Should a Solicitor Act for Both Buyer & Seller in a Property Transaction?
If you were in the process of buying a property, would you be concerned if you were told that the same firm of solicitors was also acting for the seller? Or perhaps you are wondering whether it is possible to speed up the process and save money at the same time by using the same firm as the other party involved?
At one time it was common for the same solicitor to act jointly for both buyer and seller in property transactions. Commonly referred to as “dual representation”, buyers who did not have their own solicitor were frequently recommended by agents and brokers to use the seller’s solicitor. It stood to reason that doing so would aid communications between a buyer and seller, avoiding duplicity and time wasting, since there is no need for letters and documents to be posted back and forth.
Whilst in theory dual representation sound like a good idea, in practice it can create more problems than it solves. Following numerous complaints about solicitors acting for both parties, in recent years having separate solicitors (or “separate representation”) is considered best practice and has become the more common approach.
In this piece, we look at some of the reasons why dual representation is not a good idea.
What is a conflict of interest in conveyancing?
There are two types of conflicts of interests:
1. “Own Interest Conflict”: this is where a solicitor’s duty to act in a client’s best interest conflicts with their own interests (e.g. a financial or personal interest)
2. “Client Conflict”: this is any situation where the solicitor carries out separate duties in the best interests of two or more clients in relation to the same or related matters – but those duties conflict or there is a significant risk that they will conflict.
It is this second category where problems with dual representation arise.
While current rules and regulations for solicitors do not make separate representation compulsory, they do place substantial restrictions on the circumstances in which the same solicitor or firm can act on behalf of both buyer and seller.
The Solicitor’s Code of Conduct
The Solicitor’s Code of Conduct explains that a solicitor must not represent both parties to the transaction if there is a conflict of interest or a significant risk of there being a conflict at some point during the matter. This does not automatically prevent a solicitor from acting for both parties, though due to the very nature of property transactions, it is highly likely that the interests of Seller and Buyer will be in conflict – even at the outset when the price is agreed the Seller will want the best price and the Buyer the cheapest – meaning that is likely that a solicitor will find him or herself breaking the rules. Where a conflict arises, the firm must cease acting for both parties immediately which would result in delays, wasted costs and inconvenience.
When deciding whether to accept dual representation a solicitor must assess the risk of a conflict arising during the course of the transaction. Some of the factors that a solicitor will need to consider include:
– Level of complexity
– The likelihood of having to make negotiations (in property transactions these are almost always inevitable)
– The bargaining power of the respective parties
– A vulnerability of either party
– Any disruption and additional costs incurred by parties should the solicitor have to cease acting
If a firm of solicitors decides to act for both parties they must be able to demonstrate effective procedures to identify and assess potential conflicts of interest. This will include the following safeguards:
– The seller and buyer are represented by two different individuals from within the firm;
– The parties are informed in writing of the risks and potential consequences (e.g. inconvenience, delay and possible additional costs) if the firm must cease acting
– That the factors considered by the conveyancer in reaching their decision to act for both parties are recorded
– The parties’ informed consent was given in writing before proceeding
Although – as listed here, the risk of a conflict arising can be mitigated, the possible advantages of speed and efficiency rarely outweigh the risks. The risk might first appear trivial on the surface, but if it in some way prevents a solicitor from acting in the best interests of either party then he or she must cease acting immediately. There are also concerns that dual representation can lead to an increase in fraud and a reduction in consumer confidence.
Because Timms Solicitors want the freedom to be able to always act in our clients best interests, we will almost always decline requests to work on behalf of buyers and sellers who are involved in the same transaction. There may be a few isolated circumstances where dual representation is considered appropriate for specific reasons, but in the majority of separate representation is required to protect both parties’ best interests.