CQS - Standard Practice & Procedure

1. CQS - Standard Practice & Procedure CQS Supporter

2. Contents • Introduction • Learning Outcomes • Part 1. Law Society Conveyancing Protocol • Part 2. Standard Conditions of Sale • Part 3. Law Society Code for Completion by Post • Further Resources • Next Steps

3. Introduction Welcome to this official online training course and assessment for members of firms which have successfully applied for Year 2 re-accreditation under the Law Society’s Conveyancing Quality Scheme (the ‘CQS’). Course authors This training course was devised and written in March 2012 by Andrew Crawford and Peter Reekie. Welcome Click each name to find out more about the authors: Peter Reekie Andrew Crawford

4. Introduction Peter Reekie Andrew Crawford Professor Peter Reekie is Property Training Consultant with Penningtons and Visiting Professor at The College of Law. Peter is also director of Peter Reekie Associates Ltd., which provides legal training services to lawyers and other professionals. Previously he spent some years in private practice dealing with residential and commercial property work, worked for the College of Law and was managing director of Legal Network Television. Peter writes for publication and lectures extensively at property law conferences, seminars and related events. He is Consultant Materials Editor for the College of Law’s Structured Commercial Property Programme and Consultant Editor of the Conveyancing Handbook 18th edition (Law Society, 2011).

5. Introduction Peter Reekie Andrew Crawford Andrew Crawford works mainly for Central Law Training delivering a range of practical courses on residential conveyancing designed to help delegates be more efficient and knowledgeable in the office. Andrew has worked in private practice throughout his career. He qualified in 1980 and became a partner with Thomas Eggar LLP in 1986 where he was responsible for a large residential property team based on five sites. Andrew left practice in 2010 to concentrate on his lecturing work. Andrew is a past President of Chichester District Law Society. He has been involved in training for many years and is well known on the lecture circuit.

6. Learning Outcomes The purpose of this course is to build upon the Year 1 CQS training on the Law Society Conveyancing Protocol. Following this course candidates should be able to understand: • a number of important practical and procedural points raised by the Law Society Conveyancing Protocol; • certain key provisions of the Standard Conditions of Sale 5th Edition; and • a number of detailed aspects of the Law Society Code for Completion by Post.

7. Law Society Conveyancing Protocol 1. Law Society Conveyancing Protocol

8. Law Society Conveyancing Protocol: Introduction • For many years the Law Society has set out its preferred practice for conveyancing transactions involving domestic freehold and leasehold property in a protocol. • The current Law Society Conveyancing Protocol(the ‘Protocol’) came into effect on 1 April 2011 and is at the heart of the CQS. • The Protocol comprises a set of general obligations, standard procedures in tabular form, and a timetable. The procedures are organised in stages (A-F) and modelled on a typical residential transaction. The Law Society has also produced A Guide to the Law Society Conveyancing Protocol to assist with the use and interpretation of the Protocol. • The tabular format shows what is expected of a firm acting for the seller, buyer and lender at each stage of transaction, and indicates when other parties such as the agent, and broker are involved.

9. Law Society Conveyancing Protocol: Introduction • Aims • The aims of the Protocol are, principally: • to ensure a good standard of conveyancing work is undertaken • by all those complying with the Protocol; • to set out an agreed method of working which will maximise efficiencies in the course of a transaction to those subscribing to it; • to improve communication between the parties and stakeholders; • to provide the parties and other stakeholders with an understanding of the residential conveyancing process.

10. Law Society Conveyancing Protocol: Introduction • Use of the Protocol by the CQS • In order to be accredited under the CQS a firm must nominate a Senior Reporting Officer (SRO). The SRO must sign a Practice Agreementwith the Law Society which requires the SRO to: • The use of the Protocol ensures members of the CQS adhere to consistent quality standards and demonstrates the credibility of the firm to key stakeholders, including clients, regulators, lenders and insurers. • A firm accredited by the CQS should ‘still act within the spirit of the Protocol’ (A Guide to the Law Society Conveyancing Protocol, para.2.5). • If one party’s conveyancer does not agree to adopt the Protocol, this does not prevent its use by the other party’s conveyancer (see the Interpretation section of the Protocol). “ ..use all reasonable endeavours to ensure that all Relevant Members of Staff within the Practice shall…comply with the new Conveyancing Protocol, as applicable… ”

