Complications for surveyors valuing residential investment property
The comprehensive 2016 Royal Institution of Chartered Surveyors guidance note on ‘The valuation of buy-to-let and HMO (Houses in Multiple Occupation) properties’ is both a help and hindrance for surveyors. As growth in the private rented sector looks set to continue, particularly given its focus in the recent Housing White Paper, there is likely to be far greater demand for secured lending. The guidance note illustrates the many complexities which surveyors will face. However, when things go wrong, these complexities will be the very matters that lenders are likely to seize on to assert default. This guidance, once again, brings the balance of risk against reward into sharp focus and, from a risk perspective, should be treated as creating a particularly specialised category of residential property valuation.
Increase in regulatory claims against solicitors
A marked increase in investigations by the Solicitors Regulation Authority (SRA) into the affairs of larger solicitors’ firms means prosecutions involving partners in Top 20 law firms will no longer be uncommon. The SRA is particularly interested in breaches of the Solicitors Accounts Rules and specifically Rule 14.5 which prohibits a solicitor from allowing funds to pass through a client account unless they are instructed in relation to the underlying legal transaction to which those funds relate. Although the same criteria are applied whatever the size of the firm, the SRA is concerned that larger firms can potentially fall prey to the demands of their powerful corporate clients and step outside the regulatory regime, albeit inadvertently. The risk to firms is not merely financial but also reputational. Insurers will be concerned by the high cost of investigations and defence of any subsequent prosecution. It will be the larger law firms who buy additional cover to respond to these threats. Proposed amendments to the Solicitors Account Rules, which include allowing solicitors to use third parties to hold client funds, are unlikely to have a significant impact on this exposure.
Pensions – revolutionary technological innovation
The pensions dashboard is the new technological fix to the problem people face in keeping track of how much they have saved for old age and how much they should save going forwards. Due to go live in 2019, the dashboard will show on a single screen all of a person’s pension investments and their projected income on retirement. It is hoped that this revolutionary tool will bring greater understanding, engagement and ultimately increased savings to fund old age. What those future pensions will look like we don’t know. No recent government has been able to resist changing pensions, due to the sheer amount of money involved. We can expect further reconsideration of a variety of tax reliefs, savings limits and regulatory powers at the very least. This endless change is a minefield for those providing advice; mistakes will inevitably result and claims will be made.
Supreme Court decision will provide a major boost to solicitors facing claims
Lord Sumption’s judgment in BPE Solicitors v Hughes-Holland will prove a major boost to solicitors and their insurers over the coming years. The decision overruled previous case law on the application of the SAAMCO principle to solicitors. Previous decisions had effectively created an exception to SAAMCO where a solicitor should have put a lender on notice of the risk of fraud. However, Lord Sumption emphasised that even information which is critical to the transaction decision must be treated as being provided under a limited duty. This will impact significantly on lenders and co-defendant surveyors in any future waves of lender litigation. Lenders may now review terms of engagement in an attempt to limit their exposure, but the boldness of the ruling will assist all professionals.