Solicitor negligence – when buying property
Property is likely to be the single most valuable asset that people will acquire in their lifetime. You want to be sure that there are no surprises once you have bought your property.
If your solicitor has missed something that they should have picked up on, and this has resulted in a financial loss to you, then you may have grounds for a claim.
We have set out below the most common areas of mistake, which lead to negligence claims against property solicitors:
Failing to take proper instructions on how the buyers wish to hold the property
When two or more people are buying a property together, it is essential to establish how the parties wish to hold the property.
Whether you are buying a property as a couple, with family members, or as a business asset with your business partner, it is vital that you consider what your respective interests are going to be in that property. You will need to decide how the property will be dealt with in the event of a sale of the property, the separation or breakdown of your personal or business relationship, or, indeed, upon the death of one of the co-owners.
There are two ways to hold property – joint tenants or tenants in common.
Where property is held as joint tenants, there is a presumption that the joint owners do not have a specific share in the property but they have equal shares instead. Upon the death of one of the joint owners, the deceased’s share in the property will automatically pass to the survivors, irrespective of the contents of his or her will.
Where property is held as tenants in common, each owner has a separate share, whether equal or unequal, in the property. A declaration of trust or ‘trust deed’ should set out the parties’ respective shares. A well drafted trust document will set out what rights the parties have in the event of one person wanting to sell or what will happen on the death of one of the parties. Unlike a joint tenancy, upon the death of one of the co-owners, the property does not automatically pass to the survivor. Instead it will pass in accordance with the deceased’s will (if there is one) or in accordance with intestacy laws (where there is no will).
It is obvious from the proprietorship register (Land Registry) whether the property is held as joint tenants or as tenants in common, as the latter will have a restriction stating that the property cannot be disposed of by a sole proprietor.
Surprisingly, a lot of negligence claims against solicitors arise as a result of the ownership not being clarified at all, or registered incorrectly and the consequences can be significant.
It is not uncommon for relationships to change over time, and if the title does not reflect what was originally agreed, this can result in financial loss to the owners, particularly if a dispute arises later on. The first thing that the effected party will look at is whether the property solicitor was at fault.
Failing to identify defects in the title and advise on any restrictions
The title document to a property sets out any express rights in favour of the property over neighbouring land, as well as any onerous rights or restrictions against the property for the benefit of neighbouring land.
Some of the common failures by solicitors in this area are failing to advise on any access rights/rights of way over the property; or more importantly failing to recognise that the property may lack the necessary access rights over adjoining property. It is also imperative that clients are asked to check the Land Registry plan to ensure that this accurately reflects ‘what is on the ground’.
It is also important for a solicitor to ask the buyers’ what their long terms plans are for the property. If the buyers intend to redevelop or alter the property in some way, then their solicitor will need to consider whether there are any restrictions registered against the title which will affect the buyers’ development plans, in addition to checking any planning constraints.
Restrictions may not only affect development of the property but could also restrict the use of the property by the owner e.g. the use may be strictly residential use for the use by a single family only or prohibit HMO’s (houses in multiple occupation).
Failure to carry out or advise on search results
Property solicitors will carry out ‘standard searches’ and these will include a local authority search, drainage and water search, environmental search, planning search and chancel repair search. There are other searches which may be recommended, depending on where the property is situated.
It is not enough to carry out the searches – it’s important that the buyer is advised fully on the results. The results will confirm whether or not the surrounding roads are public or private roads (in which case the solicitor needs to consider access rights over those roads), the planning history of the property, any proposed developments which may affect the property in surrounding areas, whether the sewage and water is connected to a mains water, any environmental issues (e.g. if the property is situated on contaminated land) and whether the owners could be under any liability to contribute towards the costs and maintenance of any private roads or towards the upkeep or maintenance of a local church.
Failure to advise on lease terms
When dealing with leasehold property, it is important for the solicitor to advise the buyer on the rights and obligations under the lease, as well as the rights and obligations of the other party (whether they are the landlord or the tenant).
Ground rent is a common area for negligence claims where leaseholders have not been advised, at the point of purchase, about any onerous ground rent provisions. There are many leases which contain doubling ground rents or express the rent to be a market rent for the property which could be substantially higher than the buyer expected, which is usually a nominal ground rent, particularly when they are acquiring a long leasehold interest.
Failing to advise on the term of the lease
Most lenders will require the remaining lease term to be over 60 years before agreeing to lend on the property. After a buyer has owned a leasehold property for 2 years they may be entitled to request a lease extension from their landlord (see Lease Extensions). If at the time of purchase of the property the lease was already nearing a term of 80 years the property solicitor should consider advising the buyer to ask the seller to instigate the lease extension process because when the lease gets below 80 years the premium for a lease extension substantially increases.
To find out more please contact any of our solicitors in the Professional Negligence team here.
If you are in the process of buying or selling property our Real Estate team are able to assist with this and can be contacted here.