Change tracker – Code of Conduct

2007-07-01
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Rule 3: Conflict of interests

 

The Solicitors' Code of Conduct 2007 has been replaced on the 6 October 2011 by the SRA Code of Conduct 2011 as part of the introduction of outcomes-focused regulation.

Go to SRA Handbook

Rule 3 of the Code of Conduct was amended on 31 March 2009 as part of a general updating of the rules to introduce firm-based regulation and legal disciplinary practices as provided for in the Legal Services Act 2007.

 

Introduction

Rule 3 sets out provisions for dealing with conflicts of interests. Conflicts between the duty of confidentiality and duty of disclosure owed by an individual or a firm to two or more clients are dealt with in rule 4 (Confidentiality and disclosure).

SubrulesRules 3.01 to 3.03 deal with conflicts generally.

SubrulesRules 3.04 to 3.06 deal with conflicts in particular high risk situations – gifts from clients, public offices and appointments leading to conflict, and alternative dispute resolution (ADR).

SubrulesRules 3.07 to 3.22 deal with conflicts in conveyancing. Note the special meaning of "you" in 3.07 to 3.15 (acting for seller and buyer) and 3.16 to 3.22 (acting for lender and borrower). See also 18.03 which sets out additional requirements which apply to the provision of property selling services.

SubruleRule 3.23 sets out that there is no power to waive 3.01 to 3.05.

SubrulesRules 3.07 to 3.22 do not apply to your overseas practice unless the land conveyed is situated in England and Wales.

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 principalmanager, 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 principalmanager, 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)

    Rules 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)authorised to do the work, 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)

      is a company;

    • (ab)

      does not undertake conveyancing;

    • (bc)

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

    • (cd)

      has no participating firm with majority control;

    • (e)

      has at least one participating firm which is a recognised body or recognised sole practitioner; and

    • (f)

      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.

A "participating firm" means a recognised sole practitioner, recognised body or authorised non-SRA firm which is a manager or owner of the SEAL, or one or more of whose managers or owners is a manager or 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)individuals who are authorised to do the work;

  • (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)

    Rules 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)). Rules 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 Board. 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)the firm or any of its managers or owners, 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), any of its managers or owners, or a member of their immediate family; and/or

      • (iii)

        the solicitor or RELindividual 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 above 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 solicitorlawyer 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 Council of the Law SocietySolicitors Regulation Authority Board (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 Board shall not have power to waive any of the provisions of 3.01 to 3.05.

ANNEX

CERTIFICATE OF TITLE

Details box

TO: (Lender)
Lender's Reference or Account No:
The Borrower: Property:
Title Number: Mortgage Advance:
Price stated in transfer:
Completion Date:
Conveyancer's Name & Address:
Conveyancer's Reference:
Conveyancer's bank, sort code and account number:
Date of instructions:

WE THE CONVEYANCERS NAMED ABOVE CERTIFY as follows:

  • (1)

    If so instructed, we have checked the identity of the Borrower (and anyone else required to sign the mortgage deed or other document connected with the mortgage) by reference to the document or documents precisely specified in writing by you.

  • (2)

    Except as otherwise disclosed to you in writing:

    • (i)

      we have investigated the title to the Property, we are not aware of any other financial charges secured on the Property which will affect the Property after completion of the mortgage and, upon completion of the mortgage, both you and the mortgagor (whose identity has been checked in accordance with paragraph (1) above) will have a good and marketable title to the Property and to appurtenant rights free from prior mortgages or charges and from onerous encumbrances which title will be registered with absolute title;

    • (ii)

      we have compared the extent of the Property shown on any plan provided by you against relevant plans in the title deeds and/or the description of the Property in any valuation which you have supplied to us, and in our opinion there are no material discrepancies;

    • (iii)

      the assumptions stated by the valuer about the title (its tenure, easements, boundaries and restrictions on use) in any valuation which you have supplied to us are correct;

    • (iv)

      if the Property is leasehold the terms of the lease accord with your instructions, including any requirements you have for covenants by the Landlord and/or a management company and/or by a deed of mutual covenant for the insurance, repair and maintenance of the structure, exterior and common parts of any building of which the Property forms part, and we have or will obtain on or before completion a clear receipt for the last payment of rent and service charge;

    • (v)

      if the Property is a commonhold unit, the commonhold community statement contains the terms specified by you and does not include any restrictions on occupation or use specified by you as unacceptable, and we have or will obtain on or before completion a commonhold unit information certificate;

    • (vi)

      we have received satisfactory evidence that the buildings insurance is in place, or will be on completion, for the sum and in the terms required by you;

    • (vii)

      if the Property is to be purchased by the Borrower:

      • (a)

        the contract for sale provides for vacant possession on completion;

      • (b)

        the seller has owned or been the registered owner of the Property for not less than six months; and

      • (c)

        we are not acting on behalf of the seller;

    • (viii)

      we are in possession of:

      • (a)

        either a local search or local search insurance; and

      • (b)

        such other searches or search insurance as are appropriate to the Property, the mortgagor and any guarantor, in each case in accordance with your instructions;

    • (ix)

      nothing has been revealed by our searches and enquiries which would prevent the Property being used by any occupant for residential purposes; and

    • (x)

      neither any principal nor any other solicitor or registered European lawyerindividual in the firm giving this certificate nor any spouse, child, parent, brother or sister of such a person is interested in the Property (whether alone or jointly with any other) as mortgagor.

