Co-ownership – restricting the retainer

A recent case reminds us that one of the many issues that conveyancers have to advise on regularly is co-ownership, and more particularly the ownership arrangements to be made when the purchasers are not married or in a civil partnership. If the buyers are married etc then, should the marriage break down, the court has wide powers to adjust the parties’ property rights in order to give a fair division. But if the parties are not married then what happens to the property on a breakdown of the relationship depends almost entirely upon what was agreed at the time of purchase – which is where the conveyancers come in.

So obviously we have to advise as to the differences between a joint tenancy and a tenancy in common – right of survivorship etc. And don’t forget to advise that if the buyers start off as joint tenants that this can later be unilaterally changed to a tenancy in common by severance – remember the cricketer Geoff Boycott’s action a few years ago claiming that he was not advised about this (see [2011] All ER (D) 113). Also we need to advise that if there is a severance, then this will result in the two buyers owning half each – irrespective of the financial contributions.

But the problems really present themselves when the clients want to be tenants in common – how do you advise as to what those shares should be – and indeed how far can you advise at all when there will almost certainly be problems of a conflict of interest?

Many conveyancers seem to adopt the approach that they will give clients an information sheet containing all the factors the buyers need to take into account in reaching an agreement as to shares – how much cash each is putting in, who will pay the mortgage instalments, who pays for the other outgoings etc – and then ask them to let the conveyancers know what has been agreed. Obviously if they cannot agree then it would be necessary to insist on them obtaining independent advice so that an agreement can be reached. But by not actually advising on the terms of the agreement the problems of conflict may be avoided.

Those who adopt this approach will have welcomed the recent decision by H.H. Judge Behrens in Leeds County Court – Turner v Bromets Jackson Heath LLP [2016] EW Misc B15 (CC) (16 June 2015). This was a case involving events dating back to 2005. It involved a Mr Millington and a Ms Turner who had lived together for some years in a house solely in Mr Millington’s name. There was a mortgage in favour of Halifax. Ms Turner did not contribute to the mortgage payments. The couple had decided that the house would be remortgaged for a lesser sum than the Halifax mortgage, Ms Turner contributing the £20,000 shortfall, and the house put into joint names. The couple had agreed that on a future sale, after paying off the mortgage, Mr Millington would receive £160,000 (the then current value of his equity), Ms Turner would receive £20,000 and that they should share equally any further equity in the property. The solicitors drafted a Declaration of Trust embodying these terms.

Unfortunately, the relationship subsequently broke down. Ms Turner negotiated a settlement with Mr Millington but contended that she would have achieved a better settlement if she had not executed the Declaration of Trust.

Ms Turner ultimately brought proceedings claiming that Bromets were negligent. She claimed that they had not explained the terms of the Declaration of Trust before she signed it and she would not have signed it if she had understood them. Secondly she contended that Bromets should have appreciated that there was a significant risk of a conflict of interest between herself and Mr Millington and should have advised her to seek separate advice. If that had happened she would have sought such advice and again not have signed the Declaration of Trust.

The Judge rejected both of these contentions, finding that the terms of the agreement had been properly explained. With regard to the conflict point, the judge relied heavily on a recent Court of Appeal decision involving claims of conflict when drafting an agreement to reflect the terms of a divorce settlement reached by the parties themselves. Jackson LJ set out in that case the scope of a solicitor’s retainer as follows:

i) A solicitor’s contractual duty is to carry out the tasks which the client has instructed and the solicitor has agreed to undertake.

ii) It is implicit in the solicitor’s retainer that he/she will proffer advice which is reasonably incidental to the work that he/she is carrying out.

iii) In determining what advice is reasonably incidental, it is necessary to have regard to all the circumstances of the case, including the character and experience of the client….

v) The solicitor and client may, by agreement, limit the duties which would otherwise form part of the solicitor’s retainer. As a matter of good practice the solicitor should confirm such agreement in writing.

It was, said Judge Behrens, not possible to give definitive guidance as to whether advising the clients on the merits of an agreement reached by clients relating to the beneficial ownership of a home occupied by cohabiting couples was implicit in the retainer. All will depend on the facts of the individual case. In this case, the Judge held that the terms of the agreement were in any event fair to Ms Turner and that there was no conflict. There was thus no duty on Bromets to advise Ms Turner to seek separate advice or to advise her not to enter the agreement.

Presumably, had the terms had not been fair, then a different conclusion would have been reached – advising on the agreement had not been expressly excluded by the retainer.

But giving such advice can be expressly excluded from the retainer. This must be a sensible thing for conveyancers to do on a regular basis.

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