New Zealand Law Society - No breach by lawyer, but important to clarify responsibilities with clients

No breach by lawyer, but important to clarify responsibilities with clients

A property transaction which almost failed to proceed due to a shortfall in funds is a reminder to lawyers of the need to clarify their responsibilities with clients. The Standards Committee found that in this case the lawyer had not breached their obligations, as it was the client’s responsibility to ensure finance was available for the property purchase.

HomeStart grant not completed prior to settlement

A pre-approved HomeStart grant had not been completed prior to settlement, leaving a shortfall of $5,000. The client, Mr D, was forced to borrow the sum urgently so that the purchase could be completed. Mr D complained that his lawyers had been incompetent in not ensuring that the pre-approved HomeStart grant was completed prior to settlement.

Client and mortgage broker had the necessary information for grant application

The Committee noted that Mr D was managing the process of approval for the grant himself and was also using the services of a mortgage broker. Both Mr D and the mortgage broker had the necessary information to progress the application for the grant.

The Committee noted that the firm’s letter of engagement provided that their services were limited to attendances in relation to the purchase with a mortgage.

The Committee said that “whilst it is best practice for lawyers to proactively check with clients, it is ultimately the client’s obligation to ensure that arrangements are in place for finance.”

The fact that a mortgage broker was involved added to the assumption that steps had been taken to secure all the necessary finance. The Committee did not therefore consider that the lawyers had breached their professional obligations.

Ensure first home buyers are clear on their responsibilities

The Committee noted that the complaint was “a useful reminder to lawyers to take steps to clarify with clients, particularly first home buyers, that they are aware of any responsibilities they may have in such transactions. This would remove any misunderstandings as to the work being undertaken on their behalf.”