WE:

  • (a)

    undertake, prior to use of the mortgage advance, to obtain in the form required by you the execution of a mortgage and a guarantee as appropriate by the persons whose identities have been checked in accordance with paragraph (1) above as those of the Borrower, any other person in whom the legal estate is vested and any guarantor; and, if required by you:

    • (i)

      to obtain their signatures to the forms of undertaking required by you in relation to the use, occupation or physical state of the Property;

    • (ii)

      to ask the Borrower for confirmation that the information about occupants given in your mortgage instructions or offer is correct; and

    • (iii)

      to obtain consents in the form required by you from any existing or prospective occupier(s) aged 17 or over of the Property specified by you or of whom we are aware;

  • (b)

    have made or will make such Bankruptcy, Land Registry or Land Charges Searches as may be necessary to justify certificate no. (2)(i) above;

  • (c)

    will within the period of protection afforded by the searches referred to in paragraph (b) above:

    • (i)

      complete the mortgage;

    • (ii)

      arrange for the issue of a stamp duty land tax certificate if appropriate;

    • (iii)

      deliver to the Land Registry the documents necessary to register the mortgage in your favour and any relevant prior dealings; and

    • (iv)

      effect any other registrations necessary to protect your interests as mortgagee;

  • (d)

    will despatch to you such deeds and documents relating to the Property as you require with a list of them in the form prescribed by you within ten working days of receipt by us of the title information document from the Land Registry;

  • (e)

    will not part with the mortgage advance (and will return it to you if required) if it shall come to our notice prior to completion that the Property will at completion be occupied in whole or in part otherwise than in accordance with your instructions;

  • (f)

    will not accept instructions, except with your consent in writing, to prepare any lease or tenancy agreement relating to the Property or any part of it prior to despatch of the title information document to you;

  • (g)

    will not use the mortgage advance until satisfied that, prior to or contemporaneously with the transfer of the Property to the mortgagor, there will be discharged:

    • (i)

      any existing mortgage on property the subject of an associated sale of which we are aware; and

    • (ii)

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

  • (h)

    will notify you in writing if any matter comes to our attention before completion which would render the certificate given above untrue or inaccurate and, in those circumstances, will defer completion pending your authority to proceed and will return the mortgage advance to you if required; and

  • (i)

    confirm that we have complied, or will comply, with your instructions in all other respects to the extent that they do not extend beyond the limitations contained in the Solicitors' Code of Conduct 2007, 3.19 (Conflict of interests – types of instruction which may be accepted).

OUR duties to you are limited to the matters set out in this certificate and we accept no further liability or responsibility whatsoever. The payment by you to us (by whatever means) of the mortgage advance or any part of it constitutes acceptance of this limitation and any assignment to you by the Borrower of any rights of action against us to which the Borrower may be entitled shall take effect subject to this limitation.

Signature box

SIGNED on behalf of THE CONVEYANCERS:

NAME of Authorised Signatory:

QUALIFICATION of Authorised Signatory:

DATE of Signature:

Guidance to rule 3 – Conflict of interests

General

  • 1.

    Subrules 3.01 to 3.05 mirror rule 16D of the former Solicitors' Practice Rules 1990. That rule was added to the Practice Rules in 2005 and was the first time that conflicts of interests, other than in relation to conveyancing, had been dealt with as a subject in statutory rule form. The previous requirements set out in Chapter 15 of The Guide to the Professional Conduct of Solicitors (1999) were subject to significant change. The main differences are set out below.

Conflict is defined – 3.01

  • 1.2.

    Conflict is defined as a conflict between the duties to act in the best interests of two or more different clients, or between your interests and those of a client. The definition appears in 3.01(2). This will encompass all situations where doing the best for one client in a matter will result in prejudice to another client in that matter or a related matter.

  • 2.3.

    The definition of conflict in 3.01(2) requires you to assess when two matters are "related". SubrRule 3.01(3) makes it clear that if the two matters concern the same asset or liability, then they are "related". Accordingly, if you act for one client which is negotiating with publishers for the publication of a novel, an instruction from another client alleging that the novel is plagiarised and breaches copyright would be a related matter.

  • 3.4.

    However, there would need to be some reasonable degree of relationship for a conflict to arise. If you act for a company on a dispute with a garage about the cost of repairs to a company car, your firm would not be prevented from acting for a potential bidder for the company, even though the car is a minor asset of the company and would be included in the purchase. If you act for a client selling a business, you might conclude that your firm could also act for a prospective purchaser on the creation of an employee share scheme which would cover all the entities in the purchaser's group, this work perhaps requiring the future inclusion of the target within the scheme and consideration as to whether this raised any particular issues.

  • 4.5.

    In each case, you will need to make a judgement on the facts. In making this judgement, you might want to consider the view of your existing client where you are professionally able to raise the issue with him or her. You should also take care to consider whether your firm holds any confidential information from your existing client which would be relevant to the new instructions and if so, to ensure that you comply with rule 4 (Confidentiality and disclosure).

You are or your firm is permitted to act with clients' consent in defined circumstances of conflict subject to suitable safeguards

  • 5.6.

    This reflects the fact that there may be circumstances in which, despite peripheral or potential conflict, the clients' best interests are served by you, or your firm, being able to act for two or more clients who are able to give informed consent. The circumstances in which you could act despite a conflict are set out in 3.02.

  • 6.7.

    Two different situations are defined. These are in 3.02(1) and (2):

    • (a)
      • (i)

        SubrRule 3.02(1) deals with the situation where the clients have a "common interest", they all want to continue to instruct you and it would be disproportionate, for example, in terms of cost and general disruption to their matter, to require them to instruct separate solicitors.

      • (ii)

        For there to be a "common interest" there must be a clear common purpose and a strong consensus on how it is to be achieved. However, it will be for you to decide objectively on the facts in each case whether there is a "common interest" and it is appropriate to act. In making this decision, you should always consider whether the clients will be represented even-handedly with equal weight being given to the instructions from each.

      • (iii)

        The "common interest" might arise, for example, where you are acting for several members of a family in relation to their affairs or acting for various individuals in the setting up of a company. Any areas of conflict must be substantially less important to all the clients than their common purpose and may, for example, relate to slightly different views on how the common purpose is to be achieved. It will be your duty to keep the differences under review with the clients and to decide if the point has been reached when it would be untenable to continue to represent all of them in a fair and open manner or without any of them being prejudiced.

