New development: Precedent failure
A solicitor who gave 115 clients the wrong advice about the ground rent provisions in the leases of properties they were buying – because of an incorrect precedent – has been fined £15,000.
The Solicitors Disciplinary Tribunal (SDT) heard that there were also civil proceedings underway because of the error admitted by David Carter Hughes, who is now head of property at the Irlam office of Manchester firm Bannister Preston.
At the time – from 2008 to 2015 – Mr Hughes was a solicitor at the firm and he drafted the precedent report on title that the firm used. He qualified in 2003.
Up to and including 2008, the reports for developer Taylor Wimpey provided for the ground rent to double every 25 years. But this changed in 2008 for some developments to a doubling every 10 years, including for houses – but not flats – on the development in question. The firm did not change its precedent at this point.
From 2012, Taylor Wimpey further changed the terms for both houses and flats on the development, adjusting the ground rent in accordance with the retail prices index every 10 years.
Bannister Preston amended its precedents in 2012 but did not delete the old versions from the system.
“As a result, incorrect advice continued to be provided to clients,” according to the statement of agreed facts and outcome that the Solicitors Regulation Authority (SRA) put to the SDT for approval.
In addition, incorrect advice on the amount of the initial ground rent payable was given in some matters.
The firm confirmed that it no longer used precedent reports on title for new-build developments
The SRA first became aware of a problem when a client complained in 2019, which led to Bannister Preston conducting an internal investigation.
In mitigation, Mr Hughes said his goal at the time was “improving the standard of service to my clients by producing a more detailed report on title document”.
He continued: “I admit that there was a failure of the systems and controls during this time that led to a number of clients being incorrectly advised. I have since put in place comprehensive procedures and processes to ensure that this will not happen again.”
He said the firm had written to all affected clients. “I have and will continue to assist all clients affected where I can do so.”
In deciding that a fine of £15,000 was the appropriate sanction, the SRA said that, though Mr Hughes was supervised, he had “direct control” over what went wrong.
But the harm to clients would have been mitigated to some extent by Taylor Wimpey publishing a voluntary scheme to vary the ground rent provisions for properties in the development.
The SDT approved the agreement, noting that the full extent of direct harm caused by Mr Hughes’ misconduct was not known given the parallel civil proceedings.
“The tribunal determined that Mr Hughes (a) acted mistakenly as opposed to intentionally, (b) placed too heavy a reliance upon what appeared to be bulk processing of conveyancing matters relating to Taylor Wimpey, (c) demonstrably lacked attention to detail, (d) was directly in control in that he had conduct of the conveyancing matters and (e) was experienced at the material time.”
It also took account of Mr Hughes’s co-operation and that he had “demonstrated genuine insight and acceptance of accountability”.
Mr Hughes was also ordered to pay costs of £13,350.
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