True or False:
Generally, a solicitor should not act for both the seller and the buyer in a property transaction
True
What is Principle 7 of the SRA principles?
We must act in the best interests of each client
Which part of the SRA codes supports Principle 7?
Paragraph 6.2 - A solicitor cannot act if there is a client conflict or significant risk of such conflict
How does the SRA define Client Conflict?
a situation where your separate duties to act in the best interests of two or more clients conflict
If the SRA codes do not explicitly prohibit a solicitor from acting for both the seller and the buyer, why is it generally advised not to do so?
Because there is often a significant risk of client conflict, of which would directly breach paragraph 6.2 of the SRA Codes
Who assesses the risk of a conflict?
The firm
What should solicitors bear in mind when considering the risk of Client Conflict?
- Complexity - the more complex the transaction, the greater the risk of conflict
- The likelihood of negotiations - The more likely negotiations are, the greater the risk of conflict
- The bargaining power of the parties and any particular vulnerability of a party - More difficult to act in the best interests of both if one has greater bargaining power
When can a solicitor act for 2 parties even when paragraph 6.2 of the SRA code is breached?
If there is a substantially common interest between the clients or if they are competing for the same objective
How is a substantially common interest defined by the SRA?
A situation in which there is a clear
common purpose between the clients and a strong
consensus on how it is to be achieved
True or False:
A solicitor can act for a seller and buyer if they are competing for the same objective
False. A seller and buyer cannot compete for the same asset
True or False:
A solicitor can act for joint buyers
True, however, the solicitor must have regard as to whether a conflict of interest exists.
Generally, is it acceptable for a solicitor to act for a borrower and lender?
It is unlikely to be acceptable, unless the mortgage is on standard terms (the terms are non-negotiable)
Why is it generally unacceptable to act for both a borrower and lender? Give an example
Because there is a significant risk of a conflict of interest. For example, if the contract is negotiable, the lender will want a higher interest rate, whereas the borrower will want a lower one.
Give an example of a conflict between the duty of confidentiality and disclosure in relation to a borrower and lender
Recommended: If a borrower tells you that they will breach the terms of the mortgage but does not agree to tell the lender, then the duty of confidentiality trumps the duty of disclosure. Therefore, you must inform the lender that you must withdraw as their solicitor due to a conflict of interest.
What is it called when co-owners seek or obtain a mortgage?
Joint borrowers
What is the risk in acting for joint borrowers?
The presence of undue influence
Can a solicitor act for joint borrowers?
Yes, but they must be mindful of the steps needed to protect against undue influence
What is the effect of undue influence on joint borrowers?
Whoever was unduly influenced to enter into the contract has the right to void the contract if they so choose
True or False:
RBS v Etridge only applies to the wife
True
What is the guidance provided by RBS v Etridge for solicitors when dealing with a husband and wife that seek to use a co-owned property as security?
The solicitor should speak with the wife face to face without the husband. Advice should be given in non-technical language.
Following the guidance in rbs v ertridge, what are the 8 steps a solicitor should take to ensure that the wife is not being unduly influenced by her husband?
- Explain why you are involved, e.g. to protect against undue influence
- Explain that, if necessary, the lender will rely on the solicitor’s
involvement to counter a suggestion that the wife has been unduly
influenced. - Obtain confirmation from the wife that she wishes for the solicitor
to act and give advice on the implications of the transaction
4.Advice should include;
An explanation of the nature of the documents and the
practical consequences of signing them.
A warning as to the seriousness of the risks involved.
An explanation is that the wife has a choice whether to
proceed or not and the choice is hers and hers alone. - The solicitor must then check if the wife wishes to proceed and if
the wife is happy for the solicitor to write to the lender to confirm
that matters have been explained to her. - The solicitor should check that the following financial information
has been made available from the lender, and refuse to make
confirmation until they are received:
The purpose for which the loan is being made available;
The current amount of the husband’s indebtedness;
The amount of the current overdraft facility;
The amount and terms of the new facility; and
A copy of any written application made by the husband for
the facility. - It is not for the solicitor to veto the transaction, but if the solicitor
thinks that the transaction is not in the wife’s best interests, they
should give reasoned advice to that effect. Ultimately, the decision is
one for the wife. - If it is ‘glaringly obvious’ that the wife is being ‘grievously
wronged’, the solicitor should decline to act.
What is mortgage fraud?
When someone misrepresents info about themselves to obtain a mortgage or to get a larger mortgage than they should.
Under the Fraud Act 2006, when does someone commit fraud?
When they do not disclose info that they have a legal duty to disclose, or, falsely represent info
Under the Proceeds of Crime Act 2002, a solicitor risk committing a money laundering offence if they do what?
Acquire, use, have possession of, enter into an arrangement regarding, or transfer criminal property