      • (iv)

        There exist some multi-party complex commercial transactions, where sophisticated users of legal services, who have a common purpose, may expect a firm to act for two or more parties, because this will facilitate efficient handling of the matter (taking into account amongst other things the desire to complete the transaction quickly, the availability of necessary experience/expertise and the overall costs). Indeed in many cases it may already be accepted business practice for firms to act in this manner. An example is acting for different tiers of lenders (for example senior lenders and mezzanine lenders) and/or different parties (for example arrangers/underwriters and bond/security trustees) in entering into a financing transaction where there is already an agreed or commonly understood structure with regard to the ranking of their respective claims, the content of their respective obligations and associated commercial issues.

      • (v)

        While accepted business practice can be considered as a factor in determining whether an appropriate common purpose exists, you and your firm should always exercise caution when proposing to act in accordance with 3.02 and should be mindful of the residual test of reasonableness referred to in 3.02(3).

      • (vi)

        In some situations it might be possible for you to consider whether the retainer could be limited to those areas where there is no conflict with the clients seeking separate advice on any areas of conflict. This could only be done where the conflict did not undermine the overriding common purpose (see below for further guidance on limiting retainers).

      • (vii)

        In some circumstances it might be possible that, while a conflict would prevent you from acting for another party on all aspects of a matter, a mandate limited to a specific issue where there is common purpose might be accepted. For example, you may be retained by the owner of a company to advise on its disposal. In that case you would not generally be able to advise another party on the purchase of the company. However, in the hope and anticipation of a successful sale a seller client which is a sophisticated user of legal services might agree that you should also accept a limited retainer to provide competition law advice to the prospective purchaser regarding the filings for competition law purposes that would be required in the event that the two businesses were combined.

      • (viii)

        When acting under this exception, especially in family situations, you need to consider the developing legal position. Courts are likely to make a presumption of undue influence where one of the parties who is considered vulnerable through age or other circumstances places trust and confidence in the other party. In any situation of doubt it may well be in the best interests of the clients that they are separately represented.

    • (b)
      • (i)

        SubrRule 3.02(2) is intended to apply to specialised areas of legal services where the clients are sophisticated users of those services and conclude that rather than seek out new advisers they would rather use their usual advisers in the knowledge that those advisers might also act for competing interests. An "asset" is not necessarily physical, and can include a contract or a business opportunity. Examples where this exception might apply include:

        • (A)

          acting on insolvencies so that a firm can act for more than one creditor;

        • (B)

          acting for competing bidders, and/or for those involved with the funding of bidders, for a business being sold by auction; and

        • (C)

          acting for competing tenderers submitting tenders to perform a contract.

      • (ii)

        The wording of 3.02(2) is sufficiently wide to permit other transactional work in the commercial field where clients can give consent. Solicitors and their firms should exercise considerable caution when proposing to act in accordance with 3.02(2) in categories of work where to do so is not already accepted business practice.

      • (iii)

        SubrRule 3.02(2) should not be applied to disputes over assets other than in the context of corporate restructurings and insolvencies.

  • 7.8.

    Reasonableness is an important rider to 3.02. There may be situations where, despite compliance with 3.02, it would still not be reasonable to act. The apparent unequal bargaining position of the parties, concerns about the mental stability of one of the parties, a family arrangement where an elderly parent is providing security for their son's or daughter's business loan, and the importance of one of the clients to the firm may all be situations where instructions to act for both or all parties should be declined. Having accepted instructions you must be satisfied that you can act even-handedly for both or all clients and that, taking into account any limitations in a specific retainer, you do not favour one at the expense of the other(s).

  • 8.9.

    The criterion against which reasonableness will be judged is whether one client is at risk of prejudice because of the lack of separate representation. In relation to all situations where you are proposing to act for two or more clients under the provisions of 3.02, the onus will be on you to demonstrate why it was reasonable to act for all the clients at the time the instructions were accepted. Above all, you must be satisfied that unfettered advice can be given, without fear or favour, to the clients. You must also keep under review whether it remains reasonable to continue to act for them. You should also have regard to 1.04 (Best interests of clients) which requires you to act in the best interests of each of your clients.

  • 9.10.
    • (a)

      SubrRule 3.02(4) places obligations on you to discuss with the clients the implications of you, or your firm, continuing to act for all of them. You must be satisfied that the clients understand the issues and that their consent is independently and freely given. You should consider setting out in your initial terms of business letter the issues discussed in relation to the conflict of interests and how that might affect your ability to represent both or all of the clients as the matter progresses. Extreme caution will be required where one of the clients is particularly vulnerable due to mental health, language or other problems affecting their understanding of the issues, although where a litigation friend acts for a person who lacks capacity they will be able to consent on that person's behalf. Similarly, you must always be alert to situations where a client might be consenting under duress or undue influence and in those circumstances must insist on separate representation. For the avoidance of doubt, and for evidential purposes, you should always keep a written record of all discussions with the clients about the implications of your acting for them. You must always obtain all the clients' written consent on each occasion when acting under either of the exceptions.

    • (b)

      Where seeking informed consent under 3.02(1)(b) you should identify by name the other clients you or your firm propose(s) to act for, or be able to do so when their identities are known. Provided that you do this and comply with the requirements of 3.02(4), the obligation to obtain "informed" consent in 3.02(1)(b) will have been satisfied. Where consent is sought under 3.02(2), you need to comply with the requirements of 3.02(4) but you need not identify by name the other clients you or your firm propose(s) to act for.

  • 1011.

    When acting for two or more clients on a matter, or a related matter, there may be circumstances where you will have to cease acting for one or both clients. This may be in circumstances where no conflict was apparent when accepting instructions but a conflict subsequently arose or when acting under one of the exceptions and it becomes impossible to fulfil the conditions set out in 3.02. In these circumstances it is important to try and limit the disruption that will inevitably be caused for the clients. One way of doing this is to discuss and agree with the clients at the outset what will happen if a conflict arises and agree which client the firm would continue to represent where this is possible.

  • 1112.

