In recent years there have been an increasing numbers of claims by lenders against conveyancing solicitors. In cases of suspected mortgage fraud, arguments by insurers to minimise their exposure by seeking to rely upon aggregation clauses have become increasingly prevalent.  Kevin O'Brien, Partner and Head of  the Lender Services team at JCP Solicitors explains more:

The Law Society’s prescribed Minimum Terms and Conditions of Solicitors Professional Indemnity Insurance provide that all claims against an insured firm may be treated for insurance purposes as “one claim", if they relate to “similar acts or omissions in a series of related matters or transactions."

Former firm Willmett & Co, which was the subject of Solicitors Regulation Authority intervention in December 2009, and is now in liquidation, has recently had lenders pursuing claims relating to property transactions believed to have a combined value of as much as £60 million.

These claims however, have been treated by Willmett's insurers as one claim, subject to a combined indemnity limit of only £2 million.

For lenders, the risks are clear.  Whilst they will no doubt be aware of other transactions to which they have been party which might be regarded as similar or related transactions for aggregation purposes, they may not discover the circumstances of other similar acts or related transactions involving other lenders and parties until it is too late.

JCP Solicitors acted for one of the lenders which initiated a claim against Willmetts.  By swift detection of the lender’s defective security and prompt action against the borrower as well as Willmett, our client's losses were recouped in full.

At the outset our client had what appeared to be a routine claim against Willmett & Co.  Our client had provided a mortgage loan to the borrower, but had not obtained the requisite security in return

Whilst that entitled our client to pursue a claim against the firm, it also gave rise to a claim against the defaulting borrower.

By pursuing both the firm and the borrower we secured full recovery.  Had we or our client delayed, or had we restricted our action to pursuing a claim against the firm alone, it is almost certain that our client would have become one of the many lenders left counting the cost of £50 million worth of uninsured claims.

Kevin O’Brien is a Partner and Head of the Lender Services team at JCP Solicitors. JCP Solicitors act for a wide range of lender clients and have been providing legal services to lender for over 20 years. For more information please contact Kevin on kevin.o’brien@jcpsolicitors.co.uk or telephone 01792 773 773.