Property complaints seem to be a growing area of complaints in New Zealand. For the past two years, property has been the area of practice which the Lawyers Complaints Service has received the highest number of complaints in. This year there has been a 7% increase in property complaints from last year. In the year to 30 June 2016, 308 property related complaints were received from 1,458 complaints received. In the year to 30 June 2017, of 1,419 complaints received, 327 were property related.
Within property law, conveyancing is by far the most common type of work that the Lawyers Complaints Service receives complaints about. However, it should be noted that while a high number of complaints about conveyancing are received, the number of complaints received is minuscule relative to the number of homes being sold in New Zealand. REINZ reports that 5,048 homes were sold in January 2016. The Lawyers Complaints Service received an average of only 25 property complaints monthly in 2016. REINZ reports that 4,307 homes were sold in January 2017, but the Lawyers Complaints service has received an average of 27 property complaints per month this year. This again suggests a slight increase in the number of complaints about conveyancing, despite a decrease in the number of homes being sold.
Supervision and conveyancing
It is common to delegate conveyancing work to junior lawyers or legal executives. For this reason, issues of supervision are raised in property complaints more often than they are in complaints about other areas of practice. It is important that supervising solicitors check that the conveyance is being done properly and are available to answer questions should any issues arise.
In one complaint, the legal executive had agreed to a fee from the other party’s lawyer without consulting their supervising solicitor or the client. The client later complained to the Lawyers Complaints Service about the other lawyer’s fees, at which point the other lawyer responded that the legal executive had approved the fees. Supervising solicitors should ensure that legal executives are clear on what needs to be referred to the supervising solicitor.
In another complaint, the settlement was delayed three times because the legal executive assigned to the file did not know how to lodge documentation required by LINZ to issue new titles for a subdivision. She had advised the supervising partner of this when she was given the file, but he did not offer her any help and was not available for questions. The standards committee ultimately made a finding of unsatisfactory conduct against the lawyer for failing to supervise and manage his employees. The committee stressed the fact that the legal executive reached out to several people for help and had not received any guidance from the supervising partner.
Breach of undertakings
Undertakings play an important role in legal practice, so any breach of an undertaking is taken very seriously by the committees. Complaints about conveyancing often allege that someone has breached an undertaking when they have failed to release an e-dealing as promised. Usually this happens when an unforeseen complication arises and the lawyer for the vendor believes they have the right to delay completing the e-dealing.
In one example, the lawyer for the purchaser complained that the lawyer for the vendor did not complete the e-dealing after receiving the settlement amount and penalty interest. The lawyer for the vendor had delayed because of a dispute over additional legal costs incurred due to late settlement. The standards committee said that the lawyer’s conduct in failing to release the e-dealing prior to the additional legal costs being paid demonstrated an unfamiliarity with the terms of clauses 3.12 and 3.13 of the standard Auckland District Law Society Agreement for Sale and Purchase. These clauses set out a specific process that is to be followed in the event of late settlement due to the purchaser’s default and in the event that a dispute should arise between the parties as to any additional expenses and damages. The committee said that in its view while a lawyer is entitled to require penalty interest is paid before releasing an e-dealing, any additional expenses and damages must be dealt with in accordance with clause 13.3. Ultimately, a finding of unsatisfactory conduct was made against the lawyer for the vendor. It is important that lawyers are familiar with the specifics of these processes to avoid misunderstandings such as this.
Any breach of an undertaking, even if done so unintentionally, is a serious matter. In one complaint two lawyers were unable to honour an undertaking to transfer the property immediately because the sale proceeds were not enough to repay the mortgage on the house. They had given the undertaking based on the client’s belief that the sale proceeds would be sufficient to cover the mortgage and there had been no intent to deceive; however, the committee considered that the lawyers still had an obligation to honour the undertaking.
Another unsatisfactory conduct finding was made against a lawyer for a vendor who failed to comply with an undertaking by not releasing the transfer on the settlement date due to work commitments. In upholding the decision the LCRO referred to its previous decision (LCRO 239/2010) where it said that the complainant in that matter was right to express concern that the settlement process could be compromised by lawyers who do not take care to organise matters to enable them to attend to their obligations.
Deadlines and conveyancing
There are strict deadlines around conveyancing, and it is important for practitioners to recognise that missing these deadlines can have serious implications on the personal lives of their clients. A NZLS legal standards officer has recently noticed complaints about poor advice resulting in missed deadlines for KiwiSaver withdrawals and HomeStart grants. These funds are available to KiwiSaver contributors who are purchasing their first home. The applications must be completed by the client before settlement and the funds cannot be accessed after settlement. There have been several complaints about lawyers who have failed to advise their clients of these rules and whose clients have borrowed funds from other places to settle initially, thinking that they would be able to repay these loans with the money from KiwiSaver. However, once settlement has been completed they are no longer eligible to receive KiwiSaver funds. This puts clients in the stressful situation of needing to find other ways of repaying the money they have borrowed. In one of the complaints the couple had borrowed $9,000 which put a serious, unexpected financial burden on them when they were unable to receive the HomeStart grant as they had planned.
One firm includes a section in their initial letter to the client about KiwiSaver withdrawals and HomeStart grants which makes it clear to the client that they must submit their documents to Housing New Zealand after they receive a “pre-approval” letter and before settlement. This is a good practice because it makes it very clear to clients that they must complete these forms and the time frames that they need to be aware of.
New clients and conveyancing
Conveyancing is one of the most common types of work that lawyers are engaged to do, and for many clients is the first time they have ever engaged a lawyer. Lawyers working in this area cannot assume that these clients know what to expect, so clear and regular communication is important. For instance, clients often do not realize that they will be billed for sales or purchases which fall through. To avoid confusion and conflicts over this, information about fees and billing should be made clear to clients in the Terms of Engagement and communicated to them throughout.
Lisette Solis is an employee of the New Zealand Law Society.