Risk Management under the Conveyancing Quality Scheme (CQS)
Section five is the largest chapter within the Standards, and quite rightly so when you consider it covers risk management, which in effect impacts on all other parts of the Standards through the requirement for firms to have a compliance plan and risk register.
To ensure risk management is addressed effectively, it is key for your firm to have defined risk management roles and responsibilities and for risk information to be communicated to all staff as and when appropriate. It is also a requirement to appoint a named and appropriately experienced and competent supervisor who can oversee the legal services and those involved in providing them under CQS.
Key risk management requirements of the CQS Standard
Effective management of instructions
Your firm must have an effective way of managing instructions, and in particular those of a high risk nature, in addition you must maintain and communicate to staff lists of the types of conveyancing work you will/will not undertake, for example, some firms have now decided not to handle leasehold transactions due to the heightened risks that come with them under new building safety legislation.
Risk Register
As mentioned above, you need to maintain a risk register that includes details of the generic risks and causes of claims associated with conveyancing work undertaken; such risks must be communicated to all staff as appropriate.
Key Dates
Monitoring keys dates is an essential part of managing the risks around transactions and missing them can have a serious impact on their completion and potentially lead to negligence claims and complaints.
Conflicts of interest
The SRA has made it clear in the past that acting for buyer and seller is more than likely to lead to a conflict of interests and therefore can only be undertaken in exceptional circumstances, which is why these and other conflicts must be appropriately monitored and managed.
Staff Supervision
Supervision of staff is a key requirement of the Standards and is of particular importance since the Covid lockdowns with so many staff now working from home or in a hybrid way. You must ensure that appropriate supervision arrangements are put in place, including the checking of post and regular matter and performance reviews, and where necessary putting in place cover for when fee earners are absent.
Independent File Reviews
Regular and independent file reviews are a key aspect of managing potential client and staff risks, and therefore it is essential that such reviews are undertaken, and issues identified, recorded and addressed within the timeframes detailed within the Standards.
AML Compliance
One of the risk areas that is under most focus from the SRA is compliance with the Money Laundering Regulations and whether firms are doing all they can to avoid being involved in criminal activity related to this area. The Standards place significant obligations on firms but, even so, some CQS firms have been found to be in breach of these by the SRA, which by implications means they are in breach of the Standards.
Mortgage Fraud
Another real risk for conveyancers is property and mortgage fraud, and to avoid involvement in these crimes the Standards lay down significant obligations for firms to meet, including carrying out risk assessments, relevant checks on clients, property ownership, and lawyers acting on the other side of a transaction; the provision of training around these keys areas is also critical.
Stamp Duty Land Tax (SDLT)
The payment of Stamp Duty Land Tax (SDLT) is an important part of a property transaction and the Standards lay out a number of requirements in this area, for example, you must have an SDLT policy that mainly covers the provision of key information to clients around the sums to be paid and how these have been calculated, along with the checks carried out around these to ensure such payments are correct.
Leasehold transactions
Firms that deal with leasehold transactions must ensure they provide clients with information around these, including the difference between freehold and leasehold, the length of term remaining, the amount of ground rent and service charge, and rent review provisions.
The management of risk is an ongoing requirement and as such the review of risk data created in the above areas is critical, as such reviews will help identify where problems exist and how they can be remedied and mitigated in the future.