11. Law Society Conveyancing Protocol: Introduction • Application of the Protocol • The Protocol is designed for use in sales and purchases of freehold and leasehold residential property. • At the commencement of a transaction it will be necessary to decide if the Protocol applies. To decide whether the Protocol applies, the Law Society recommends the following are considered: • ‘the use of the property; • the nature of the transaction; • the nature of the parties; • the nature of the contract; • the nature of any mortgage.’ • (A Guide to the Law Society Conveyancing Protocol, para.2.4). • Having decided the Protocol applies there may still be matters in a specific transaction that make some deviation from the Protocol necessary and/or desirable.

12. Law Society Conveyancing Protocol: Introduction • Breach of the Protocol • Members of a firm accredited by the CQS are encouraged to report a suspected breach of the Protocol to the Law Society’s CQS team. • The Guide to the Law Society Conveyancing Protocol outlines, at para.2.5, the likely procedure when a firm accredited by the CQS which has agreed to adopt the Protocol fails to comply with its requirements: • A material breach or repeated breaches in the same transaction may result in CQS staff requiring the SRO to supply an explanation. • Repeated cases of serious default will be monitored. • Where necessary, monitored cases may be adjudicated under the membership rules of the CQS. • Repeated cases of serious default may result in expulsion from the Scheme.

13. Law Society Conveyancing Protocol: Introduction • General obligations • It is recommended that you familiarise yourself again with the 12 ‘general obligations’ which preface the Protocol. These obligations are explained in the ‘Interpretation’ section of the Protocol and in A Guide to the Law Society Conveyancing Protocol. • Firms are reminded at the beginning that the duty to act in the best interests of the client takes precedence over the provisions of the Protocol. • The first general obligation requires you to obtain agreement from the client to enable you to act in accordance with the Protocol. Other obligations provide, broadly, that: • you are required to deal with the person acting on the other side of the transaction in a courteous and helpful manner; • you agree to divulge information about the transaction and your client's circumstances, subject always to your overriding duty of confidentiality to your client.

14. Question Is the following statement True or False? “ In order to comply with your Protocol obligations it would be sensible to explain to your client at the start about the requirement of disclosure and obtain their consent in writing to you disclosing relevant information concerning their transaction to the other side. ” True False

15. Question Is the following statement True or False? “ In order to comply with your Protocol obligations it would be sensible to explain to your client at the start about the requirement of disclosure and obtain their consent in writing to you disclosing relevant information concerning their transaction to the other side. ” True False The correct answer is True. (General obligation 1 requires you to seek instructions and set out the limits of the retainer, particularly in relation to obtaining the client’s agreement to act as the Protocol requires.)

16. Law Society Conveyancing Protocol: Stage A Sharing information Item 4 of the Protocol requires each party’s conveyancer to establish if their respective client has a related sale/purchase, whether an offer has been accepted, and whether there is any ‘linked transaction or chain of transactions’. For example, the transaction may be linked to a re-mortgage of another property, and this information should be established and a discussion with the client should take place about the possible timetable in which the transaction might reasonably be completed. General obligation 7 states that you should ‘share information with others to assist in the efficient management of each transaction or chain of transactions’ if you have obtained the client's consent to the disclosure of information (and clients ‘should not encouraged to withhold authority unless there are exceptional circumstances’).

