Rule

3.01 Duty not to act

• (1)

  You must not act if there is a conflict of interests (except in the limited circumstances dealt with in 3.02).

• (2)

  There is a conflict of interests if:

  • (a)

    you owe, or your firm owes, separate duties to act in the best interests of two or more clients in relation to the same or related matters, and those duties conflict, or there is a significant risk that those duties may conflict; or

  • (b)

    your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter.

• (3)

  For the purpose of 3.01(2), a related matter will always include any other matter which involves the same asset or liability.

3.02 Exceptions to duty not to act

• (1)

  You or your firm may act for two or more clients in relation to a matter in situations of conflict or possible conflict if:

  • (a)

    the different clients have a substantially common interest in relation to that matter or a particular aspect of it; and

  • (b)

    all the clients have given in writing their informed consent to you or your firm acting.

• (2)

  Your firm may act for two or more clients in relation to a matter in situations of conflict or possible conflict if:

  • (a)

    the clients are competing for the same asset which, if attained by one client, will make that asset unattainable to the other client(s);

  • (b)

    there is no other conflict, or significant risk of conflict, between the interests of any of the clients in relation to that matter;

  • (c)

    the clients have confirmed in writing that they want your firm to act in the knowledge that your firm acts, or may act, for one or more other clients who are competing for the same asset; and

  • (d)

    unless the clients specifically agree, no individual acts for, or is responsible for the supervision of, more than one of those clients.

• (3)

  When acting in accordance with 3.02(1) or (2) it must be reasonable in all the circumstances for you or your firm to act for all those clients.

• (4)

  If you are relying on the exceptions in 3.02(1) or (2), you must:

  • (a)

    draw all the relevant issues to the attention of the clients before agreeing to act or, where already acting, when the conflict arises or as soon as is reasonably practicable, and in such a way that the clients concerned can understand the issues and the risks involved;

  • (b)

    have a reasonable belief that the clients understand the relevant issues; and

  • (c)

    be reasonably satisfied that those clients are of full capacity.

3.03 Conflict when already acting

If you act, or your firm acts, for more than one client in a matter and, during the course of the conduct of that matter, a conflict arises between the interests of two or more of those clients, you, or your firm, may only continue to act for one of the clients (or a group of clients between whom there is no conflict) provided that the duty of confidentiality to the other client(s) is not put at risk.

3.04 Accepting gifts from clients

Where a client proposes to make a lifetime gift or a gift on death to, or for the benefit of:

• • (a)

    you;

  • (b)

    any principal, owner or employee of your firm;

  • (c)

    a family member of any of the above,

and the gift is of a significant amount, either in itself or having regard to the size of the client's estate and the reasonable expectations of the prospective beneficiaries, you must advise the client to take independent advice about the gift, unless the client is a member of the beneficiary's family. If the client refuses, you must stop acting for the client in relation to the gift.

3.05 Public office or appointment leading to conflict

You must decline to act where you, a member of your family, or a principal, owner or employee of your firm holds some public office or appointment as a result of which:

• • (a)

    a conflict of interests, or a significant risk of a conflict, arises;

  • (b)

    the public might reasonably conclude that you, or your firm, had been able to make use of the office or appointment for the advantage of the client; or

  • (c)

    your ability to advise the client properly and impartially is inhibited.

3.06 Alternative dispute resolution (ADR)

If you provide ADR services you must not:

• • (a)

    advise or act for any party in respect of a dispute in which you or any person within your firm is acting, or has acted, as mediator;

  • (b)

    provide ADR services in connection with a matter in which you or any person within your firm has acted for any party; or

  • (c)

    provide ADR services where you or any person within your firm has acted for any of the parties in issues not relating to the mediation, unless that has been disclosed to the parties and they consent to your acting.

3.07 Acting for seller and buyer in conveyancing, property selling and mortgage related services

• (1)

  3.07 to 3.15 apply to the transfer of land for value, and the grant or assignment of a lease or some other interest in land for value. Both commercial and residential conveyancing transactions are covered. The terms "seller" and "buyer" include a lessor and lessee. "You" is defined in 23.01, but is to be construed in 3.07 to 3.15 as including an associated firm (see rule 24 (Interpretation) for the meaning of "associated firms").

