Beth de Montjoie Rudolf, Legal Services Consultant

Three little words, ‘Treating Customers Fairly’ are changing the world of Conveyancing, Probate and Estate Management

The new Council For Licensed Conveyancers (CLC) Code of Conduct marks the start of significant changes in the world of Estate Management.

The outcome focused regulation, born out of the Legal Services Act 2007, is effective immediately from 6th October 2011 and the new CLC handbook set out how the principles of the act should be applied. The six Overriding Principles set out the requirements to illustrate that Licensed Conveyancers have adhered to the new regulation. In the main, the wording will still be very recognisable, but, how Licensed Conveyancers will evidence that they have complied will be more difficult.  Overriding Principle 3, Acting in the best interests of the client requires, amongst other things, that the following Outcomes are delivered:-

3.1 Each Client’s best interests are served;
3.2 Clients receive advice appropriate to their circumstances;
3.3 Clients have the information they need to make informed decisions

This is not just acting in the best interests of a client but proving that you have acted in the best interests of all clients and that they have been treated fairly.

In certain areas (of the law) the new code of conduct is fairly clear cut; for example, when acting for a couple buying a house a Conveyancer will be careful to ensure that not only do they conduct the conveyancing professionally, but also that they advise the couple both on the title to the property and the trust relationship between themselves.  To satisfy the new regulation and prove that a Conveyancer has acted in a client’s best interests they will need to evidence correspondence or attendance notes outlining what joint ownership means, how the couple can protect their interest in the property as well as a report on the title to the property.

However, there are more complex areas of advice, for example if you have multiple clients with varying interests and this is where confusion and mistakes may arise. For example, when dealing with probate work, a Conveyancer may be instructed as the executor of the estate, however, they will also have a responsibility to ensure that they act in the interests of the other executors.  Caution should be taken to ensure that executors are not put into a position of breach of duty, as well as the Conveyancer maintaining their duty to the beneficiaries to protect and administer the estate effectively.

Under the new regulation, activities which would have previously been left to the lay executor or an ‘involved’ beneficiary fall back into a Conveyancer’s area of responsibility, as they now have to evidence that the clients have been given best advice sufficient to make informed decisions throughout the process.

Consider the value of the property in the estate.  Previously a valuation obtained by a family member may have been accepted, now however, evidence must be provided that the price is a fair assessment of the value by obtaining three independent valuations. 

At the beginning of the year it was widely reported that HM Revenue and Customs was reviewing some 9,000 property valuations submitted through inheritance tax forms in this year alone. Any penalties that occur as a result of an incorrect valuation will be directed straight to the executors.

With this in mind, the duty of care from the Conveyancer arguably now extends to include the management and the sale of the property, this would mean ensuring that the property has been drained down, secured and that vacant property insurance has been put into place. 

There are now a number of new potential pitfalls for Licensed Conveyancers when selling a property. They will need to be mindful of selecting the best performing estate agent who will return as close as possible to the asking price in a specified time period. A strong working relationship between a Conveyancer and their estate agent will be key to ensure that the agent is fully trusted and the Conveyancer knows that the property won’t be sold to an agent’s contact at a lower price for quick sale.

If the estate has been left to a charity, there are further points to consider. A property with development potential, agricultural opportunity or an increase in value since the date of death may require a s.36 Charities Act Report to protect the charity’s best interests.

Increasing numbers of probate professionals are now turning to asset managers and other property professionals for specialist help. 

Asset managers, in particular, had a head start, having had to deal with the new principles when working with lenders since March 2008, when the Financial Services Authority brought in the Treating Customers Fairly Act. Consequently asset managers have had time to implement systemised processes to provide an audit trail with complete transparency to show that the property has been treated in a way that achieves the best value for the estate, protects the asset and ultimately treats all of their clients fairly. 

By outsourcing the peripheral administrative requirements of the estate to asset management and property experts, Licensed Conveyancers avoid wasting their client’s time and money, as well as their own time and money.  If a Conveyancer operates on a fixed fee, trying to manage the sale of the probate property whilst trying to ensure that they are complying with the new guidelines can be very time consuming.