Conveyancing Solicitors Negligent in New Build Purchase

With the expansion of house and flat building throughout the UK, and the tendency for agents marketing the new properties to suggest that buyers use high volume conveyancing firms to deal with the transaction, there is a higher than ever before risk of conveyancing transactions for new build properties being negligently mishandled, causing financial loss, delays and other issues. 

Samuels Solicitors have recently assisted a buyer of two new build flats from a developer, who suffered significant financial losses when their conveyancing solicitors were negligent during the purchase process. 

Background to the Dispute 

The buyer instructed conveyancing solicitors to deal with their purchase of two new build flats from a developer. The conveyancing solicitors went through the usual steps of raising enquiries and preparing a report on title (a document prepared by the solicitors for the client, which summarises the legal, physical and financial status of a property before exchange of contracts). The developer sent the buyer's solicitors a copy of their residential warranty policy document which stated that, in the event of the developer ceasing to trade, the insurer would either pay any additional costs required to complete the build or refund any deposit the buyer had paid. 

Contracts were exchanged for both flats, and the buyer paid the two deposits. 

In a typical conveyancing transaction, once deposits are paid (usually 10% of the total purchase price), they do not have to be returned to the buyer, even if the transaction dos not complete. It is therefore vitally important that conveyancing solicitors check that there is adequate insurance in place to protect buyers, if they have paid a deposit and then a purchase falls through. It works differently in a new build transaction - the contract in this case said that if the developer didn’t serve a notice to complete by a certain date, the buyer could rescind the contract and the developer had to return the deposit. 

The developer of the new build flats could then not be contacted prior to completion of the build and ultimately went into administration. This meant that even though the buyer had paid deposits for the two flats, the transactions could not complete. The buyer sought to recover their deposits via the warranty but cover was declined. It turns out that the developer had not registered the warranty.

What did the Conveyancing Solicitors do Wrong?

The buyer's conveyancing solicitors made serious errors in their handling of these transactions. They failed to:

1. check that the developer's warranty had been registered. If they had carried out the necessary checks, they would have discovered that it was not registered, at which point the buyer could have been advised about the risks of paying the deposits with no insurance protection; and
2. check the financial status of the developer. Accounts filed at Companies House, showed that the developer was running at a huge loss and this was not considered by the buyer's conveyancing solicitors at any time. 

Because of these failures by the buyer's conveyancing solicitors, the buyer lost their deposits. They could not sue the developer for the return of the deposit money, as the developer had gone into administration.

Claiming Against Conveyancing Solicitors for Negligence

With the help of Samuels Solicitors, the buyer successfully argued that their conveyancing solicitors had been negligent, and that they should compensate the buyer for the losses they had suffered. 

The first step in this negligence claim was for the buyer to demonstrate that the conveyancing solicitor owed them a duty of care. This is beyond question, as the buyer's conveyancing solicitors had a duty to act with reasonable skill, care and diligence. They also had a duty to act in the buyer's best interests. 

The second step in the negligence claim was for the buyer to show that the duty of care had been breached. As the conveyancing solicitors had failed to check that a valid policy of insurance was in place, and failed to check the financial status of the developer, they breached their duty to the buyer. 

Thirdly, the buyer had to show that they had suffered financial loss as a result of the conveyancing solicitor's negligence. The buyer could not recover their deposits under the warranty or from the developer, because of the mistakes made by the conveyancing solicitors. 

The buyer was therefore able to claim five figures in compensation from their negligent conveyancing solicitors, as well as their legal costs. 

Has Your Conveyancing Solicitor Caused You Financial Loss?

When you are buying a new build property, there is always a risk that you could lose your deposit if your conveyancing solicitors don't ensure that there is a warranty in place to cover your deposit between exchange and completion. Your conveyancing solicitors should ask the seller for a certificate confirming that the warranty has been registered. 

If your conveyancing solicitor's mistake made you lose your deposit, you should be able to make a claim against them for compensation. At Samuels Solicitors we have decades of experience helping clients who have been let down by other solicitors. We understand the issues and how important it is that you recover your losses quickly. 

If you would like to speak to one of our expert lawyers about a mistake made by another solicitor, contact us today to find out how we can help. 

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