Unreasonable pressure from developers: A recurring issue?

The issue of property developers applying unreasonable pressure upon conveyancers has once again risen to the fore – but just how common is this issue?

“How far has this got to go before the walls come crashing down and we all end up paying through our PII premiums when the builder’s puppet conveyancers are caught with their trousers down?”, asked one member of Bold Legal Group’s (BLG) online forum.

In answering this, it’s important to address how far this issue has already gone. Conveyancers on the forum report accusations of “awkwardness”. Some have ceased to take on any new estates as they’re “rarely worth the time and effort” – with matters on a new-build frequently demanding “three-to-four times more work than a standard purchase”. Another conveyancer said:

“Then there’s the added pressure and constantly being asked (or demanded) by developers to do things any respectable conveyancer wouldn’t be comfortable with and the risks arising as a result. It seems like every new build I deal with involves a lengthy explanation to the client about how the developer is essentially scamming them in continuously complex and reprehensible ways.”

Conveyancers on the forum went on to report some of their more notable encounters with developers. One such post read:

“I want to know if anything can be done to challenge [developers’ practice] at the highest level. I’ve yet again received a contract pack from one of the UK’s biggest developer’s solicitors, which includes a number of legal titles not yet registered in the developer’s name.

Enquiries are being responded to with a refusal to consider any form of undertaking and my being told – bluntly – that I’m the only one raising this and that I am expected to advise my client to proceed to exchange or lose a significant incentive!

My client has been told that I am ‘being awkward’ and that they should have used the builder’s panel, who I’m told are blindly advising clients to exchange and even completing.”

The same user went on to say their firm has assessed the last 24 months of cases involving a new-build purchase and found that almost every case has seen so much extra work that they’ve also ceased to take on any new estates, though this came with a caveat:

“My only fear is that we’re also now seeing the issues raising their heads on first re-sales… We’re just storing up problems for the next generation of conveyancers.”

Following on from the above post, another conveyancer said:

“The last time I [dealt with such a situation] I reviewed the transfer to the developer and noted some of the rights would be caught by a restriction on the title that prohibited any disposition.

The developer refused to expedite their application, disclose a copy of their AP1 or provide any of the supporting documents to their application other than the transfer. They did not agree that the transfer would be caught by any of the restrictions on the former title.

As it was causing issue I asked HMLR to expedite the application and, a few days later, requisition followed. The transfer provisions were of course caught. We had a month or so ‘delay’ while that transfer was then amended.

Several of the plots had already completed and so it was very difficult to keep the client ‘on side’.

Had that application to expedite not been made it would likely not have arisen as an issue for at least six to twelve months. So why take the risk?”

Dealing with such practice not only has the potential to cause headaches, but it also exposes conveyancers to risk should they not report such practice. A compliance expert on the forum said:

“Just a reminder to those who are regulated by the SRA, and who encounter questionable conduct of others regulated by the SRA, that under the Codes of Conduct you are required to promptly (within 24-48 hours) inform the SRA of matters you reasonably believe should be brought to its attention in order that it may investigate whether a serious breach of its regulatory arrangements has occurred or otherwise exercise its regulatory powers.

The issues raised here seem to clearly suggest that a report should be made whether or not you think the SRA will be interested; you need to cover your backs!”

Reverting to the original question of how far this could go “before the walls come crashing down”, Rob Hailstone, CEO, BLG, said:

“I am currently helping a friend who bought her property last December. She is now desperate to sell (and has a ready, willing, and able buyer) and if she can’t, will lose the offer of a well-paid job. When she was advised to exchange and complete, she was not told that her seller’s title was still not registered and what the consequences could be if she wanted to sell in the near future. Nor was she told that registration may never take place if there was a defect in the title! Neither, it would appear, were her neighbours (or their lenders) who also purchased recently. She has reported the firm to the SRA, and LeO and is now considering pursuing a negligence claim.

It is obvious that the situation is bad now, and if the market begins to slow, it will only get worse. Developers have targets and even more pressure will be brought to bear upon the firms being recommended to act for buyers of new homes. In my opinion, regulators and PII companies should be taking a closer look at what some firms are doing before these issues escalate even further.

In addition, the firms themselves should be doing some soul searching; is what they are doing morally right, and is it really worth any financial gain versus the reputational damage that could ensue?”