Independent Legal Advice-the Holy Grail? Asks Property Venture

Robust, independent, legal advice in property transactions, seems like the Holy Grail.

But what if your lawyer isn’t all that they seem?

Much has appeared in the press over the last couple of years about the pitfalls of buying abroad. Various news stories, from countries such as Spain, or Cyprus should have served to raise awareness of overseas buyers about the ways they can ensure, they buy as safely as possible.

One of the first pieces of advice a potential overseas buyer should always get, is to use an independent lawyer. In the UK, it is considered a conflict of interest if a lawyer works for both a developer and a client, at the same time, or at different times. Professional protocol dictates that each party should have a different and independent lawyer, and it helps considerably if they are knowledgeable in overseas property. In many countries abroad, this protocol does not always seem to be the norm.

First of all, what should you expect from your lawyer?

At a basic professional level, they should be checking all the legal paperwork, the relevant land title, building licences and planning permissions, as well as whether the property has a clean title e.g. no outstanding debt associated with the property. They should also be checking the preliminary contract and final contract to ensure it is balanced and fair, with manageable staged payments, with clauses and penalties for non-performance by the developer (if new build or off-plan purchase). The purchase should also be registered promptly at the relevant Land Registry, so that the Title Deeds can be received promptly by the buyer and make the ownership “official”.

All legal documentation is binding in the local language, so in Poland it will be Polish, in Spain it will be Spanish. It is evidently very important to have translated paperwork, so the buyer knows what is happening. So it helps to work with a bilingual lawyer who can translate key items and documents, but it may be cheaper to have a good translator to do this. Some developers already provide documentation in English, but for the main contract it is best to have an independent verification of the translation, prior to signing it. Even the preliminary or pre-purchase contract should be properly translated, as this is where a buyer may be committing to a staged payment plan.

How can you tell if they aren’t doing their job as they should?

Generally speaking, if a lawyer is slow at responding and a client is always having to chase or initiate communication, that might start alarm bells ringing. Although it is worth noting, some lawyers do seem to work to different timescales to buyer expectations and some of this may be dependent on local bureaucracy, so it is worth checking all this up front.

It can help using an overseas property agent, who can guide through the local buying process and prompt on what needs to be done. In addition, seeing copies from various searches can provide reassurance to a buyer that checks are being done, although these might need to be translated to verify them.

It is also worth checking the lawyer has the relevant Professional Indemnity Insurance in place, with appropriate amounts of cover.

What can you do about it, if a lawyer does not turn out to be doing the job you expect?

If a client considers their lawyer has behaved unsatisfactorily, then they should appeal to the Country’s Legal Ombudsman, which is an independent way of resolving issues. The Ombudsman has powers to enforce its decisions and can act over property title issues if a lawyer has behaved "negligently". Not all countries have this arrangement however, so if such a scheme is not in place, then the relevant regulatory body, such as the Solicitors’ Regulatory Authority in the UK, could be a first port of call

How are you best to avoid potential problems from the outset?

Using a UK-based lawyer provides an extra level of comfort for many buyers and that, as long as they have a practising certificate (a requirement of the Solicitors Act 1974), they would come under the relevant regulatory body e.g. Solicitors’ Regulation Authority – which also covers some overseas lawyers, so there is some recourse for them should things go wrong.

There are also codes of conduct surrounding conflicts of interest: a solicitor “must not act for more than one party in conveyancing, property selling or mortgage related services”, which help provide reassurance. This is not always so explicit for firms operating overseas, as I have already mentioned.

There may be other layers of protection for a buyer, if purchasing overseas property in the European Union, where there are Directives and protective laws in place e.g.  the Unfair Commercial Practices Directive 29/2005/EC, which might be used to help buyers who have come unstuck in Cyprus recently, in some instances where property was mortgaged without the buyer’s knowledge. Although these EU legal processes can be lengthy to go through.

Whilst there may be a degree more protection using a UK-based lawyer to oversee the property purchase abroad, this may also come at a cost. There will be some additional project-management or communication involved, which affect costing, but some buyers are happy to pay this for peace of mind.

To what extent does it help using a big law firm over a small one?

It is not necessarily better to go with a big firm of lawyers, there may be more potential for conflict of interest and it is best to choose a solicitor that matches an individual’s needs. A larger firm may have its overheads geared to servicing larger clients, which might not be appropriate for a smaller client.

Author Louise Reynolds, Property Venture^®  Posted 1st Decemberr 2010

Property Venture®, is an independent, European property expert, who helps people buy holiday homes and investment property in Europe and the Mediterranean, more easily and safely than they can on their own, because they offer grounded common-sense advice. Their focus is mainly: Spain property, Turkey property, Poland property, Morocco property, Cyprus property, Bulgaria property and Montenegro property. They are overseas members of the professional body: National Association of Estate Agents, the NAEA. This means they have been subjected to the membership criteria and have signed up to the professional code of conduct, established to help potential buyers or investors, buy overseas property with confidence.