News | Property solicitor breached conflict of interest rule in lease between family members

Consultant failed to ensure client’s parents-in-law had sought independent advice

3 August 2017

A property solicitor has been fined £1,500 and given a rebuke after taking instructions from an elderly couple’s daughter-in-law in the sale of their house and for acting for both sides in relation to a lifetime lease on an annexe the pair moved into at the younger couple’s home.

Conveyancing specialist Allan Hudson was a consultant with Howard Kennedy at time. The young couple, Mr and Mrs B, had been long-standing clients and he lent them £30,000. The loan was unsecured and there was no written agreement. It was understood that the Bs would repay Hudson by remortgaging their home.

Mrs B then asked Hudson to act for her parents-in-law, Mr and Mrs A, in the sale of their property. Following the sale, Mr and Mrs A moved into an annexe at the B’s home, under the terms of a lease which they paid for in a lump sum out of the proceeds of the sale of their home.

Hudson acted for the B’s in relation to the lease and told Mrs B on two occasions that Mr and Mrs A should seek independent legal advice on the matter.

Separately, the solicitor had asked Mrs B if she and her husband could repay the loan out of the premium Mr and Mrs A were paying for the lease. Mrs B agreed and gave Hudson a letter of authority signed by Mrs A – but not by Mr A, who did not fully understand the circumstances – allowing the solicitor to repay himself directly.

In a settlement agreement with the Solicitors Regulation Authority, Hudson admitted his conduct had been in breach of conflict of interests rules because he had acted “where he stood to financially benefit from the proceeds of the transaction he was dealing with”.

Further, he had “acted for two clients in related property transactions where their interests conflicted or where there was a significant risk that their interests would conflict”.

Hudson also admitted he breached the rule in principle 4 which requires solicitors to act in the best interests of each client. He had failed to take sufficient steps to ensure that Mrs B had authority to provide instructions on Mr and Mrs A’s behalf and to advise the elderly couple that they should seek independent legal advice in relation to the lease.

He should also have ensured that that Mr and Mrs A consented to the use of their money to repay the loan he had made to Mr and Mrs B.

In mitigation, the SRA noted that Mrs B had been a longstanding client of Hudson’s, whom he trusted enough to personally lend her £30,000 on an unsecured basis. The solicitor also trusted her to safeguard her parents-in-law’s interests and therefore did not consider them to be vulnerable clients.

Hudson agreed to pay the SRA’s investigation costs of £300.

This story was first published on Solicitors Journal on 3 August 2017 and is reproduced by kind permission

 

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