17. Question Is the following statement True or False? “ Under the Protocol you should reveal to the other side information about your client’s circumstances that might dictate the timing of the transaction or your client's ability to proceed, assuming your client has consented to this. ” True False

18. Question Is the following statement True or False? “ Under the Protocol you should reveal to the other side information about your client’s circumstances that might dictate the timing of the transaction or your client's ability to proceed, assuming your client has consented to this. ” True False The correct answer is True. (General obligation 7 requires you to ‘share information with others to assist in the efficient management of each transaction…’)

19. Law Society Conveyancing Protocol: Stage A If you are acting for a buyer, you must check whether the buyer is in rented accommodation and, if so, establish from your client details of their tenancy and its termination date or what arrangements might be needed to give notice to terminate (see Protocol: Item 4). Co-owners Where there is more than one buyer you will need to advise them ‘generally as to shared or joint ownership’ (Protocol: Item 4). Advice will include, for example, information on the various ways property may be held in joint names and whether an express declaration of trust should be drawn up. You will need to take detailed instructions and consider if more than one party is contributing a greater part of the purchase price or might in the future contribute a greater amount to the repayment of any mortgage or for any capital expenditure or any disproportionate payment in respect of outgoings. You should be conscious of the possibility of undue influence being exerted by one party against another and the risk of conflict in seeking to act for more than one client. Buyer in rented accommodation

20. Law Society Conveyancing Protocol: Stage A Surveys When acting for a buyer you should suggest the buyer ‘consults an independent surveyor for advice on valuation and survey’ (Protocol: Item 5). In practice caution should be exercised because it may be that some surveyors recommended by some estate agents might have financial connections with that estate agent or may be owned by an associated company of the estate agent A mortgage valuation report carried out on behalf of the lender to check the value of the property is not a survey. If acting for the lender, the conveyancer should also have regard to the provisions in the CML Lenders’ Handbook relating to the lender’s valuation report (section 4) or BSA Mortgage Instructions (C2-C6).

21. Law Society Conveyancing Protocol: Stage A Click each box to find out about the different types of survey: RICS Condition Report RICS HomeBuyer Report Building Survey

22. Law Society Conveyancing Protocol: Stage A Click each box to find out about the different types of survey: RICS Condition Report RICS HomeBuyer Report Building Survey This type of survey includes an inspection and a report in standard form by a surveyor. It does not include a market valuation nor opinion an on the reinstatement cost. It is intended for ‘a conventional house, flat or bungalow built from common building materials and in reasonable condition.’ The Report focuses on the condition of the property and includes: ‘• traffic light ratings of the condition of different parts of the building, services, garage and outbuildings, showing problems that require varying degrees of attention; • a summary of the risks to the condition of the building; and • other matters including guarantees, planning and building control issues for… legal advisers.’(RICS Home Surveys Information Sheet). For further information on survey types visit: www.rics.org and www.direct.gov.uk

23. Law Society Conveyancing Protocol: Stage A Click each box to find out about the different types of survey: RICS Condition Report RICS HomeBuyer Report Building Survey • The RICS HomeBuyer Report replaced the previous ‘RICS Homebuyer Survey and Valuation’. The HomeBuyer Report includes everything that’s in the cheaper Condition Report but also includes: • a market valuation; • an opinion of the reinstatement cost; • A ‘more extensive roof space and underground drainage inspection’ (RICS Home Surveys Information Sheet). • The reinstatement cost will help the buyer decide on the building insurance cover needed. For further information on survey types visit: www.rics.org and www.direct.gov.uk

24. Law Society Conveyancing Protocol: Stage A Click each box to find out about the different types of survey: RICS Condition Report RICS HomeBuyer Report Building Survey • The building survey (formerly the ‘structural survey’) is the most expensive and comprehensive option. The surveyor will make a detailed inspection of a wider range of issues. Unlike the Condition and Homebuyer Report, a building survey report does not come in a standard format. It gives detailed information about the structure and fabric of the property, and also aims to: • establish how the property is built, what materials were used, and how these will perform in future; • describe visible defects and expose potential problems posed by hidden defects; • outline the repair options • A building survey may be appropriate for ‘large, older or run-down property, a building that is unusual or altered, or if… planning major works.’ It does not include a market valuation nor an opinion on the cost of reinstatement.

25. Question Is the following statement True or False? “ The simplest of mortgage valuations carried out for a lender does not give detailed information concerning the fabric or condition of the building. ” True False

26. Question Is the following statement True or False? “ The simplest of valuations carried out for a lender does not give detailed information concerning the fabric or condition of the building. ” True False The correct answer is True. (A mortgage valuation is carried out to advise the lender of the value of a property and of any aspects of the property which might affect its value as security for the proposed loan.)

