This article lays down principles that guide a conveyancing solicitor looking to represent both the buyer and the seller. It also discusses situations where there could arise a conflict of interest, between the parties and situations where it is allowed.
It is possible that a conveyancing solicitor may represent both, seller and buyer. This is usually done when both parties know the solicitor well and would not want anyone else to manage the conveyancing. The terms of the sale and the purchase can be recorded at the same time, thus saving duplicity and waste of time.
The Code of Conduct, Outcome (3.5) explains that a conveyancer shall not represent both parties to the transaction if there is likelihood of client conflict. Chapter 14 of the Code also explains what constitutes a client conflict. Accordingly, a client conflict occurs when the property solicitor owes a separate duty to act in the best interest of his clients in relation to the same or related matters and there is a conflict or there appears to be a risk of conflict. Such a conflict can exist from the start or during the transaction, when both parties have agreed to a deal, but further search or enquiry reveals information that could cause the buyer to reduce the price or insert a conditionality clause in the agreement. But it is up to the conveyancing solicitor to decide, if acting for both parties is likely to cause a client conflict. The conveyancing lawyer has to take the decision in light of factors like, if there is a need to negotiate between both the clients and if there is a likelihood of an imbalance in the bargaining, or if one of the clients is vulnerable. Such factors are discussed in detailed in Outcome 3.3 of the Code of Conduct.
The SRA Guide titled “Outcomes- focused regulation at a glance”, states that solicitor firms shall not act for both buyers and sellers when there is a high risk of conflict of interest. Such a conflict is reflected through Indicative behaviours(IBs) like:
- Refusing to act when there is a need to negotiate on issues related to price or other matters of substance.
- Refusing to act when there is an unequal bargaining power with one of the parties.
Adhering to IBs, shows that the conveyancing solicitor has complied with the principles set in the Code of Conduct. However, if the conveyancer has significantly acted for a buyer/lease or a seller/leaser, he is said to have not complied with the Principles set under the code of conduct.
However, notwithstanding anything said above, the solicitor can still represent both parties even if there is a client conflict when they have a common interest with respect to a particular aspect and safeguards (explained below) have been put in place. This is under Outcome 3.6 of the Code. It is important that the clients understand the risks and have given their consent to the risks, and the benefits far outweigh the risks. Chapter 14 of the Code also explains about ‘substantial common interest’. This is a situation when the common purpose with respect to the particular aspect is clear, and there exists a strong consensus on how this is to be achieved, and the client conflict is secondary to the common purpose. Here again, it is up to the conveyancing solicitor to decide on the common interest. However, when a solicitor is acting for both seller and buyer, but tends to show that the outcomes in Chapter 3 of the Code are not achieved, he is said to have not complied with the principles.
To reiterate the above mentioned points; a conveyancing solicitor can undertake conveyancing only under rare circumstances, when he is certain that there is no conflict of interest, and even if there is one, it is not related to the client’s interest. In instances, when the land is given as a gift, or transferred between parties who are related by blood, marriage, civil partnership or living together, it is possible that the solicitor may act for both parties. It is also possible in the commercial context between companies, when one party is the holding company and the other is the subsidiary company or between both subsidiary companies of a single holding company. However, it is not possible in instances when land is transferred for value.
In instances where it is allowed by the Code of Conduct to undertake conveyancing for both parties, the solicitor should cease to act for a party, if there occurs a conflict (or when the conflict does not remain unimportant) between the parties. However, he may continue to act for the other party, if it does not harm the confidentiality of the former client. However, in reality it is cumbersome and not practical to act for both parties and conveyancing solicitors avoid it, even in circumstances where the Code allows it.
What if same conveyancing solicitor acts for joint buyers and joint borrowers?
Acting for joint buyers is approved in the Code of Conduct, unless there is no conflict of interest. But in the case of residential buyers, especially those who are not married or in a civil partnership, it is important that the solicitor make understand the joint partners about their rights in the property.
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