Complaints from third parties – could you be accountable?

Delay by lender’s solicitor

In 2012, Mr Z purchased a property with the assistance of a mortgage.

Some years later, he found a cheaper mortgage deal which meant his monthly repayments would decrease. He decided to remortgage the property.

His new lender instructed a firm of solicitors to carry out the legal work.

On being instructed, the firm wrote to Mr Z explaining its role in the transaction. It informed Mr Z that:

• the lender was its client and would be responsible for paying its fees
• as Mr Z was not their client, they would not be able to give him legal advice on the transaction, and he would have to seek his own independent advice if he had queries

Mr Z was keen to complete the remortgage as soon as possible to reduce his monthly mortgage payments.

However, he became concerned the firm was unreasonably delaying matters resulting in him losing money.

Mr Z raised a formal complaint with the firm. The firm refused to respond, saying Mr Z was not their client.

Mr Z escalated his complaint to LeO and it was accepted for investigation.

The firm challenged LeO’s involvement on the basis the lender was their client, not Mr Z.

The LeO finding: complaint upheld

LeO carefully considered the firm’s challenge.

There is no requirement in LeO’s Scheme Rules 2023 that a complaint must be from a client of the firm.

LeO can determine whether the firm provided a legal service to the complainant.

While LeO accepted the lender was the firm’s client, LeO determined the firm nevertheless provided a legal service to Mr Z.

LeO explained that any errors or delays by the firm in completing the remortgage could result in detriment to Mr Z, such as financial loss.

Mr Z’s new mortgage payments were £45 per month cheaper than his old mortgage. As the firm had, in his view, delayed matters by four months, they had caused him to suffer a financial loss of £180.

LeO considered it was fair and appropriate to investigate the complaint and upheld it.

Further, LeO determined the firm had unreasonably delayed matters for four months, causing Mr Z to suffer financial loss of £180.

The firm was order to pay this sum.

Delay by seller’s solicitor

Mr and Mrs G instructed a law firm to act for them in the purchase of a property.

At the time of the purchase, the government introduced a stamp duty holiday.

If Mr and Mrs G could complete the purchase before the end of the holiday, they would not be liable to pay stamp duty, saving them £7,000.

Searches relating to the property were undertaken and contracts were exchanged.

However, the searches raised concerns. Mr and Mrs G’s solicitors advised against progressing the transaction until satisfactory responses were received to enquiries raised with the seller’s solicitors.

Unfortunately, despite chasing the seller’s solicitors for a response, the answers to Mr and Mrs G’s questions were not provided until the stamp duty holiday expired.

Eventually, the enquiries were satisfactorily answered and the transaction was able to complete. However, Mr and Mrs G had to pay the stamp duty liability of £7,000.

Whilst Mr and Mrs G had no criticism of their own solicitors, they complained the delays caused by the seller’s solicitors had cost them £7,000.

They raised a formal complaint with the seller’s solicitors, who did not uphold their complaint.

The seller’s solicitors considered they responded to the enquiries in a reasonable timeframe and were not at fault.

Mr and Mrs G were unhappy with the response and referred the matter to LeO.

The LeO finding: complaint not upheld

LeO determined it was not able to investigate the matter, as Mr and Mrs G’s complaint was outside its jurisdiction.

Unlike Mr Z’s case, the seller’s solicitor was acting for the seller and had no obligation to the purchasers at all.

As the seller’s solicitor was not providing a service to Mr and Mrs G, LeO was unable to investigate the complaint.

Avoiding complaints

It is important to remember that LeO’s Scheme Rules do not state the complainant has to be a client of the firm to fall within its jurisdiction.

Rule 2.8(a) provides the complaint “must relate to services which the authorised person provided to the complainant”.

If the complainant is receiving the benefit of a service, even if they did not directly instruct the firm or pay their fees, they are likely to fall within LeO’s jurisdiction.

If a third party is receiving the benefit of a firm’s service, it is important to:

• keep them informed of any delays and the reasons for this to manage their expectations – particularly in situations where the firm is not at fault
• acknowledge any concerns raised
• give clear explanations

These simple steps are likely to avoid complaints from arising.