27. Law Society Conveyancing Protocol: Stage A • Source of funds (Protocol: Item 7) • The buyer’s conveyancer should: • ‘check availability, amount and source of deposit funds and purchase monies including whether a property is to be sold or mortgaged to provide funds’. • check whether any financial contribution is to be made by a third party and, if so, whether they require ‘external advice’. • consider the advice to be given to the lender in respect of such contributions if this needs to be disclosed under the terms of the CML Lenders’ Handbook, BSA Mortgage Instructionsor express instructions from the lender.

28. Law Society Conveyancing Protocol: Stage A If a contribution might affect the lender’s decision to lend then clearly it must be disclosed (with the borrower’s prior consent). If this consent is not forthcoming you must not continue to act for the lender. It is important to remember the general obligations of the Protocol in this respect, particularly: “ 2. Where acting for a lender as well as for a buyer/seller, the duties owed to the lender are no less important than they are for any buyer/seller, subject to the nature of the instructions. ”

29. Question Is the following statement True or False? “ If you are acting for a borrower and lender you should not disclose to the lender information about your borrower client unless you have the consent of the borrower to do so. ” True False

30. Question Is the following statement True or False? “ If you are acting for a borrower and lender you should not disclose to the lender information about your borrower client unless you have the consent of the borrower to do so. ” True False The correct answer is True. (See general obligation 7 of the Protocol and Outcome 4.1 of the SRA Code of Conduct 2011)

31. Law Society Conveyancing Protocol: Stage A Buildings insurance When acting for a buyer you should suggest that they obtain quotations for buildings insurance and advise that the terms of any policy taken out must be compliant with the lender’s requirement, if applicable (Protocol: Item 7). You should be familiar with the provisions of the CML Lenders’ Handbook and BSA Mortgage Instructions, and check the Part 2 requirements specific to the appropriate lender regarding which risks the insurance must cover. In the Statement of Principles on the Provision of Flood Insurance (July 2008) the insurance industry agreed to continue to insure certain types of properties against flood risk. This agreement is due to expire in 2013. It is possible that clients buying in a flood risk area may in the future find that either insurance premiums are more costly than before or that this cover may not be available. It would be prudent to link your advice with regard to buildings insurance to any information that you might obtain through searches on flood risk. Further information and advice is available on the Defra website.

32. Law Society Conveyancing Protocol: Stage A Redemption of the mortgage When acting for a seller who is an existing borrower, Item 7 of the Protocol requires that you should obtain a redemption figure at an early stage and give advice on the cost of obtaining redemption statements and of obtaining any updates. You should read the redemption statement and notify the client of redemption penalties or negative equity. If there is negative equity or for some other reason the seller will not be able to discharge all the registered charges from the proceeds of sale the possible courses of action should be discussed with the seller. If aware a redemption statement is for information purposes only and that there’s a possibility of the client drawing down further monies before completion, which will increase the redemption figure, take extra care and advise the client accordingly. It is important not to make a commitment to discharge the mortgage by way of an undertaking which you might not be able to fulfil. The client should be advised of the risk of exchanging contracts where the debt may not yet be certain, e.g. an "all monies charge” or where the lender allows continuing credit to the borrower secured by a mortgage.

33. Law Society Conveyancing Protocol: Stage A Leasehold properties When you are acting for a seller of a leasehold property you should, at an early stage, ‘obtain the original lease or official copy of the lease’ (Protocol: Item 12(1)). You should also obtain from your client the contact details for the landlord and/or the managing agent and you should establish if a standard form of landlord/management company replies to enquiries can be obtained and, if so, the cost. You should also consider, with your client, whether to submit a questionnaire to the landlord or the managing agent at this time. You will need to consider if any third parties need to consent to the sale (e.g. the landlord or management company) and, if so, establish the costs of obtaining such consent. It ‘should generally be accepted that the seller will discharge this liability’ (Protocol: Item 12(5)).