• (2)

  You must not act for more than one party in conveyancing, property selling or mortgage related services other than as permitted by, and in accordance with, 3.08 to 3.15. "Property selling" means negotiating the sale for the seller. "Mortgage related services" means advising on or arranging a mortgage, or providing mortgage related financial services, for a buyer. "Mortgage" includes a remortgage.

3.08 Conveyancing transactions not at arm's length

Subject to the prohibition in 10.06(3) and 10.06(4), you may act for seller and buyer when the transaction between the parties is not at arm's length, provided there is no conflict or significant risk of conflict.

3.09 Conveyancing transactions at arm's length

Subject to the prohibition in 10.06(3) and (4), you may act for seller and buyer if the conditions set out in 3.10 below are satisfied and one of the following applies:

• • (a)

    both parties are established clients;

  • (b)

    the consideration is £10,000 or less and the transaction is not the grant of a lease; or

  • (c)

    seller and buyer are represented by two separate offices in different localities.

3.10 Conditions for acting under 3.09

In order to act for seller and buyer under 3.09 above, the following conditions must be met:

• • (a)

    the written consent of both parties must be obtained;

  • (b)

    no conflict of interests must exist or arise;

  • (c)

    the seller must not be selling or leasing as a builder or developer; and

  • (d)

    when the seller and buyer are represented by two separate offices in different localities:

    • (i)

      different individuals (either solicitors or RELs qualified to do conveyancing under regulation 12 of the European Communities (Lawyer's Practice) Regulations 2000 (SI 2000/1119) who normally work at each office, conduct or supervise the transaction for seller and buyer; and

    • (ii)

      no office of the firm (or an associated firm) referred either client to the office conducting the transactions.

3.11 Property selling and mortgage related services

Subject to the prohibition in 10.06(3) and (4), you may act for seller and buyer if the conditions set out in 3.13 below are satisfied and one of the following applies:

• • (a)

    the only way in which you are acting for the buyer is in providing mortgage related services; or

  • (b)

    the only way in which you are acting for the seller is in providing property selling services through a Solicitors' Estate Agency Limited (SEAL).

3.12 SEALs and participating firms

A SEAL means a recognised body which:

• • (a)

    does not undertake conveyancing;

  • (b)

    is owned jointly by at least four participating firms which are not associated firms and none of which has majority control;

  • (c)

    is conducted from accommodation physically divided from, and clearly differentiated from that of any participating firm; and

  • (d)

    a "participating firm" means a firm one or more of whose principals (or members if it is an LLP, or owners if it is a company) is part owner of the SEAL.

  3.13 Conditions for acting under 3.11

  In order to act for seller and buyer under 3.11 above, the following conditions must be met:

  • (a)

    the written consent of both parties must be obtained;

  • (b)

    no conflict of interests must exist or arise;

  • (c)

    the seller must not be selling or leasing as a builder or developer;

  • (d)

    different individuals must conduct the work for the seller and the work for the buyer and, if these individuals need supervision, they must be supervised by different solicitors or RELs who are qualified to do conveyancing under regulation 12 of the European Communities (Lawyer's Practice) Regulations 2000 (SI 2000/1119);

  • (e)

    you must inform the seller in writing, before accepting instructions to deal with the property selling, of any services which might be offered to a buyer, whether through the same firm or any associated firm; and

  • (f)

    you must explain to the buyer, before the buyer gives consent to the arrangement:

    • (i)

      the implications of a conflict of interests arising;

    • (ii)

      your financial interest in the sale going through; and

    • (iii)

      if you propose to provide mortgage related services to the buyer through a SEAL which is also acting for the seller, that you cannot advise the buyer on the merits of the purchase.

3.14 Special circumstances in property selling and conveyancing

If any of the circumstances set out in 3.09 apply (established clients; consideration of £10,000 or less; representation by two separate offices), you may sell the property, provide mortgage related services, and act for seller and buyer in the conveyancing, subject to the prohibition in 10.06(3) and (4) and compliance with the conditions set out in 3.10 and 3.13 as appropriate.

3.15 Conflict arising when acting for seller and buyer

If a conflict arises during the course of a transaction in which you are acting for more than one party, you may continue to act for one of the parties only if the duty of confidentiality to the other party is not at risk.