    The rule does not specifically deal with potential or future conflict, although it does make clear that a significant risk of conflict should prevent a solicitor from acting. You should always be cautious, therefore, about accepting instructions where the possibility of future conflict is evident. The risks should be explained to the clients about the problems and expense which the requirement for future separate representation could bring.

Limited/defined retainers

  • 1213.

    There may be situations where, when acting for two or more clients, it is appropriate to continue to advise them but necessary to make clear that there are defined areas of conflict on which you cannot advise, and one or more of them may need separate advice. Your retainer with your clients will, when these situations arise, need to be limited to exclude those areas of work or advice. Care must always be taken, however, to ensure that the clients understand:

    • (a)

      exactly what you are proposing to deal with on their behalf; and

    • (b)

      those contested areas which are to be excluded from the retainer.

  • 1314.

    A limited retainer would be unlikely to be appropriate in any situation where one of the clients was disadvantaged in some way as against the other. This might be because of an unequal bargaining position or because one had some form of disability. In any situation where you agree to act for two or more clients by limiting the retainer it is important that you keep all developments under review to ensure that it remains appropriate to continue to act.

Professional embarrassment

  • 1415.

    There may be some circumstances in which you should refuse instructions when, although there is no actual conflict of interests as defined in rule 3, you might feel unable to do your best for a client because of some form of professional embarrassment. It may be, for example, that if you have acted for a client in the past and accept instructions to act against that client you may feel inhibited in doing your best for the new client because of the past relationship with the former client. If so, the instructions from the new client should be refused as you would, otherwise, be in breach of core duties 1.03 (Independence) and 1.04 (Best interests of clients).

  • 1516.

    There may also be situations where you and your firm are asked to act with consent, using an information barrier in accordance with rule 4 (Confidentiality and disclosure), but the information you hold and which you cannot disclose to your client is of such a nature that it would cause severe embarrassment to your firm if, or when, it later came to light that your firm held such information. It may be, for example, that you are asked to act for a client on the acquisition of a business in circumstances where confidential information is held by your firm that the business has a serious problem with its accounts. Similarly, it may be that you are asked to prepare an employment contract for a company which is planning to recruit an individual who is known, confidentially, to be under investigation for fraud. In those circumstances you and your firm would be seriously embarrassed acting for a client who you knew was wasting legal fees on an outcome the client would not want to pursue if in possession of the knowledge held by your firm. It could be argued that you are not acting in the best interests of the client (see 1.04 (Best interests of clients)) or that you are damaging public confidence in the profession (see 1.06 (Public confidence)).

  • 1617.

    Where professional embarrassment is not a factor and the circumstances which would otherwise prevent you from acting in 4.03 (duty not to put confidentiality at risk by acting) do not arise, it will be a purely commercial decision as to whether you should act against the interests of another client or former client, provided there is no conflict as defined in 3.01 or 3.02.

In-house practice

  • 1718.

    If you are employed as an in-house lawyer your employer is your client. The nature of this relationship may cause problems because you do not have the same freedom as a firm would have to decline instructions. There may be occasions, for example, when you are asked to advise your employer in situations where conflict or potential conflict arises between your interests and the interests of your employer. These include:

    • (a)

      where your personal interests as an employee may conflict with the interests of your employer who wants advice on a course of action which could be detrimental to you as an employee where, for example, a merger could lead to your redundancy;

    • (b)

      where your employer asks you to do something which would place you in breach of your professional obligations, for example, to file a document with the court which you know contains false information; or

    • (c)

      where your employer may act against your advice and, for example, engage in criminal activity which may require you to take action against your employer.

  • 1819.

    In relation to situations where your personal interests may conflict with a course of action proposed by your employer you need not necessarily be excluded from advising your employer. Your employer will usually be aware of exactly how you will be affected by its proposals, and if you are able to give objective advice on the legal issues where your expertise is required you would normally be free to do so. There may, however, be situations where you are so affected by the advice you are asked to give that you feel your objectivity and independence are impaired and in those situations you would have to ask your employer to seek other advice, either internally or externally. What is important in these situations is that there is transparency about your interests. Beyond that, you will have to make a judgement about whether you feel you have the necessary objectivity to advise.

  • 1920.

    If your employer was unaware of your interests – and, therefore, the potential for conflict - the position would be different. If, for example, you had a large shareholding in another company and your employer's proposed action could adversely affect the value of those shares then you would either have to disclose your interest or explain that a conflict prevented you from advising on that issue.

  • 2021.

    In situations where you are asked to act contrary to your professional obligations then you should not compromise your position and you must refuse to carry out instructions which would have this result, even if ultimately this led to the loss of your job.

  • 2122.

    There may be situations where there is a positive legal obligation on you to take action against your employer where, for example, your employer is engaging in money laundering or where there are "whistle blowing" obligations. Legal issues of this nature are beyond the remit of this guidance. They are situations where your relationship with your employer has reached the stage where you would need to consider the advisability of seeking legal advice on your own position.

  • 2223.

    Finally, as an in-house lawyer you are, under rule 13 (In-house practice), able to act for a limited number of other bodies and individuals. For example, if employed by a company, you may act for a holding, associated or subsidiary company of that company employer. If you do so you must ensure that you do not act in any situation where there would be a conflict between the interests of your employer and the other company for whom you are also acting (see 13.01 and 13.03). Similarly, if employed in local government you may act, for example, for local councillors in certain circumstances, provided you can comply with rule 3.

Co-defendants

  • 2324.

    In publicly funded cases, regulations require that one solicitor be appointed to act for all co-defendants in a legal aid case unless there is, or is likely to be, a conflict. The purpose of this is to ensure economy in the use of public funds by ensuring that a single solicitor represents co-defendants where it is proper to do so. The professional conduct obligations which deal with conflicts of interest have always prevented a solicitor or firm acting for two or more clients where there is a conflict or significant risk of a conflict arising between the interests of two or more clients. A solicitor can act, however, for co-defendants where conflict is not a factor. The difficulty often lies, however, in spotting potential conflict and deciding whether it is sufficiently real to refuse instructions.

