The Conveyancing Protocol 2019

The Law Society has recently declared the implementation of a draft Conveyancing Protocol, set to be enforced in August, to facilitate the transition of residential and commercial lawyers towards a modernised digital contract exchange process in the 21st century. An explanation of The Law Society Conveyancing Protocol The Law Society’s Conveyancing Protocol issued a structured framework for solicitors to follow when handling the sale or purchase of a property. This protocol is specifically tailored for residential freehold and leasehold real estate transactions, excluding the acquisition of newly constructed homes. Practitioners accredited by the Conveyancing Quality Scheme (CQS) are required to adhere to the Conveyancing Protocol. Although solicitors are not obligated to utilise the protocol, it is highly recommended to follow it as closely as feasible. What is the reason behind The Conveyancing Protocol 2019?  Following the Court of Appeal’s ruling in Dreamvar [2018] EWCA Civ 1082, the Conveyancing Protocol of 2011 was substituted by the 2019 protocol, incorporating various changes. The case of Dreamvar (UK) Ltd v. Mishcon de Reya (MdR) involved the buyer taking legal action against their solicitors (MdR) for negligence and breach of trust. Furthermore, the buyer pursued a claim against the seller’s solicitors (Mary Monson Solicitors Ltd (MMS)) for breaching the warranty of authority, failing to fulfil an undertaking, and breaching trust. On 1st September 2014, Mr. Vardar conducted an inspection of a property. He initially offered £1 million but was informed that another developer had already made an offer. Subsequently, Mr. Vardar increased his offer to £1.1 million, which was welcomed. He then appointed MdR to represent Dreamvar in the purchase process. Mr. Vardar made MdR aware of the limited time available for completing all required research. He inquired about the possibility of proceeding with the project and the associated risks. On 3rd September, MdR notified MMS that they have been directed to represent Dreamvar in the purchase. MMS informed them that they had not yet received evidence of the seller’s identity or formal instructions for the sale, therefore preventing them from sending a contract pack to MdR. MdR sent Dreamvar a retainer letter regarding the purchase on that very day, however, the retainer letter failed to specify the conditions for MdR to hold and transfer the purchase funds to the seller or their solicitors. MdR was responsible for reviewing the contract pack, submitting pre-contract inquiries, and conducting essential searches. Before the 10th of September, MMS requested the seller to certify his identity and address. The seller presented copies of a driving licence and a TV licence, which were authenticated with the original documents by a solicitor from MMS. The seller happened to run into a MMS’ solicitor in the waiting room of Dennings, another law firm. Emitted just a short while ago on 28 August, the driving licence was only valid for 3 years. Nevertheless, it does provide the address of Broadfield Road. The TV licence was not part of the list of documents approved by the Law Society’s Anti-Money Laundering Practice Note for verifying the identity of UK-based clients. The judge deemed that no additional measures were taken to confirm the seller’s identity, and that no one from MMS had ever meet him. Preceding the trial, MMS admitted that they had not been efficient in obtaining the driving licence and TV licence as proof of identity. They accepted that they should have stood firm in meeting with the client and demanding valid proof of identity and address from him. The draft transfer was delivered to MMS by MdR on 16 September, along with a claim for title concerning rights of way over the property. MdR submitted their report on title deeds to Dreamvar, mentioning that only searches conducted by local authorities were still pending. Mr. Vardar expressed his willingness to proceed without these searches. Notably, the report did not raise any concerns regarding the possibility of identity theft by the seller. MdR asked for an indemnity insurance policy to ensure protection against any potential issues regarding rights of way on the property. The transfer has been confirmed, and MMS communicated to MdR that the contract had been dispatched to the seller for signing. On 17 September, MdR forwarded the purchase money to MMS. The simultaneous exchange and completion were conducted over the phone later the same day. It was the duty of MdR to retain control over the funds until the terms for MdR to hold and transmit funds were concluded. The seller requested on 16 September that MMS transfer the payment for the purchase to a different law firm, ‘Dennings‘, which was also his legal representative. Just a couple of days before, MMS had solicited the seller to furnish the essential information for the bank account where the funds from the transaction would be deposited. MMS viewed the order as atypical, nevertheless, they chose to continue in accordance with the instructions given in an email from Dennings‘ lawyer, advising on the seller’s actions regarding the procurement of machinery and equipment in China. After commencing work on the property, Dreamvar applied to register their title deed. The Land Registry managed to reach out the legitimate Mr. Haeems, thereby exposing the fraudulent activity. The Court of Appeal decided to uphold the appeals of MdR and Dreamvar, reversing the judge’s decision that MMS did not violate trust. Moreover, the Court chose not to grant relief to MdR under s.61 Trustee Act 1925, which at discretion, allows to excuse a breach if it is the court’s view that the trustee has ‘acted honestly and reasonably and ought fairly to be excused’ for the breach. Additionally, the Court sided with MdR and Dreamvar in their appeals against the judge’s dismissal of their claims against MMS related to a breach of the undertaking. Solicitors, estate agents, and other relevant individuals must comply with the Money Laundering Regulations (MLR), which enforces the adoption of customer due diligence measures when establishing a business relationship or carrying out occasional transactions. This obligation remains applicable, irrespective of any suspicions regarding the client’s involvement in money laundering or doubts about the accuracy of the identification documents or information given by the customer.