Specific Regulations of Conflicts
A number of professional conduct requirements have been embodied in statutory instruments made under the Solicitors Act. This makes the requirements unconditional professional practice requirements.
A number of the regulations relate to conveyancing and property transactions. Conveyancing transactions includes transfers of property, gifts, licenses, leases and mortgages. A solicitor may not act for a seller and purchaser in a conveyancing transaction.
Commercial Property Undertakings
The Professional Practice Conduct and Discipline Commercial Property Transactions restricted the ability of a solicitor to give an undertaking in respect of commercial property as defined. This includes buy to let property. If followed widespread failures of compliance and structural weakness prior to the 2008 economic crisis.
A commercial property transaction is any property transaction including a mortgage other than a residential property transaction. It includes the acquisition and refinancing of any land or building, used solely in connection with any business or trade or the production or supply of services.
It includes the acquisition and refinancing of any property exclusively with a view to earning rental income or capital appreciation or both or which in all the circumstances is reasonably likely to be used in connection with commercial development. Commercial development means development of the land for commercial or trade use, for construction of multiple residential units or with a view to earning rental income.
A residential property transaction is a transaction including a mortgage for nonbusiness use. The definition specifically excludes the acquisition of property for the purpose of earning rental income.
The undertaking covers any of the following
- undertaking to pay off prior mortgages
- undertaking to furnish a certificate of title relating to the commercial property
- undertaking to furnish deeds or title to the commercial property to a financial institution
- procuring payment of stamp duty in connection with the acquisition
- procuring registration of the property or a mortgage on it.
It does not include an accountable trust receipt when taking up documents.
A financial institution includes any credit institution, retail credit firm, home reversion firm or any party who engages in a professional business in providing a financial accommodation of any nature to another or to an assignee of a debt from an entity that has been engaged in such business
There are limited exceptions which include
- a conveyancing transaction comprising only the voluntary transfer i.e., without consideration of a family home or shared home between spouses or partners as the case may be,
- conveyancing transaction in which the vendor or the purchaser or associated companies or one as individual and the other as company with which the party is associated
- A conveyancing transaction where property is held under a bare trust, and it is being transferred to new trustees or being transferred to a beneficiary
- Certain qualified parties
For the exceptions to apply as regards qualified parties, the solicitor’s firm is to request the vendor or purchaser to consent to representing them both and must notify them in writing that it may have to give them conflicting advice and set out the measures proposed to be implemented in relation to such representation. This notification shall include the statement that where a dispute or other conflict between the parties during and after the transaction, which is likely to result in litigation or arbitration, the solicitor’s firm shall not act for either party in such dispute and will cease to act for both of the in the conveyancing transaction.
The solicitor shall establish and maintain the measures appropriate for the circumstances of the firm as well as those of the conveyancing transaction and clients in question. This shall include measures to ensure that the vendor and purchaser shall be represented by separate individuals, within the firm, neither of whom may be supervised by the same person and communications between the solicitor shall be conducted in all respects if there are members of different firms. Detailed records and notes shall be maintained by both solicitors of all correspondence, discussions and meeting.
The qualified party is qualified investor under the Prospectus Regulations or company which is an associated company of an entity meeting the above criteria. Breach of any of the regulations is a disciplinary measure.
Undertakings for Self & Connect
The Solicitors (Professional Practice Conduct and Discipline Secured Loan Transactions) Regulations 2009 limit the ability of solicitors to give undertakings in relation to secured property transactions on their own behalf. A solicitor shall not give an undertaking to or for the benefit of a bank in relation to a secured transaction in which the solicitor or a connected person of that solicitor, has a beneficial interest in the underlying properties used to secure the loan unless the solicitor has given notice in writing to the bank of the beneficial interest to the solicitor or connected person in the secured loan transaction and the bank has acknowledged receipt of such notice and consented to the solicitor providing the undertaking.
The above does not apply to a statement or declaration of intention made by a person who is a solicitor as a necessary requirement of a loan application provided there is a similar requirement for a non- solicitor applicant. It does not apply in respect of an undertaking given by a solicitor who is a sole principal or partner in a firm in relation to a secured loan transaction in which another solicitor who is not a partner or is engaged in that firm whether fulltime or part-time has a beneficial interest where neither of the solicitor giving the undertaking nor a connected person has a beneficial interest.
A beneficial interest is widely defined to include a company controlled by the solicitor or connected person, a partnership, or other arrangement in which he or she is a partner, or coowner or a trust to which he or she is connected or where a connected person is a beneficiary. The beneficial interest must be at least 25 percent of the total value of the assets.
Connected person is a spouse of the solicitor, another solicitor who is a sole principal or partner in the firm fulltime or part-time and/or cohabitee with the solicitor in domestic circumstances equivalent to husband and wife for a period of not less than three years and a person with whom that solicitor is engaged to be married.
Nature of Undertaking
Generally, an undertaking by a solicitor will be interpreted as being his personal undertaking rather than being an undertaking by the client given as agent.
An undertaking is an equivocal declaration of intention addressed to a bank on which it which reasonably places reliance which is made by the solicitor in the course of his or her practice either personally or by a member of the staff whereby the solicitor or in the case of a member of his staff, his employer becomes personally bound in relation to
- the existence or acquisition of good marketable title to the property
- the execution and confirmation of the mortgage over the property.
- the redemption of an existing charge over the property or any other property required by way of collateral security
- to discharge stamp duty or registration fees or holding loan proceeds entrusted with the bank
- lodging purchase deed for stamping and dealing or registration of the purchase deed and the bank’s mortgage over the property and dealing with queries by the registration authority
- furnishing a certificate of title to the bank
- other acts necessary to perfect the security of the bank in respect of the property or other collateral security required by the bank as part of the secured loan transaction.
A bank in this context means any financial institution, credit union or bank.
Acting for Both Sides New Build
1997 Professional Practice Conduct and Discipline Regulations were an earlier narrower version of the above general prohibition. They prohibit a solicitor acting for both vendor and purchaser in the sale and purchase for value of a newly constructed residential unit or a residential unit in the course of construction where the vendor is the builder of that residential unit or is associated with that builder. It does not apply in the following cases unless there is a conflict of interest between buyer and seller.
- Where the buyer and seller are associated companies, or the purchaser is a member director of employee of the vendor insofar associated company.
- Where the vendor is a corporate entity, any member or director of the vendor is related to the purchaser.
A residential unit means a house, or an apartment intended for use as a residence although not necessarily by the purchaser.