  • 2425.

    Your starting point should always be your fundamental professional obligation to act in each client's best interests. Can you discharge this obligation to each client? This means first asking each client if they are aware of any actual or potential conflict between them and then, if they indicate that there is no such conflict, asking yourself whether you feel there are any constraints on the advice you would want to give to one client, or on the action you would want to take on that client's behalf, which are likely to arise because you act for another co-defendant.

  • 2526.

    A conflict of interest arises wherever there is a constraint of that sort, for example where it is in the best interests of client A:

    • (a)

      to give evidence against client B;

    • (b)

      to make a statement incriminating client B;

    • (c)

      to implicate client B in a police interview;

    • (d)

      to provide prejudicial information regarding client B to an investigator;

    • (e)

      to cross-examine client B in such a manner as to call into question his or her credibility;

    • (f)

      to rely upon confidential information given by client B without his or her consent; or

    • (g)

      to adopt tactics in the course of the retainer which potentially or actually harm client B.

  • 2627.

    If these obligations actually come into conflict when acting for two or more clients you will have to cease to act for one and often both. This can cause considerable disruption and expense, which is why the rules require that you should not accept instructions if there is a significant risk of this happening.

  • 2728.

    Many criminal clients will, of course, have retained you at the police station prior to a police interview and are thus not at that stage defendants. The obligations referred to above apply at this early stage, and you must be satisfied that accepting instructions on behalf of a client prior to a police interview does not place you in conflict with another client who is also to be interviewed. In order to assess whether you can act for both clients it is important that you do not interview the clients together and that you get instructions which are as full as possible from the first client before any substantive contact with the second client. However, never let the police deter you from seeing the second client because they think there is a conflict – that decision must be yours.

  • 2829.

    A further consideration when taking instructions at the police station, especially out of office hours when an immediate conflict check is not possible, is that the firm may already act for another defendant in that matter or information obtained at the police station may be relevant to another client on an unrelated matter. For example, the firm may be acting in divorce proceedings for a wife where violence is alleged and information that her husband has been charged with an offence involving violence would be relevant and may make it impossible to continue acting for the wife. This highlights the importance of carrying out a conflict check at the earliest opportunity.

  • 2930.

    When considering accepting instructions from more than one client in the same matter you need to assess not only whether there is a conflict at the outset, but whether events are likely to arise which will prevent you from continuing to act for one or both at a later stage in the proceedings. In almost all cases there will be some possibility of differences in instructions between the clients but the rules do not prevent you acting unless the risk of conflict is significant. Assessing the risk is often not easy. It is also important that where you have accepted instructions from co-defendants you remain alert to the risk of conflict arising as the case progresses.

  • 3031.

    When considering whether there is an actual conflict there are obvious indicators such as whether the clients have differing accounts of the important relevant circumstances of the alleged crime or where one seems likely to change his or her plea. There are also less obvious indicators. These would include situations where there is some clear inequality between the co-defendants which might, for example, suggest that one client is acting under the influence of the other rather than on his or her own initiative. If you are acting for both this may make it difficult for you to raise and discuss these issues equally with them. In trying to help one, you might be undermining the other. If you believe you are going to be unable to do your best for one without worrying about whether this might prejudice the other you should only accept instructions from one.

  • 3132.

    The risk of future conflict can be an even more difficult issue to assess. It may be that you have two clients who are pleading not guilty and who are apparently in total agreement on the factual evidence. Should they both be found guilty, you need to consider at the outset whether you would be able to mitigate fully and freely on behalf of one client without in so doing harming the interests of the other. It may be that one has a long list of convictions and is considerably older than the other. If so, it may be that the younger client with a comparatively clean record was led astray or pressurised into committing the crime and would want you to emphasise this in mitigation. If there is a significant risk of this happening you should not accept instructions from both.

  • 3233.

    Even where care is taken when accepting instructions from more than one client in the same matter there will inevitably be situations where a conflict subsequently arises. This will commonly happen where one defendant changes his or her plea or evidence. A decision will then have to be taken as to whether it is proper to continue to represent one client or whether both will have to instruct new firms. In making this decision you need to consider whether in the changed circumstances your duty to disclose all relevant information to the retained client will place you in breach of your duty of confidentiality to the other client. In other words, you need to decide whether you hold confidential information about the departing client which is now relevant to the retained client. If you do have such information then you cannot act for either client.

  • 3334.

    Following changes to regulations affecting publicly funded cases, some practitioners have reported pressure from some court clerks on solicitors to represent co-defendants even where there is a clear risk of conflict. Similar pressure has been applied by police at police stations prior to interviews. However, the professional rules of conduct preclude you acting for both clients in those circumstances, and the regulations are not intended to put solicitors in a position where they are asked to act contrary to their professional responsibilities. If asked by the court for your reasons why you cannot act for both defendants, you must not give information which would breach your duty of confidentiality to your client(s). This will normally mean that you can say no more than that it would be unprofessional for you to continue to act.

  • 3435.

    For the avoidance of doubt, you cannot resolve a conflict by instructing another firm or counsel to undertake the advocacy on behalf of one client. Neither can you pass one of the clients to another member of your firm. The rules make it quite clear that your firm cannot act for clients whose interests conflict.

  • 3536.

    Any decision to act, or not to act, for co-defendants should be recorded with a brief note of the reasons.

Mediation

  • 3637.

    There is no objection to your acting as a conciliator and mediator between parties in a dispute. However, in so acting you should have regard to the appropriate codes of practice such as those issued by the Law Society from time to time. These codes provide detailed guidance on dealing with conflict when acting as mediators.

Local authority client

  • 3738.

    If tendering for local authority work, your firm will need to consider how frequently the range of work is likely to give rise to conflicts between existing clients and the local authority, for example, in housing and custody matters where the firm acts against the local authority.

