It has been a hectic 12 months for the housing market, as demand for moving home soared following the first national lockdown and buyers were spurred on by stamp duty holiday savings.
Both in March 2021, when the £15,000 saving was initially set to be cut before its extension, and in June when it eventually ended up being trimmed back to a more modest top level £2,500, buyers piled in to the market in great numbers to try and beat the deadline.
This put immense pressure on the professionals involved in the process, in particular surveyors and conveyancing solicitors.
In hot water: Solicitors and surveyors may be blamed for mistakes in paperwork that were made when house sales were being rushed through so buyers could make stamp duty savings
With caseloads piling up, staff were overloaded with work and some firms even had to stop taking on new clients because they simply couldn’t cope.
Buyers who did manage to get in before the cut-off may be feeling quite pleased with themselves – though the holiday is still available in its tapered down form until September.
However, with legal and surveying work potentially rushed through, lawyers are warning that some buyers may discover mistakes and omissions in their paperwork that could cost them tens of thousands, or in the worst-case scenario, even result in their home being rendered worthless.
Michael Young, a lawyer dealing with professional negligence claims at Lime Solicitors, says: ‘Buying or selling a property can be complex and sometimes stressful, made worse if you receive negligent advice from a conveyancing specialist.
‘Risks for new homeowners are heightened by the fact conveyancers are under huge pressure to beat expiry of the stamp duty deadline and hence it is more likely for issues to slip through the net.’
The legal and surveying errors that could cost homeowners big
Failing to spot Japanese knotweed could cause homeowners a headache
Failing to spot the signs of Japanese knotweed
If a surveyor missed the presence of Japanese knotweed on a property, it will cost homeowners an average of £1,750 to have it removed according to Checkatrade – but the worst cases can cost up to £15,000.
It could also reduce the value of your home when you come to sell.
‘I’m pretty sure we’re going to see a rise in misrepresentation over the coming weeks and months,’ says Nic Seal, founder of removal specialist Environet.
‘Buyers and sellers keen to rush deals through to meet the stamp duty holiday deadline have been more inclined to cross their fingers and hope for the best, but the problem could come back to bite them if the plant suddenly appears.’
Not checking charges and restrictions on leasehold homes
Properties sold leasehold often come with an array of legal requirements for the buyer, for example restrictions on what they can do with their property and obligations to pay service charges.
In extreme cases, these can make the property unsaleable – for example if there are very few years left on the lease (these can be expensive to extend) or if the service charges are set to increase rapidly in a short period of time.
If a lawyer missed this, they could have to pay the entire value of the property back to the buyer.
Restrictive covenants can stop owners from extending their properties
These are rules that limit the way a homeowner can use their property, and they are common in buildings or areas that have a homeowner’s association or are part of a managed estate.
For example, they might stipulate that you cannot alter the appearance of your property, extend it, use it for business purposes, or even get a pet – or require you to pay a fee to do so.
When solicitors check whether a property has ‘good title,’ they are making sure that no one else has any claims to its ownership apart from the buyer and that it can easily be sold on in future.
If this is not properly investigated, and good title is later found not to be present, it could result in the buyer losing their home.
An important function of a property survey is to highlight structural issues that could cause damage to the property or danger to its new inhabitants.
This could be anything from cracks in the walls to subsidence, damp and asbestos. Depending on the problem, the costs can run into many thousands of pounds and even make a property unsaleable.
Surveyors and lawyers should make buyers aware of the place where their property ends and their neighbour’s begins.
This often becomes an issue when neighbours have disputes over repairing fences, garden ownership or who is responsible for party walls.
While he says that issues slipping through the net are ‘extremely rare’, Marc Schneiderman of London estate agent Arlington Residential recalls two near-misses in the run-up to the stamp duty deadline that could have cost buyers huge sums if they were not spotted at the last minute.
In the first instance, a he was selling a home that also included a separate double garage across the street.
‘The buyer’s solicitors, perhaps in haste and under pressure with so many ongoing transactions, omitted to deal with the purchase of the garage and contracts were exchanged on the house alone,’ he says.
‘The value of the garage was in the order of £200,000 so an expensive mistake to have made.’
