he range of searches available to conveyancers has increased dramatically in recent years. Many will consider this to be a good thing, but it puts practitioners in a quandary. What searches should they make on behalf of buyers and how far do their duties to report to their clients extend? Orientfield Holdings Ltd v Bird & Bird LLP [2015] EWHC 1963 (Ch); [2015] PLSCS 215 answers some of these questions and provides valuable guidance on a conveyancer’s duties in relation to due diligence.
The case concerned a law firm’s failure to report on the results of a Plansearch Plus report obtained in connection with the acquisition of a residential property for £25m. Plansearch Plus reports contain useful information about planning activities in the area around a property and deal with a wider geographic area than would ordinarily be covered by a local search.
The search does not figure among those that are generally considered essential in the course of ordinary due diligence. It was made because the seller chose to sidestep one of the buyer’s pre-contract enquiries, which was designed to discover whether there were any proposals to develop or alter property or land nearby. The seller’s solicitors did not reply directly to the question – and suggested that the buyer obtain a Plansearch report instead.
Had the buyer, or its solicitors, requested further information about the results contained in the report subsequently obtained, they would have discovered that planning permission had been granted to redevelop two small schools within 250 metres of the property to create an academy and specialist school for 1,400 pupils. But the buyers’ solicitors failed to follow this up and made no reference to the results of the search when they reported to their client.
The buyer became aware of the position shortly before completion and rescinded the contract due to concern about the negative impact the development would have on the property. In due course, it settled litigation with the seller on terms that the deposit was to be split equally between the parties, with each party being responsible for its own costs. Were the buyer’s solicitors liable for the remainder of the buyer’s losses?
Breach of duty
The judge observed that solicitors are not required to make investigations that are not expressly or impliedly requested by their clients. The buyer had not made it clear whether it was purchasing the property as an investment, as a residence or as both, and did not provide any specific instructions about the investigations it required. Therefore, it would not have been able to complain if its solicitors had insisted on nothing more than a proper answer to their pre-contract enquiries and then advised it to rely on those answers, because the law firm did not have express or implied instructions to go further than that.
However, if a buyer’s solicitors acquire information that “may be important” to a client, they have a duty to bring it to their client’s attention. The judge acknowledged that this set the threshold for information to be communicated to clients at a low level and explained that this is because solicitors are not generally required to advise on the business merits of transactions. It is up to clients to make their own judgments, and to assess the impact of material that may be relevant, and not their solicitors.
Having requisitioned the Plansearch report, the buyer’s solicitors should have summarised its contents in their own report to their client (especially as they had included the results of the various other searches they had made). A reasonably competent solicitor in possession of the report would not have unilaterally assumed that only developments within 100 metres were material. The buyer’s solicitors had not inspected the property, or researched what the planning permissions revealed by the Plansearch report were for, and were not in a position to form any view about the contents of the report or whether it might affect the buyer’s decision to proceed. Consequently, it had been a breach of duty to state that nothing adversely affected the property. The buyer’s claim was upheld.
Lessons learned
The judge stated that what the buyer’s solicitors should have done was to tell their client exactly what the Plansearch report revealed. They should have explained the further enquiries that could have been made of the local authority without undue difficulty, cost, or delay, and should then have asked their client whether it wanted to proceed, or to withdraw, or to obtain further information before deciding.
The case highlights the care that is needed in the course of due diligence and when reporting to buyers. It does not mean that conveyancers must make every single search that is available to them in order to avoid claims from clients – but does confirm that it is essential for conveyancers to understand their clients’ requirements, and to respond accordingly.
Practitioners who ask clients how they intend to use a property, what information they consider to be important, and how much they are prepared to spend in order to obtain it, will be in a better position to assess what searches to make. In addition, when reporting to clients, practitioners may use statements to the effect that “there is nothing adverse to report” rather more sparingly in the future to avoid claims.
Allyson Colby is a property law consultant