Insolvency practice

  • 3839.

    If you are a licensed insolvency practitioner you must consider whether any relationship which you have, or your firm has, with clients or others might affect your independence and create a conflict preventing you accepting an appointment to administer an insolvent estate or bankruptcy. See also rule 17 (Insolvency practice).

Your interests conflicting with the client's – 3.01(2)(b)

  • 3940.

    There are no circumstances where you can act for a client whose interests conflict with your own interests. The situations outlined in 3.02 where you can act for two or more clients whose interests conflict have no application in this situation. This is because of the fiduciary relationship which exists between you and your client which prevents you taking advantage of the client or acting where there is a conflict or potential conflict of interests between you and your client. Examples appear below.

  • 4041.

    In conduct there is a conflict of interests where you in your personal capacity sell to, or buy from, or lend to, or borrow from, your client. In all these cases you should insist the client takes independent legal advice. If the client refuses you must not proceed with the transaction.

  • 4142.

    You should never enter into any arrangement or understanding with a client or prospective client prior to the conclusion of a matter under which you acquire an interest in the publication rights with respect to that matter. This applies equally to non-contentious business.

  • 4243.

    Whilst you are entitled to take security for costs you should be aware of the risk of the court finding undue influence. Before you do take a charge over a client's property it is advisable, therefore, to suggest the client consider seeking independent legal advice. Such advice would not normally be essential unless the terms of the proposed charge are particularly onerous or would give you some unusual benefit or profit. It is, however, important always to ensure that the client understands that a charge is being taken and the effect of such a charge.

  • 4344.

    You are not able to secure costs by a first legal charge over your client's property if this means that you are entering into a regulated mortgage contract as a lender. A regulated mortgage contract is an investment which is regulated by the Financial Services Authority (FSA). It arises where the lender provides credit to an individual or trustee, and it is secured by a first legal mortgage on land which is in the United Kingdom, and at least 40% of the land is, or is to be, used as a dwelling by the borrower or, where the borrower is a trustee, by a beneficiary of the trust or by a related person. You must be authorised by the FSA in order to secure your costs in this way. Detailed guidance on this is in the booklet "Financial Services and Solicitors" available from the Professional Ethics Guidance Team.

  • 4445.

    You must always disclose with complete frankness whenever you have, or might obtain, any personal interest or benefit in a transaction in which you are acting for the client. In such circumstances, you must insist that the client receives independent advice.

  • 4546.

    Independent advice means both legal advice and, where appropriate, competent advice from a member of another profession, e.g. a chartered surveyor.

  • 4647.

    Your interests referred to in this rule may be direct (for example, where you seek to sell to or buy property from the client or lend to, or borrow from, the client), or indirect (for example, where your business interests lead you to recommend the client to invest in a concern in which you are interested).

  • 4748.

    This rule applies, therefore, not only where you are personally interested in a transaction, but equally where another person working in your firm has an interest of which you are aware and it impairs your ability to give independent and impartial advice.

  • 4849.

    The interests envisaged by this rule are not restricted to those of a primarily economic nature only. For example, if you become involved in a sexual relationship with a client you must consider whether this may place your interests in conflict with those of the client or otherwise impair your ability to act in the best interests of the client.

  • 4950.

    If you are a director of a company for which you act, or own shares in the company, you must consider whether you are in a position of conflict when asked to advise the company upon steps it has taken or should take. It may sometimes be necessary to resign from the board or for another solicitor (including a solicitor from the same firm if appropriate) to advise the company in a particular matter where your own interests conflict, or are likely to conflict. If acting for a company in which you have a personal interest you should always ensure that your ability to give independent and impartial advice is not, for that reason, impaired.

  • 5051.

    If you hold a power of attorney for a client you must not use that power to gain a benefit which, if acting as a professional adviser to that client, you would not be prepared to allow to an independent third party. This applies regardless of the legal position, for example, as to whether you could lend the donor's money to yourself.

  • 5152.

    You are free to negotiate your terms of business, including costs, with your clients. This includes negotiating conditional fees which are subject to statutory regulation. In all these negotiations you are not acting for the client. There may be situations, however, where the terms of business are particularly unusual and it would be prudent for you to suggest the client seeks independent advice. It would be advisable to do so if, for example, as part, or all, of your remuneration you are to receive shares in a company you are setting up on behalf of your client.

  • 5253.

    You need to consider whether the conditional fee agreement involves you in insurance mediation activities, such as arranging and/or advising on after the event insurance contracts, etc. Solicitors who carry on insurance mediation activities either need to be able to comply with the Solicitors' Financial Services (Scope) Rules 2001 or be authorised by the FSA. Detailed guidance is in the booklet Financial Services and Solicitors available from the Professional Ethics Guidance Team.

  • 5354.

    You must always be careful to ensure that any settlement achieved for a client, or any advice given in a non-contentious matter conducted on a contingency fee basis, is in the client's best interests and not made with a view to your obtaining your fee.

  • 5455.

    Where you discover an act or omission which would justify a claim against you, you must inform the client, and recommend they seek independent advice. You must also inform the client that independent advice should be sought in cases where the client makes a claim against you, or notifies an intention to do so. If the client refuses to seek independent advice, you should not continue to act unless you are satisfied that there is no conflict of interest. See 20.09 (Dealing with claims).

Accepting gifts from clients – 3.04

  • 5556.

    SubrRule 3.04 does not prevent you accepting a client's gift but does require the client to take independent advice where the gift is significant, or significant as compared with the client's likely estate and the reasonable expectations of prospective beneficiaries.

  • 5657.