Luckily, the error was spotted and the contracts amended before the sale went through.
Costly mistake: A surveying error could lead to huge bills to make a home suitable to live in – and may make it harder for the owner to sell in future
The second example was a mere typo – but it could have cost the buyer a seven-figure sum.
‘An incorrect purchase price was written on the sales contract drawn up the seller’s lawyer. One digit out and incorrect to the tune of £1million,’ Schneiderman says.
This was noticed by the buyer’s lawyers, though, and corrected before contracts were exchanged.
But some buyers were not so lucky, and agents say that some buyers have already spotted worrying issues, either in their legal paperwork or in their homes themselves.
North London estate agent Jeremy Leaf says: ‘We are already hearing of some regretting, not necessarily the decision to buy but certain aspects of it if there was not enough time to carry out not just legal but perhaps property checks.
‘And of course these might have resulted in other decisions, such as tougher price negotiations.’
For those concerned that these errors will impact the value of their home, or their ability to live in it comfortably, making a legal claim on the grounds of professional negligence is an option.
What should you do if you notice something has been missed?
This is Money asked professional negligence lawyer Ragan Montgomery, of LCF Law, to explain when home buyers should consider making a legal claim, and how the process would work.
Before consulting lawyers, she says the first step is to complain to the firm that you believe has made the mistake – whether that is a surveyor or a solicitor.
‘Lots of firms are great, and will hold their hands up, apologise and then pass it on to their insurers, and it will get sorted – but others, not so much so,’ she explains.
If your complaint relates to a lawyer, another option is to get in touch with the Legal Ombudsman.
While they cannot get involved in claims for negligence, they can award compensation to clients who have not received a good service from their lawyer.
Crucially, their services are free of charge – unlike taking the issue to court where complainants will incur substantial legal fees.
How much does legal action cost?
If you do decide to hire solicitors and launch a legal claim, Ragan says fees can be higher than £50,000 if the case goes to trial – though the majority do not get that far.
Many claims are resolved much earlier on through mediation or negotiation, though this can still cost thousands.
She recommends that anyone buying a home gets legal expenses insurance, which can be added to your contents or buildings insurance for around £25 a year.
‘This will very often cover things relating to a home or property and pick up the tab,’ she says.
How does the legal process work?
The first thing to know is that a professional negligence case can take over a year, if it goes all the way to court.
The process starts with you hiring a solicitor, who will begin by writing a letter of claim to the potentially negligent firm, outlining the mistake you believe has been made and the potential costs.
Home sales have gone through the roof in the past year thanks to the stamp duty holiday
They will probably be dealing with the firm’s insurers, rather than the firm themselves.
If the letter of claim does not lead to a resolution, your solicitor will issue a claim in court.
The firm’s solicitor will then have to file a defence, and both parties would be issued with a series of directions from the court asking them to exchange things like witness statements and documents.
After that, it would go to trial and a judge would decide whether to grant your claim for negligence.
Alongside all this, you would be encouraged to take part in mediation and negotiations to try and come up with an out-of-court settlement, at which point the process would end.
How much compensation could you get?
Because the award depends entirely on the mistake made and how it has affected the value of your home, Ragan says there is no standard figure.
‘How much you will get in compensation depends entirely on the issue,’ she says. ‘If it is something like a boundary issue that affects the value of the property, the court can award the difference between what you paid for the home and what the reduced value now is.
In the event that the mistake has made your property unsaleable, you could potentially be reimbursed for the total purchase price.
This, Ragan says, can happen when a clause in a leasehold agreement has been missed that requires the buyer to pay service charges that increase dramatically over a short period of time.
‘They can arguably make the property worthless because no one will want to buy it, so there is potential for the buyer to be awarded the value of the property because they are living in a worthless home.’
But on the other end of the scale, there are minor issues that would not be likely to get the buyer much of a pay-out.
In these cases, the legal costs would outstrip the compensation and the buyer would be left out of pocket.
‘The courts get very irritated by minor claims, such as boundary issues that only concern a very small amount of space,’ Ragan says. ‘You would likely spend far more than you would ever achieve in compensation.’