34. Law Society Conveyancing Protocol: Stage B Checking the identity of the other firm One of the aims of the Protocol is to reduce the opportunity for fraud. General obligation 4 requires a conveyancer adopting the Protocol to: “ Endeavour to maintain vigilance to protect and guard against fraudulent or other illegal behaviour encountered in the conveyancing process. ” A well managed firm adopting the Protocol will be able to assist in identifying a rogue firm. The key provisions of the Protocol in this respect are Items 21 and 22. Item 21 requires that, unless they are personally known to you, you should check the identity of the solicitor acting for the other party. You must also ‘follow the latest SRA and Law Society guidance and advice’ and ‘record and keep copies of evidence’ of identity of the firm(Protocol: Item 21)

35. Law Society Conveyancing Protocol: Stage B Checking the Identity of Other Firm: Law Society Advice The Law Society’s Mortgage Fraud Practice Note advises: “ • If you do not know [the conveyancer acting for the other side] you should check the recognised directory of their professional body. • Find a Solicitor • Directory of Licensed Conveyancers • You can also check a solicitor's details with the SRA over the telephone. Their contact number is 0870 606 2555. • Some fraudsters will try to assume the identity of professionals who actually exist. You should check that both the details and the final destination of documents match the details in the directory. You may consider contacting the firm directly by the contact details on the registry if you have concerns about the bona fides of the representatives on the other side to the transaction, particularly if there is a last minute change of representative. ”

36. Law Society Conveyancing Protocol: Stage B • Checking the identity of other firm • It is a requirement of Item 22 of the Protocol that you should contact the other party’s solicitor to establish: • the name of the conveyancer; and • the supervising solicitor or regulated principal. • You must also supply this information to the other side. • The purpose of this is to establish the identity of the fee earner and that the person responsible for the fee • earner’s work is duly qualified.

37. Question Is the following statement True or False? “ When acting for the buyer you need only request confirmation of the identity of the seller’s conveyancer and record and keep a copy of this evidence. ” True False

38. Question Is the following statement True or False? “ When acting for the buyer you need only request confirmation of the identity of the seller’s conveyancer and record and keep a copy of this evidence. ” True False The correct answer is False. (Item 22 of the Protocol requires you to confirm the name of the conveyancer and the supervising solicitor or regulated principal).

39. Law Society Conveyancing Protocol: Stage B Official copies Official copies, the title plan and copies of registered documents will have been obtained by the seller’s conveyancer at an earlier stage to establish title to the land and allow time to consider any defects (Protocol: Items 8 and 10). It is important for the conveyancer acting for the seller to ensure that entries in the register will be less than six months old at the time of submitting the contract bundle to the buyer’s conveyancer (Protocol: Item 12(2)).

40. Law Society Conveyancing Protocol: Stage B • Planning consents • If alterations or additions to the property have been carried during the seller’s ownership, the Protocol requires the seller’s conveyancer to include in the contract bundle: • planning permissions and/or building regulations consents and completion certificates; and • confirmation that the originals of the building plans will be handed over at completion, if these are being held (Protocol: Item 24(6)). • When acting for a buyer you should consider whether any further planning documentation is required and also whether this might be obtained from the local authority or planning authority website. • If any planning permissions were issued more than 20 years ago, the buyer’s solicitor should seek to obtain copies directly from the appropriate planning authority and not expect the seller to provide these (Protocol: Item 31).

41. Law Society Conveyancing Protocol: Stage B • Additional enquires • When acting for a buyer in receipt of the contract bundle from the seller’s conveyancer you should only raise those specific additional enquiries which are: • required to clarify issues arising out of the documents submitted; • relevant to the particular nature or location of the property; • expressly requested by the buyer (Item 32). • The purpose behind this Protocol requirement is to reflect the conveyancer’s duty to deal with matters of legal relevance and to avoid the conveyancer having to spend time on other matters that could be outside their expertise or retainer and could more properly be dealt with by the buyer’s own inspection, enquiry or by the employment of a surveyor. Indiscriminate use of ‘standard’ additional enquiries may constitute a breach of the Protocol. If such enquiries are submitted, the Protocol does not require the seller’s solicitor to deal with them (Protocol: Item 32).

