Ken Swinton makes the case for mandatory separate legal representation for home buyers and their mortgage lenders in all conveyancing transactions, arguing that the conflict of interest is real.
If you had to reduce the ethical standards for Scottish solicitors to just two they would be the duty of confidentiality and the duty to avoid conflicts of interest. Both have their place in the consolidated Scottish Solicitors Practice Rules. Solicitors may not act for two parties’ whose interests conflict. However a solicitor may act in a situation where there is no present conflict but the potential for conflict is recognised. One type of this situation is acting for the buyer and lender in a conveyancing transaction.
The problem faced by the solicitor is appreciating in the course of what is a pressured situation whether a conflict has arisen and if so how to resolve it. Prof Rennie provided a response to the Working Party which reported before the AGM which elegantly summed up the issue. His experience indicated that solicitors identified one party as the primary client and the other as the secondary and resolved issues in favour of the former. The primary client was inevitable the client who was present and the remote lender was the secondary client. That resolution was to the effect that there was no conflict of interest. It therefore should come as no surprise that of the 30 solicitors responding to the survey carried out by McVey & Murricane 22 did not report any conflicts of interest in the preceding three years (Scottish Legal News, September 11, 2013). That survey is of course far too small to draw any statistically relevant conclusions.
So here is a test for you- which of the following would constitute a conflict?
Your purchaser client tells you the day before settlement that he is glad his purchasing will be completing. It will give time to get the house sorted out before he goes freelance next year and gives up his job.
On receipt of your state for settlement two weeks before settlement the client says she had not really budgeted for all the costs of the mortgage, buying and furnishing the flat so she is going to have to rent out the spare room to cover costs.
The buyer phones you to ask if there is anyway he can get out of the contract. His employer has just announced a 90 day consultation period for redundancies and he is at risk.
Your client advises you in the course of the transaction that she has just been diagnosed with cancer and the prognosis is poor.
In each case you owe a duty of confidentiality to the client. At the same time under the CML Handbook these are matters which might affect the underwriting of the loan and ought to be disclosed. Each example is a clear conflict of interest and nothing to do with the process of conveyancing for which you were engaged. Sep Rep means that the solicitor is not faced with that type of dilemma.