Jayna Patel (a member of the Professional Negligence Lawyers Association) offers some guidance on the possible options available to SMEs where there has been a failure to complete the purchase of residential property before the expiry of the recent Stamp Duty holiday.
It is first worth checking that the solicitors have not sought to impose an exclusion of liability clause. Due to the unprecedented work levels caused by the Stamp Duty holiday many firms informed clients that whilst they would work towards beating the Stamp Duty deadline, they would not be held liable in the event that this was not possible. The wording in these disclaimers might be phrased along the lines of “Please note that we will not accept liability for any direct or indirect financial loss as a result of completion taking place after 30 June 2021, or indeed after 30 September 2021″.
You will need to establish why completion was delayed. The timing of conveyancing transactions is not usually entirely within a solicitor’s control. There are many external factors that can delay a purchase from proceeding e.g. with surveys, valuations, mortgage offers, completed forms and documents from third parties and the usual conveyancing searches. Against the backdrop of the pandemic, these delays have sometimes been exacerbated by home working and Covid related isolation. Therefore, delayed completion is rarely the solicitor’s fault, but with the conveyancing sector having been stretched to its limits over the last year with the upsurge of new instructions combined with the practical difficulties of Covid, mistakes will inevitably have been made.
To have a claim against your solicitor you will need to establish whether they have been professionally negligent. As ever with the law the position is not entirely straightforward and advice that is wrong, or a poor standard of service, may not necessarily be negligent. A solicitor is expected to conform to the standard of care of a reasonably competent solicitor and only if the solicitor fails to do so then he or she will have acted negligently.
- failing to advise the client of the risk of the higher SDLT rate after 30 June (and 30 September 2021) and its effect. However, commercial and experienced property clients might be deemed to have knowledge of these effects;
- failing to include an “all parties walk away” clause in the event that completion is not effected before the deadline; and
- failing to put the other side on notice of foreseeable damages e.g. “If notice to complete is served and should matters pose to run past the 30th June, in addition to general damages our client will be seeking additional damages in the sum of £XXX due to the change in the rate of the SDLT.”
If you can establish that your solicitor was the cause of not meeting the deadline you also need to consider whether their negligence caused your loss. For example, an SME investing in residential property for investment purposes should explain the reasoning behind the decision to invest e.g. witness statements and board minutes supported by an analysis of yield/base return. You should also consider what you might have done differently if the advice or work had not been negligent.
It’s important to know that you are obliged to try to mitigate your loss. Is it possible to recover the loss further down the chain, or from another party? Only reasonable steps are required and you are not obliged to embark on speculative litigation.
For the reasons outlined above, I do not think that there will be a significant number of claims against solicitors for missing the Stamp Duty holiday deadline. However, I do expect there to be a substantial increase in successful negligence cases against solicitors over the coming year as the mistakes that occurred over lockdown come to the surface.
- Start at the end and first look at what losses you have claimed and then work back and link the losses to the negligent act.
- Decide if it really is worth the commercial time and expense of pursuing a claim. It only makes sense to go to court if substantial damages are realistically achievable. It is unlikely that you will recover legal fees if the claim is worth less than £10,000.
- First raise a complaint to with the negligent professional and, if necessary, escalate it to the Legal Ombudsman (and be mindful of the 6 month deadline to do so). Be wary of accepting any offer in full and final settlement at this stage as it will prevent you from pursuing a civil claim.
- Don’t delay. You generally have six years from the date you exchanged contracts. If you miss the deadline then your claim expires.
- Check whether you benefit from before the event legal expense insurance. Legal cover might help you fund you legal costs. There are other ways to fund litigation and your solicitor can discuss these with you.
- Find the right legal adviser. Appoint a new solicitor (not your negligent conveyancing solicitor who will be conflicted) with experience in litigation and professional negligence.
- Your solicitor should give you an idea of timescales, costs and prospects of recovery. Request a Costs v Benefits analysis. Parties pursuing a £20,000 claim through the courts are likely to incur disproportionate fees, as costs to Trial are likely to be around £30,000 – £80,000 per party.
- The Professional Negligence Pre-Action Protocol sets out good practice and lists steps to follow before starting court proceedings. The protocol requires everyone to engage in early discussions and parties are encouraged to settle the case using mediation or other techniques.