Five common conveyancing errors (commercial)

In this article we examine some of the common conveyancing errors made by solicitors and licensed conveyancers when acting on commercial property transactions.

If you would like to know more about some of the common conveyancing errors that can occur in relation to residential property transactions, these are covered in a separate article that can be accessed here.

There can be similarities in the nature of the conveyancing errors made in residential and commercial transactions. However, the context in which these errors occur can be different, as can the nature and amount of the loss arising from them. For this reason, we have addressed them separately.

Historically, conveyancing errors have given rise to more claims against solicitors than any other area of legal practice and here, we identify those that we have seen arise with some frequency and for which we can offer reported examples.

Failing to utilise an appropriate plan

In our experience, conveyancing plans are a notorious source of errors, particularly in relation to development land. In some instances, it is the lack of clarity in the plan that gives rise to problems. In other cases, for example, it can be confusion as to which of a number of similar plans is the correct one for the particular conveyance. Some plans are simply erroneous and fail to correspondence fully with the contracts or deeds to which they are intended to relate.

In the recent case of Mansion Estates Ltd v Hayre & Co the claimant instructed the defendant firm of solicitors on the purchase of development land in Bradford, part of which it intended to dispose of by way of a sub-sale. However, after completion of the sub-sale, issues arose over the extent of the land included in the sub-sale, which precluded vehicular access being gained to the claimant’s retained land. The claimant asserted that the plan attached to the transfer deed was not correct and was not the plan that he had given to the defendant solicitors. The defendant asserted that it was.

Proceedings were issued for professional negligence and at trial, the court preferred the claimant’s evidence. In addition, it found that in filing the wrong plan, the defendant solicitors had been negligent and it awarded damages against them of £211,500 on this basis.

Failing to advise on planning limitations

In the commercial market, the use to which land and property is put has a tendency to change much more frequently than in the residential market. While it is not in every case that a change of use will necessitate further planning permission, this should certainly be a consideration before land or property is purchased. This is particularly so where the land or property in question is located in an area where planning sensitivities exist, such as green belt land, national parks or areas of outstanding natural beauty and/or where the proposed change of use is significant.

In AW Group Ltd v Taylor Walton the claimant had instructed the defendant firm of solicitors to act for it on the purchased of industrial land and units near Luton. However, following completion, the council served an enforcement notice in relation to the construction and use of part of the land for the parking of HGVs.

On this occasion, the defendant was successful in persuading the court that it had not in fact caused the claimant’s consequential loss. However, in failing to ascertain and/or clarify the claimant’s intentions for the land and in failing to advise on planning permission issues, the defendant was nevertheless found to have acted in breach of its duty of care.

Failing to make pre-exchange searches

Pre-exchange searches are just as important in a commercial setting as they are in a residential one. While some searches should be undertaken as a matter of course, others will be discretionary. In many cases the scope of the searches undertaken will depend on all the circumstances and not just on whether the property is residential or commercial. However, searches in respect of enterprise zones and hazardous substance consents are, for example, generally more common in a commercial context.

In G + K Ladenbau (UK) Ltd v Crawley & De Reya the claimant had instructed the defendant firm of solicitors to act on its behalf in the purchase of industrial land, which it intended to swiftly resell to a third party for more than three times the original purchase price. However, following the purchase and during the course of the resale, rights of common were identified as a result of a search not previously undertaken by the claimant’s solicitors. In consequence, the resale was delayed, causing various financial losses to be suffered by the claimant.

While recognising that there was clearly room for some discretion, the court found on the facts of this case that the defendant solicitors had been negligent in not undertaking a search of the commons register prior to the original purchase.

Failing to advise fully on rental provisions within a lease

In the commercial market, the demand for leasehold property is generally much greater than for freehold property. For many businesses, leasehold property not only requires less of an upfront financial commitment, but also offers flexibility should the needs or circumstances of the business change. However, to better assess whether future rental commitments can be met, businesses will need to understand the basis upon which they will be calculated, which may not be straight forward.

In the case of County Personnel (Employment Agency) Ltd v Alan Pulver & Co. the claimant entered into a 15-year lease, with rent reviews every 5 years. The lease provided that upon review, the initial rent would increase by the same percentage as the landlord’s rent, under the terms of the head lease. However, while the landlord’s rent reflected true market value, the initial rent was already at least three time higher than its true market value. As a consequence, and upon first review, the claimant’s rent increased significantly and to a level that the claimant could not sustain. Therefore, the lease was surrendered.

Proceedings were then commenced against the defendant solicitors for professional negligence. On appeal, the court found that they had been negligent in failing to warn the claimant of the risks inherent in the rental provisions of the lease, which should have been apparent to them, but which were most unlikely to occur to the claimant.

Failing to comply with time limits

Time limits are prolific in conveyancing and for good reason: they encourage progress and provide certainty. While some are imposed by statute, others are arrived at by agreement between the parties and recorded in contracts and leases. Time limits for completing a sale, exercising an option to purchase or exercising a break clause, are just a few common examples. Unfortunately, deadlines can easily be missed and when they are, the financial consequences can be serious.

In Whelton Sinclair (a firm) v Raymond William Hyland the claimant was the lessee of retail premises in Kent. Shortly before the expiry of his lease and under section 25 of the Landlord and Tenant Act 1954, solicitors for his landlord served on both the claimant and his solicitors notice to terminate his tenancy. Any counter-notice for a new tenancy had to be served within 2 months. However, the claimant’s solicitors mislaid the instructions the claimant had provided by telephone and this deadline was missed.

Both at first instance and on appeal, the court found that the defendant solicitors had been negligent in failing to serve the required counter-notice. The court also awarded damages against them for the value of the premium that the claimant could have realised, had he obtained and assigned a new lease, as was his intention.

How we can assist

As professional negligence specialists, we act for clients nationwide to resolve claims against a wide range of professionals, including solicitors and licensed conveyancers.

If you think that you may have suffered a financial loss as a result of a conveyancing error, and if you would like to explore the possibility of pursuing a claim for compensation, please contact us on 0800 195 4983 or at mail@pnclegal.com

Please also contact us if you are intending to buy or sell a property and would like the details of an experienced solicitor, who specialises in commercial conveyancing. We would be happy to provide these to you.

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