3.16 Acting for lender and borrower in conveyancing transactions

• (1)

  3.16 to 3.22 cover the grant of a mortgage of land and are intended to avoid conflicts of interests. "Mortgage" includes a remortgage. Both commercial and residential conveyancing transactions are covered. "You" is defined in 23.01, but is to be construed in 3.16 to 3.22 as including an associated firm (see rule 24 (interpretation) for the meaning of "associated firms").

• (2)

  You must not act for both lender and borrower on the grant of a mortgage of land:

  • (a)

    if a conflict of interests exists or arises;

  • (b)

    on the grant of an individual mortgage of land at arm's length;

  • (c)

    if, in the case of a standard mortgage of property to be used as the borrower's private residence only, the lender's mortgage instructions extend beyond the limitations contained in 3.19 and 3.21, or do not permit the use of the certificate of title required by 3.20; or

  • (d)

    if, in the case of any other standard mortgage, the lender's mortgage instructions extend beyond the limitations contained in 3.19 and 3.21.

3.17 Standard and individual mortgages

• (1)

  A mortgage is a "standard mortgage" where:

  • (a)

    it is provided in the normal course of the lender's activities;

  • (b)

    a significant part of the lender's activities consists of lending; and

  • (c)

    the mortgage is on standard terms.

  An "individual mortgage" is any other mortgage.

• (2)

  A mortgage will not be on standard terms if material terms in any of the documents relating to the mortgage transaction are negotiated between the lender's and borrower's lawyers or licensed conveyancers contemporaneously with effecting the mortgage. In commercial transactions, the element of negotiation will often relate to the facility letter or facility agreement rather than the mortgage deed itself.

• (3)

  Provided there has been no contemporaneous negotiation of material terms between the parties' lawyers or licensed conveyancers, a mortgage will be on standard terms where the lender uses a prescribed form of mortgage deed. Minor variations, such as the usual clause limiting the liability of trustee mortgagors, are not regarded as material and do not alter the nature of these terms as standard.

• (4)

  In addition to its normal standard terms, a lender may have a different set or sets of standard terms applicable to specialised types of borrower, such as registered social landlords. Provided these terms are applied by the lender to all equivalent specialist borrowers or have been agreed between the lender and a specialist borrower as applicable to all transactions between them, they will constitute standard terms for the purposes of 3.16 to 3.22.

• (5)

  The lender and the borrower must be separately represented on the grant of an individual mortgage at arm's length (see 3.16(2)(b)). 3.16 to 3.22 are not then applicable.

• (6)

  You may act for both lender and borrower in a standard mortgage (see 3.16(2)(c) to (d)), provided:

  • (a)

    there is no conflict of interests;

  • (b)

    the mortgage instructions do not go beyond the limits set out in 3.19; and

  • (c)

    in the case of a property to be used solely as the borrower's private residence, the approved certificate of title set out in the annex to rule 3 is used.

• (7)

  The limitations of 3.19 also apply to a standard mortgage where the lender and the borrower are separately represented (see 3.22(1) which includes certificates of title). However, 3.22(2) allows the borrower's lawyer or licensed conveyancer, in a transaction where the property is not to be used solely as the borrower's private residence, to give a certificate of title in any form recognised by the Board of the Solicitors Regulation Authority. You also remain free to give any other form of certificate which complies with this rule.

• (8)

  There may be cases where the lapse of time between the mortgage offer and completion (for example, when new properties are added) results in use of an earlier edition of a recognised certificate. That is acceptable.

3.18 Notification of certain circumstances to lender

• (1)

  If you wish to act for both lender and borrower on the grant of a standard mortgage of land, you must first inform the lender in writing of the circumstances if:

  • (a)

    the prospective borrower is:

    • (i)

      a principal in the firm (or a member if the firm is an LLP, or owner or director if the firm is a company), or a member of their immediate family;

    • (ii)

      a principal in an associated firm (or a member if the firm is an LLP, or owner or director if the firm is a company), or a member of their immediate family; and/or

    • (iii)

      the solicitor or REL conducting or supervising the transaction, or a member of their immediate family; or

  • (b)

    you propose to act for seller, buyer and lender in the same transaction.

• (2)

  "Immediate family" means spouse, children, parents, brothers and sisters.

