8 ways to mitigate negligence claim risks for CQS firms
As a consequence of the government’s stamp duty holiday and pent-up property activity from the Covid-19 lockdown, the conveyancing market has seen a massive increase in the number of transactions taking place in the last few months. However, the rise in demand also comes with increased risks for those handling them.
CQS-accredited firms must ensure that they comply at all times with the CQS scheme rules and CQS protocol, otherwise they are at risk of negligence claims being made by clients.
Many PII insurers and brokers have said that the October 2020 renewal period will be extremely tough and could see premiums increase by up to 30%. It will therefore be essential for firms to ensure that they are seen as good risks by their current and potential insurers; there is no guarantee that insurers will want to keep their existing clients if they no longer fit with their risk appetite - so don’t take anything for granted.
With that in mind, we look at 8 key risks you should be watching out for to avoid or mitigate entirely.
1. Poorly scoped retainers
You must ensure that when you are looking to accept a client’s instructions, you scope these appropriately. Don’t make promises you know you can’t deliver on just to keep a client happy, they would prefer to know the truth even if it may not be what they want to hear.
2. Reporting to clients
Endeavour to set appropriate expectations when reporting to clients. For example, will you report periodically to them even if nothing has changed, or only when something changes? If you use automated systems such as SMS messaging, make sure you update your systems appropriately.
3. Managing file notes
Keep detailed notes of everything you do on a client’s file; insurers and regulators work on the basis that if it is not noted then it did not happen.
4. Failure to act in a timely manner
Many complaints and claims are generated due to firms not acting when they should, either on the instructions of the client or as part of the normal conveyancing process. With case management and diary systems now available, there is no excuse for missing anything.
5. Unthorough contract checking
Most clients will rely on you, as a conveyancing specialist, to check everything that is contained in property contracts, and although they have ultimate responsibility for signing them, they will probably look to blame you if something is missed and they suffer detriment. The current review of how clients have been impacted as a consequence of signing up to leasehold transactions rather than freehold transactions is likely to see many clients saying they were not fully informed of the issues around such matters.
6. Fraud
Mortgage and property fraud are on the increase and criminals are likely to use the current busy transaction period as a means of trying to further their activities. They will rely on you being so busy that you won’t have the time to carry out normal due diligence checks (ID, source of funds, source of wealth, etc.). Make sure your risk assessment checks don’t fall by the wayside.
7. Client money and assets
Due to the current economic and employment climate, many people will be short of money - including your staff - and may see client money as an easy target. You must ensure that you have the appropriate systems and procedures in place to protect client money and assets and regularly police these.
8. Undertakings
Although most conveyancing undertakings are routine they still need to be monitored and acted upon as appropriate. Failing to comply with an undertaking is not only a regulatory failure but could also lead to clients taking you to court to enforce them. Insurers and CQS take a very dim view of firms failing to comply with undertakings.
The Future
There are plenty of opportunities for you in the current property boom but only if you take care and do the right things at the right time. Don’t fall into the trap of making short-term gains by taking shortcuts and then finding it comes back to haunt you later.
How we can help
We are committed to helping our customers in these difficult times and can provide various resources and services that can help you protect your firm, all of which can be accessed remotely, including:
• CQS training courses accredited by the Law Society
• Governance, Risk and Compliance eLearning courses for Law Firms
• A compliance helpline and advisory services
