What a start to the year of 2021, not the one that we were all expecting with Lockdown 3 upon us, tougher restrictions in place and uncertainty around the timescales of when some sort of normality will prevail.
Last year, the Government announced a number of measures to relieve the economic pressures of Covid-19 and the restrictions, the Stamp Duty Land Tax holiday being one of them. With no signs of the looming deadline being extended on this holiday period, that being Wednesday 31st March 2021, insurers have raised concerns, that this could potentially be a hotspot for claims against law firms for missing the Chancellor’s ‘Stamp Duty Holiday’ deadline.
What are insurers concerns?
Transactions taking longer:
With tougher restrictions in place, conveyancing transactions are taking longer, with a potential backlog of transactions. Therefore, there is a possibility that some transactions will miss the deadline of the 31st March 2021. This could lead to a number of disappointed clients looking to pick holes in the conveyancing transaction itself and point fingers at firms, alleging that the solicitor caused the delay, resulting in the client being out of pocket having missed out on the land tax relief.
Many firms may have already written to their clients advising that they are unlikely to benefit from the tax break, as completion will be after the deadline, giving clients some forewarning of what to expect in this climate. However, with this in mind, insurers have concerns.
Neil Ross, Head of AXIS Pro Europe commented:
"Many firms may not be managing client expectations quite so well which could create dissatisfied clients, who will seek to make a claim against their solicitor following the missed deadline of the SDLT holiday. The key point from a risk management perspective will be managing client expectations and/or including disclaimer language in the engagement letter."
At a time of uncertainty, fraud is rife with criminals looking to exploit all angles for financial gain and with a race to complete conveyancing transactions by the SDLT deadline, such transactions will be a target for such crime, with the large sums of money involved. Law firms will be aware of the fraud risks of misappropriation of funds, where clients are tricked into sending funds to the wrong account after receiving a fake email with new payment details. UK Finance believe that buyers are in danger of being manipulated by fraudsters, with GBP16.2m lost from personal accounts through frauds involving clients being sent fake emails in the first half of 2020. Law firms should make their clients aware of the heightened risk of fraud in this current climate and highlight the red flags where possible.
Other scams to be aware of involve identity theft, in which letters sent to old addresses are used by criminals to apply for credit or benefits in their name.
It is worth noting that whilst the housing market remains open for business, there is mounting pressure on the Government from MHCLG that house moves may need to be suspended to control the spread of Covid-19. At this time, no decision has been made, but if such a drastic move is taken, there will inevitably be more pressure on law firms to complete transactions prior to the SDLT holiday deadline. This could potentially lead to increased volumes of work, coupled with the pressures of potential staff shortages due to sickness and furlough; this could be a breeding ground for errors and further claims in areas that we have already seen such a Multiple Dwelling Relief, Escalating Ground Rent, Failed Investment Schemes, Home Equity Release and Will Drafting.