42. Question Is the following statement True or False? “ Your firm uses a set of standard additional enquiries and sends these out on the occasion of each purchase. This is okay to do under the Protocol. ” True False

43. Question Is the following statement True or False? “ Your firm uses a set of standard additional enquiries and sends these out on the occasion of each purchase. This is okay to do under the Protocol. ” True False The correct answer is False. (Indiscriminate use of ‘standard enquiries’ may be a breach of the Protocol under Item 32.)

44. Law Society Conveyancing Protocol: Stage D From TA13 Completion Information and Undertakings (2nd edition) Form TA13 is a Law Society form, last updated in 2011 to coincide with the new edition of the Protocol. A copy of the form can be viewed here. Previous editions of the form were known as Completion Information and Requisitions on Title. Use of Form TA13 is required by the Protocol (Item 53) and by the Law Society Code for Completion by Post(para.5). The current Protocol introduced a change which requires form TA13 to be completed by the seller’s solicitor or licensed conveyancer and sent to the other side without waiting for a request to do so.

45. Law Society Conveyancing Protocol: Stage D • Transfer • The seller's solicitor should, prior to completion, supply a copy of the transfer that has been executed by the seller and which is intended to be handed over at completion (Protocol Item 56). • The purpose of this provision is to: • allow the buyer’s solicitor to check that execution of the transfer is satisfactory (e.g. to check that it has it been properly witnessed); and • allow the buyer’s conveyancer to satisfy himself there is no doubt that the transfer has indeed been signed.

46. Law Society Conveyancing Protocol: Stage D Transfer If the transfer needs to be signed by both the seller and the buyer it may be that there is insufficient time for the single form of transfer to be signed by both parties. In this situation the buyer may well have to execute a counterpart of the transfer. This is an approved procedure under the Protocol (Item 57.). In the Standard Conditions of Sale (5th edition) clause 4.3.2 provides for the buyer to produce the form of transfer. There is nothing in the Protocol that prevents this from being lawfully varied by the parties where necessary. (A Guide to the Law Society Conveyancing Protocol, para.4.4.) “ Many solicitors acting for the seller may draft the transfer and obtain the seller’s signature to it along with the sale contract in order to reduce the time required between exchange of contracts and completion. If this is done, the seller’s solicitor should submit a copy of the executed transfer to the buyer’s solicitor in advance in order to ensure that any corrections that may be required are undertaken prior to completion. ”

47. Law Society Conveyancing Protocol: Stage D • Official search • Item 57 of the Protocol requires the buyer's conveyancer to prepare and submit at ‘the appropriate time’: • an official search of the register with priority at the Land Registry (or a land charges search if the land is unregistered); and • a search of the bankruptcy register against the borrower’s name where acting for a lender. • It is obviously important to time the submission of your Land Registry search to maximise the priority period available to you post completion in order to complete your registration within this period. However, it is equally important not to leave the submission of the search until immediately prior to completion in case there is an adverse entry revealed which needs some investigation. It would therefore generally be appropriate to aim to receive your search result in good time to react to any untoward entries, e.g. at least five days before the completion date.

48. Law Society Conveyancing Protocol: Stage D Payment of the purchase price When acting for a buyer and obtaining funds from a lender you should send the certificate of title and/or requisition for funds to the lender or lender’s solicitor ‘promptly’ (Protocol: Item 80). Where the advance is to be sent by CHAPS, request wherever possible, that the lender’s advance is sent one working day before completion. You should notify the buyer, if applicable, that interest may be charged by the lender from the day of transmission.

49. Law Society Conveyancing Protocol: Stage E Adopting the Law Society Code for Completion by Post The Law Society Code for Completion by Post(the ‘Code’), last revised in April 2010, contains various obligations and undertakings that must be adhered to by a firm that adopts the Code. The reason that the Code is not an integral part of the Protocol is because the Code might be used where the Protocol is not being adopted e.g. in a commercial conveyancing transaction. If you agree to adopt the Protocol you will be impliedly agreeing to adopt the Code, where completion is to be by post (Protocol: Item 61)

50. Standard Conditions of Sale 2. Standard Conditions of Sale