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Lawyer reprimanded after client unable to utilise KiwiSaver contributions

12 October 2015

A complainant, C, whose lawyer, B, failed to properly advise on the rules of the KiwiSaver contribution on a purchase of a residential property has had her complaint upheld.

A lawyers standards committee has found that B’s conduct was unsatisfactory. B has been reprimanded, ordered to refund C $200 of the fees charged and ordered to pay $500 costs to the Law Society.

In July 2012 C agreed to purchase a new house and section and instructed B to act. The purchase was subject to a series of conditions, including the vendor obtaining council consents for a subdivision and a Code Compliance Certificate.

C intended to obtain bank finance towards the purchase price and also to use funds in a KiwiSaver account to assist. All parties (including B) were aware of this.

The contractual conditions were progressively confirmed and on 22 November the vendor’s lawyer wrote to B to advise that title had been issued, which left only the Code of Compliance Certificate outstanding. This was expected to be issued in early December 2012.

A KiwiSaver contribution withdrawal application was signed on 11 December and sent to the scheme provider. B did not provide either the Solicitor’s Certificate or a letter of undertaking because the agreement was not yet unconditional.

Condition of scheme

It was a condition of the KiwiSaver scheme that an agreement be unconditional before an application for withdrawal of contributions can be made.

On 18 December B emailed the vendor’s solicitors, pressing them for an update on the issue of the Code of Compliance Certificate.

The same day B also spoke to the KiwiSaver provider, who advised B the department would be closing for the Christmas break at noon that day.

The vendor’s lawyers issued a settlement statement on 18 December, with settlement scheduled for 20 December. B advised C that an additional cash contribution of nearly $2,000 would be required, and noted that the Code Compliance Certificate had still not been received.

B received the Code of Compliance Certificate on 20 December. C settled the purchase that day, without her KiwiSaver contribution.

On the day of settlement, B posted a second KiwiSaver contribution withdrawal application. The application did not reach the provider until 24 December, four days after settlement. The application was declined because KiwiSaver contributions cannot be used to repay a loan already made.

Not alerted to risk

“In the committee’s view [C] was not alerted to, or alternatively was not warned adequately of, the risk that if she settled her purchase prior to receiving her KiwiSaver contribution she would not be able to withdraw those funds and utilise them for the purchase,” the committee said.

“That there was a tight time frame there is no doubt. However, that was obvious right at the beginning of the transaction. The issue could have been canvassed at that point and a change to the Agreement sought to allow for greater time between the unconditional date and the settlement date.

“In the committee’s view [C] was not advised properly of the risk she faced and was not advised of her options,” the committee added.

“It is also clear that [C] was naturally anxious to settle and move in before Christmas. The committee understands the pressures on [B] to try and achieve this for [C].”

B told the committee that B had “explained the problems on a number of occasions”, but the committee noted that “there is no file note, email or letter noting such advice and instruction to proceed. It is accepted that there was probably significant pressure to settle. That would be all the more reason to record the advice/instruction given that the KiwiSaver contribution would be lost.”

The refund and costs penalties awarded reflected that while C was unable to utilise her KiwiSaver contributions and that caused her some financial inconvenience, C did not lose her contributions, which remained in her KiwiSaver account.

Last updated on the 12th October 2015