    SubrRule 3.04 allows you to prepare a will for a family member under which you receive a significant gift without requiring the client to seek independent advice on that gift. However, extreme caution should always be exercised in these circumstances as your ability to give independent, dispassionate advice could easily be undermined by your relationship with others within, and outside, the family. The risk of conflict, therefore, is very high. If you are to receive a significant gift from the estate you need also to consider the reasonable expectations of the other prospective beneficiaries, who are likely to be your relatives. If, having taken these reasonable expectations into account, it appears that you are to receive a benefit which is in any way disproportionately large you should always ensure that the client is separately advised on that gift. "Prospective beneficiaries" in the context of this rule means others who would be reasonably expected to benefit because of their relationship to the client and their reasonable expectations would be dependent on the closeness of that relationship. An objective test would be applied in the event of a complaint.

  • 5758.

    There are other factors which should be taken into account when preparing a will for a family member under which you benefit. It may also be far easier for a close family member to talk through their proposals for their will with someone who has no personal interest in its contents and who is unlikely to be offended by any suggestions they might wish to make. Finally, your relative's bequests are secure from allegations of undue influence if their will is drawn by someone totally independent and who does not take a benefit from it. "Family member" is not defined in 3.04 to allow a flexible approach to be taken. Co-habitants are not included in the exception to independent advice because their legal position is less secure than those related by blood, marriage or adoption.

  • 5859.

    A "significant amount" for the purposes of 3.04 cannot be quantified because the particular circumstances of the proposed gift must be taken into account. In general, however, anything more than a token gift will be considered significant. If, therefore, anything more than a token amount is accepted without the client having separate advice (other than where you are acting for a family member as permitted by 3.04) you may be exposed to allegations of misconduct.

  • 5960.

    When considering whether a gift is of a "significant amount" the date of preparation of the document is relevant when determining the size of the estate.

  • 6061.

    If more than one gift is made to members of a firm, for example, £1,000 to each of the partners in the firm, they should be amalgamated for the purpose of establishing whether the gift is "significant".

  • 6162 .

    The implications of 3.04 need to be made clear to all members of your firm who take instructions from clients, whether solicitors or not. Supervision is important to ensure compliance.

  • 6263.

    Where you are given money or property to distribute for the benefit of others, such as in a secret trust, this is not considered to be a "gift" for the purposes of 3.04. However, care should be taken to ensure that records are kept confirming the arrangement and to ensure that the transaction is not one which could contain a potential for money laundering.

Public office or appointment leading to conflict – 3.05

  • 6364.

    Examples of the public offices and appointments which 3.05 covers are:

    • (a)

      local councillor;

    • (b)

      judicial appointments;

    • (c)

      justices and justices' clerks;

    • (d)

      gaming boardthe Gambling Commission;

    • (e)

      coroners;

    • (f)

      police authority;

    • (g)

      the Legal Services Commission's Regional Legal Services Committees; and

    • (h)

      Criminal Injuries Compensation AuthorityBoard.

  • 6465.

    Where you hold (or a member of your firm or family holds) any of these, or similar, offices or appointments it will be up to you in every case to consider:

    • (a)

      whether any political or other interest which you may have in connection with the office or appointment may conflict with, or affect, your duty to act in the best interests of any of your clients (including your ability to advise impartially and independently);

    • (b)

      whether any duties which arise from your office or appointment conflict with, or affect, your duty to act in the best interests of your clients;

    • (c)

      whether the terms of appointment, or any statutory provisions, restrict your ability to act in any particular matter; and

    • (d)

      whether there is likely to be a public perception that you have, or your firm has, been able to obtain an unfair advantage for your client(s) as a result of the office or appointment.

  • 6566.

    Where you are aware that a member of your firm or family has accepted an appointment it is important for you to consider whether there is likely to be a public perception of your firm gaining an unfair advantage for your client(s).

ADR and conflict – 3.06

  • 6667.

    You may provide ADR services as part of your practice or through a separate business. For more information on separate businesses see rule 21 (Separate businesses).

  • 6768.

    SubrRule 3.06 also applies when you provide ADR services through a separate business.

  • 6869.

    "ADR service" means the service provided by you when acting as an independent neutral, for example, as mediator, conciliator or arbitrator.

  • 6970.

    The SRA Board of the Solicitors Regulation Authority recommends that those who offer ADR services comply with a code of practice such as the Law Society's Code of Practice for Civil and Commercial Mediation and Code of Practice for Family Mediation.

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

  • 7071.

    SubrRules 3.07 to 3.15 set out the limited circumstances in which you may act for more than one party in conveyancing, property selling or mortgage related services. They apply to all types of conveyancing transaction, commercial and residential.

  • 7172.

    The general rule is that separate representation is required because conveyancing is an area where the risk of a conflict arising between two parties is high and where any conflict may affect a conveyancing chain.

  • 7273.

    When judging whether or not a transaction is "at arm's length", you need to look at the relationship between the parties and the context of the transaction. A transaction may be regarded as not "at arm's length", even if it is at market value or is stated to be on arm's length terms. A transaction would not usually be at arm's length, for example, if the parties are:

    • (a)

      related by blood, adoption or marriage, or living together;

    • (b)

      the settlor of a trust and the trustees;

    • (c)

      the trustees of a trust and its beneficiary or the beneficiary's relative;

    • (d)

      personal representatives and a beneficiary;

    • (e)

      the trustees of separate trusts for the same family;

    • (f)

      a sole trader or partners and a limited company set up to enable the business to be incorporated;

    • (g)

      associated companies (i.e. where one is a holding company and the other is its subsidiary within the meaning of the Companies Act 1985, or two associated companies); or

    • (h)

      a local authority and a company within the meaning of 13.08(c).

  • 7374.

    SubrRules 10.06(3) and 10.06(4) deal with the prohibition on acting for more than one prospective buyer, or for seller and buyer where there is more than one prospective buyer. These provisions recognise the inevitable conflict of interests which makes it impossible to act for more than one prospective buyer, or for the seller and one of several prospective buyers. If you were already acting for seller and buyer (for example, both are established clients), you would be unable to continue acting for both if another prospective buyer were introduced during the course of the transaction. There is a significant inherent conflict in these circumstances. It would be impossible, for example, to reconcile the interests of both clients if it were in the seller's best interests to exchange with the other prospective buyer.