3.19 Types of instruction which may be accepted

If acting for both lender and borrower in a standard mortgage, you and the individual solicitor or REL conducting or supervising the transaction may only accept or act upon instructions from the lender which are limited to the following matters:

• • (a)
    • (i)

      taking reasonable steps to check the identity of the borrower (and anyone else required to sign the mortgage deed or other document connected with the mortgage) by reference to a document or documents, such as a passport, precisely specified in writing by the lender;

    • (ii)

      following the guidance given by the Law Society or the Solicitors Regulation Authority on property fraud and on money laundering;

    • (iii)

      checking that the seller's conveyancers (if unknown to you) appear in a current legal directory or hold practising certificates issued by their professional body; and

    • (iv)

      in the case of a lender with no branch office within reasonable proximity of the borrower, carrying out the money laundering checks precisely specified in writing by the lender;

  • (b)

    making appropriate searches relating to the property in public registers (for example, local searches, commons registration searches, mining searches), and reporting any results specified by the lender or which you consider may adversely affect the lender; or effecting search insurance;

  • (c)

    making enquiries on legal matters relating to the property reasonably specified by the lender, and reporting the replies;

  • (d)

    reporting the purchase price stated in the transfer and on how the borrower says that the purchase money (other than the mortgage advance) is to be provided; and reporting if you will not have control over the payment of all the purchase money (other than a deposit paid to an estate agent or a reservation fee paid to a builder or developer);

  • (e)

    reporting if the seller or the borrower (if the property is already owned by the borrower) has not owned or been the registered owner of the property for at least six months;

  • (f)

    if the lender does not arrange insurance, confirming receipt of satisfactory evidence that the buildings insurance is in place for at least the sum required by the lender and covers the risks specified by the lender; giving notice to the insurer of the lender's interest and requesting confirmation that the insurer will notify the lender if the policy is not renewed or is cancelled; and supplying particulars of the insurance and the last premium receipt to the lender;

  • (g)

    investigating title to the property and appurtenant rights; reporting any defects revealed, advising on the need for any consequential statutory declarations or indemnity insurance, and approving and effecting indemnity cover if required by the lender; and reporting if you are aware of any rights needed for the use or enjoyment of the property over other land;

  • (h)

    reporting on any financial charges (for example, improvement or repair grants or Housing Act discounts) secured on the property revealed by your searches and enquiries which will affect the property after completion of the mortgage;

  • (i)

    in the case of a leasehold property:

    • (i)

      confirming that the lease contains the terms stipulated by the lender and does not include any terms specified by the lender as unacceptable;

    • (ii)

      obtaining a suitable deed of variation or indemnity insurance if the terms of the lease are unsatisfactory;

    • (iii)

      enquiring of the seller or the borrower (if the property is already owned by the borrower) as to any known breaches of covenant by the landlord or any superior landlord and reporting any such breaches to the lender;

    • (iv)

      reporting if you become aware of the landlord's absence or insolvency;

    • (v)

      making a company search and checking the last three years' published accounts of any management company with responsibilities under the lease;

    • (vi)

      if the borrower is required to be a shareholder in the management company, obtaining the share certificate, a blank stock transfer form signed by the borrower and a copy of the memorandum and articles of association;

    • (vii)

      obtaining any necessary consent to or prior approval of the assignment and mortgage;

    • (viii)

      obtaining a clear receipt for the last payment of rent and service charge; and

    • (ix)

      serving notice of the assignment and mortgage on the landlord;

  • (j)

    in the case of a commonhold unit:

    • (i)

      confirming receipt of satisfactory evidence that common parts insurance is in place for at least the sum required by the lender and covers the risks specified by the lender;

    • (ii)

      confirming that the commonhold community statement contains the terms specified by the lender and does not include any restrictions on occupation or use specified by the lender as unacceptable;

    • (iii)

      enquiring of the seller (or the borrower if the property is already owned by the borrower) and the commonhold association as to any known breaches of the commonhold community statement by the commonhold association or any unit-holder, and reporting any such breaches to the lender;

    • (iv)

      making a company search to verify that the commonhold association is in existence and remains registered, and that there is no registered indication that it is to be wound up;

