Should a conveyancing solicitor check the seller’s credit status?

4 March, 2015
by: Cripps Pemberton Greenish

In a recent High Court decision, it was held that there is no general duty of a solicitor acting for a buyer to check the credit status of the seller in a transaction unless instructed to do so.

The claimant sought damages against solicitors who acted for him in the proposed purchase of a property.

When contracts were exchanged, unusually a deposit was paid on the basis that it be held by the seller’s solicitor as agents for the seller. The seller did not complete and the deposit was lost. The seller was subsequently bankrupt and the solicitors who acted for him disappeared. 

The claimant argued that he should have received better advice about the risks involved, which would have revealed that a bankruptcy petition was outstanding against the seller, in which case he would not have proceeded with the transaction on that basis.

The defendant solicitors argued that the claimant was properly advised and this included advice not to exchange contracts on the basis of the terms of the deal.  The claimant decided to go ahead anyway. 

The court held that there was no general duty on the part of the solicitor to check the credit status of the seller and that the buyer had understood the advice he was given.  If the claimant had wanted to check the seller’s credit status then he could have done so himself.

A link to the decision in Karmjeet Singh Kandola v Mirza Solicitors LLP [2015] EWHC 460 (Ch) can be found here.