  • 7475.

    The test of whether a person is an "established client" is an objective one – is it reasonable to regard the person as an established client? A seller or buyer who instructs you for the first time is not an established client. A former client is not necessarily the same as an established client. There needs to be a degree of permanence in the solicitor-client relationship as exemplified by some continuity of instruction over time and the likelihood of future instruction. An individual related by blood, adoption or marriage to an established client, or who is living with an established client, counts as an established client. A person also counts as an established client if selling or buying jointly with an established client.

  • 7576.

    The consideration will only count as £10,000 or less if the value of any property given in exchange or part exchange is taken into account.

  • 7677.

    A builder or developer who acquires a property in part exchange, and sells it on without development, is not selling "as a builder or developer" within the meaning of 3.10(c) and 3.13(c).

  • 7778.

    If acting for seller and buyer under the provisions of 3.07 to 3.15, you would have to stop acting for at least one of the clients if a conflict were to arise during the course of the transaction. Clients should be made aware of the consequent disruption and additional expense involved in such circumstances, and of the advantages of separate representation, before giving their written consent.

  • 7879.

    An RFL cannot undertake conveyancing. RELs may undertake conveyancing only if they are entitled to do so under regulation 12 of the European Communities (Lawyer's Practice) Regulations 2000 (SI 2000/1119).

  • 7980.

    The effect of 3.11 is as follows:

    • (a)

      if providing mortgage related services to the buyer (either through your own firm or a SEAL - see 3.12 for the definition of a SEAL which allows participating authorised non-SRA firms but requires at least one participating firm to be a recognised body or recognised sole practitioner), you may also provide property selling services to the seller (either through your own firm or a SEAL) and do the seller's conveyancing; and

    • (b)

      if providing property selling services to the seller through a SEAL (not your own firm), you may also provide mortgage related services to the buyer (either through your own firm or the SEAL) and do the buyer's conveyancing.

  • 8081.

    A SEAL may act for the seller and provide mortgage related services to the buyer; one of the participating firms may do the seller's conveyancing, and another participating firm may do the buyer's conveyancing.

Acting for lender and borrower in conveyancing transactions

  • 8182.

    There will be no breach of 3.16(2)(c) to (d) or 3.19 if the lender has certified that its mortgage instructions and documents sent pursuant to those instructions are subject to the limitations set out in 3.19 and 3.21, and certifies any subsequent instructions and documents in the same way. If there is no certification, when acting in a transaction involving the charge of property to be used solely as the borrower's private residence you must notify the lender that the approved certificate of title will be used and that your duties to the lender will be limited accordingly (see 3.20(b)). In other types of transaction, you should draw the lender's attention to the provisions of 3.19 and 3.21 and state that you cannot act on any instructions which extend beyond the matters contained in 3.19.

  • 8283.

    As an alternative to printing the approved certificate for each transaction, it is acceptable for a lender to use a short form certificate of title which incorporates the approved certificate by reference. The form must include, in the following order:

    • (a)

      the title "Certificate of Title";

    • (b)

      the contents of the details box in the order set out in the approved certificate (use of two columns is acceptable) but with details not required shaded out or stated not to be required; and

    • (c)

      the wording "We, the conveyancers named above, give the Certificate of Title set out in the annex to rule 3 of the Solicitors' Code of Conduct 2007 as if the same were set out in full, subject to the limitations contained in it."

    Administrative details, such as a request for cheque, may follow the Certificate of Title.

  • 8384.

    The approved certificate is only required for a transaction where the property is to be used solely as the borrower's private residence. The approved certificate need not, therefore, be used for investment properties such as blocks of flats, business premises such as shops (even if living accommodation is attached), or "buy to let mortgages" on properties which are not intended for owner-occupation.

  • 8485.

    You must inform the lender of the circumstances, in accordance with 3.18, so that the lender can decide whether or not to instruct you.

  • 8586.

    A lender's instructions (see 3.19(x)) may require a wider disclosure of your circumstances than 3.18 requires; and you must assess whether the circumstances give rise to a conflict. For example, there will be a conflict between lender and borrower if you become involved in negotiations relating to the terms of the loan. A conflict might arise from the relationship you have or your firm has with the borrower - for example, if you are, or your firm is, the borrower's creditor or debtor or the borrower's business associate or co-habitant.

  • 8687.

    In relation to 3.22(2), the limitations contained in 3.19 will not apply to the insertion into a recognised certificate of any information required by that certificate. For example, where the recognised certificate requires details of the parties' repairing obligations under a lease of the property, you may provide a summary of the relevant terms of the lease despite the general limitation contained in 3.19(i). However, any additions or amendments to the text of a recognised certificate to suit a particular transaction must not, to the extent to which they create an increased or additional obligation, extend beyond the limitations contained in 3.19.

  • 8788.

    Many lenders require their lawyer or licensed conveyancer to check the vires of corporate borrowers and that the correct procedures have been followed to ensure the validity of the mortgage. SubrRule 3.19(n) enables lenders to impose duties on their lawyer or licensed conveyancer in relation to the execution of the mortgage and guarantee. Within this context it is perfectly proper for a lender to require you to obtain such information as the circumstances may require in relation to the capacity of, or execution of documents by, the borrower, third party mortgagor or guarantor; for instance, by way of certified copy minutes or an opinion from a lawyer of the relevant jurisdiction as to the validity and enforceability of the security or guarantee given by a foreign registered company. There is no reason why you should not assist corporate clients by drafting minutes or board resolutions. You should not, however, certify the validity or passing of resolutions unless you were present at the meeting and have verified that it was convened and held strictly in accordance with all relevant requirements.

  • 8889.

    SubrRule 3.19(u) allows you to accept instructions from a lender to carry out administrative arrangements in relation to any collateral security. This expression includes associated debentures, collateral warranties, second charges, rent assignments, charges over rent income and deeds of priority. The administrative arrangements necessarily include the preparation and execution of the relevant documents and subsequent registration.