    • (v)

      obtaining the last three years' published accounts of the commonhold association and reporting any apparent problems with the association to the lender;

    • (vi)

      obtaining a commonhold unit information certificate; and

    • (vii)

      serving notice of the transfer and mortgage of the commonhold unit on the commonhold association;

  • (k)

    if the property is subject to a letting, checking that the type of letting and its terms comply with the lender's requirements;

  • (l)

    making appropriate pre-completion searches, including a bankruptcy search against the borrower, any other person in whom the legal estate is vested and any guarantor;

  • (m)

    receiving, releasing and transmitting the mortgage advance, including asking for any final inspection needed and dealing with any retentions and cashbacks;

  • (n)

    procuring execution of the mortgage deed and form of guarantee as appropriate by the persons whose identities have been checked in accordance with any requirements of the lender under (a) above as those of the borrower, any other person in whom the legal estate is vested and any guarantor; obtaining their signatures to the forms of undertaking required by the lender in relation to the use, occupation or physical state of the property; and complying with the lender's requirements if any document is to be executed under a power of attorney;

  • (o)

    asking the borrower for confirmation that the information about occupants given in the mortgage instructions or offer is correct; obtaining consents in the form required by the lender from existing or prospective occupiers of the property aged 17 or over specified by the lender, or of whom you are aware;

  • (p)

    advising the borrower on the terms of any document required by the lender to be signed by the borrower;

  • (q)

    advising any other person required to sign any document on the terms of that document or, if there is a conflict of interests between that person and the borrower or the lender, advising that person on the need for separate legal advice and arranging for them to see an independent conveyancer;

  • (r)

    obtaining the legal transfer of the property to the mortgagor;

  • (s)

    procuring the redemption of:

    • (i)

      existing mortgages on property the subject of any associated sale of which you are aware; and

    • (ii)

      any other mortgages secured against a property located in England or Wales made by an identified lender where an identified account number or numbers or a property address has been given by the lender;

  • (t)

    ensuring the redemption or postponement of existing mortgages on the property, and registering the mortgage with the priority required by the lender;

  • (u)

    making administrative arrangements in relation to any collateral security, such as an endowment policy, or in relation to any collateral warranty or guarantee relating to the physical condition of the property, such as NHBC documentation;

  • (v)

    registering the transfer and mortgage;

  • (w)

    giving legal advice on any matters reported on under 3.19, suggesting courses of action open to the lender, and complying with the lender's instructions on the action to be taken;

  • (x)

    disclosing any relationship specified by the lender between you and the borrower;

  • (y)

    storing safely the title deeds and documents pending registration and delivery to or as directed by the lender; and

  • (z)

    retaining the information contained in your conveyancing file for at least six years from the date of the mortgage.

3.20 Using the approved certificate of title

In addition, if acting for both lender and borrower in a standard mortgage of property to be used as the borrower's private residence only:

• • (a)

    you must use the certificate of title set out in the annex to rule 3 (below) ("the approved certificate"); and

  • (b)

    unless the lender has certified that its mortgage instructions are subject to the limitations contained in 3.19 above and 3.21 below, you must notify the lender on receipt of instructions that the approved certificate will be used, and that your duties to the lender are limited to the matters contained in the approved certificate.

3.21 Terms of rule to prevail

The terms of 3.16 to 3.20 above will prevail in the event of any ambiguity in the lender's instructions, or discrepancy between the instructions and 3.19 or the approved certificate.

3.22 Anti-avoidance

• (1)

  Subject to (2) below, if acting only for the borrower in a standard mortgage of property you must not accept or act upon any requirements by way of undertaking, warranty, guarantee or otherwise of the lender, the lender's solicitor or other agent which extend beyond the limitations contained in 3.19.

• (2)

  Provided the property is not to be used solely as the borrower's private residence, (1) above does not prevent you from giving any form of certificate of title recognised from time to time by the Board of the Solicitors Regulation Authority (a "recognised certificate"). Additions or amendments which arise from the individual transaction may be made to the text of a recognised certificate but, to the extent to which they create an increased or additional obligation, must not extend beyond the limitations contained in 3.19.

3.23 Waivers

In spite of 22.01(1) (Waivers), the Board of the Solicitors Regulation Authority shall not have power to waive any of the provisions of 3.01 to 3.05.