting for the borrower O(4.1) and O(4.2) - Could persuade borrower disclose the information to the lender IB(4.4) - Could continue to act for lender if the lender consented to not having information revealed to it * However this would be unlikely as the mortgage lender would suspect that what is not being revealed is information key to it providing the loan 4) Conclusion / advice Would have to cease to act for the client (borrower) unless they consented to the disclosure and may have to stop acting for both