News releases

SRA seeks views on acting for seller and buyer

14 May 2007

The Solicitors Regulation Authority (SRA) wants to know what people think about solicitors' professional conduct obligations in relation to conflicts of interests when they want to act for seller and buyer in conveyancing, property selling and mortgage-related services.

There are several reasons for seeking views at this time. A simpler rule could be easier to understand; the advent of Home Information Packs on 1 June requires a fresh look at the rules relating to acting for sellers and buyers, and the current rule may unnecessarily limit the scope for solicitors to act, thus reducing options and increasing costs for clients.

The SRA aims to prevent solicitors acting where there is a risk of conflict of interests, but to allow them freedom to meet clients' needs and not unnecessarily restrict clients' choice of solicitor.

Three options for consideration

Option 1

The first option is to keep the rule as it stands. Currently, a solicitor can act for seller and buyer if he or she obtains the written consent on both parties, no conflict of interest exists or arises, and the seller is not selling as a builder or developer. If these conditions are met, the solicitor can act, but only in limited situations—for example, if seller and buyer are related to each other, or both are established clients of the solicitor.

An argument for keeping the current provisions is that past consultations indicated no need to change the rule, which has been in force for many years without serious problems.

Option 2

The second option is to scrap the rule and allow the general conflict provisions to apply. Arguments for this include simplicity and consistency with the wider rules on solicitors avoiding conflicts of interest.

The current rule says "a solicitor must not act for seller and buyer… if a conflict of interest exists or arises..." However, it then states that the solicitor can act only in limited situations. This "double hurdle" may be over-complex.

A single test—is a conflict present or likely?—may be easier for solicitors and clients to understand, and would allow solicitors to make appropriate decisions in each case.

Option 3

The third option would be to remove the rule and rely on the general conflict provisions, but with safeguards.

Due to the risks of conflict of interests in conveyancing, it may be that general conflict provisions should apply, but with safeguards requiring the solicitor to provide each client with an assessment of the risk of conflict, and information about the consequences of a conflict arising.

The solicitor would also have to obtain each client's written agreement to the firm acting. The agreement would be on the basis that if a conflict arose, the solicitor must cease acting for both parties, and could not charge for any work done. All material information would have to be freely disclosable between the clients. If, part-way through the transaction, one client decided he or she could no longer go along with this, the firm would have to stop acting for that client and not charge for any work already done.

The SRA is not considering completely banning acting for seller and buyer, because that would be disproportionate and unnecessary.

The consultation period ends 26 July 2007. To take part, visit www.consultations.sra.org.uk.