City Firm Mishcon de Reya has been found liable for a breach of trust and has been ordered to pay more than £1,000,000 in compensation.
The claim arose because its client bought a property from the tenant posing as the owner of a property.
The claim is based on the alleged failure by the firm to obtain an undertaking from the seller’s solicitors that they had taken reasonable steps to identity the seller. However, the claim for negligence against the firm failed and the judge in the case made it clear that both firms involved had acted honestly and innocently in carrying out their respective roles.
Instead the judge found that Mishcon De Reya was in breach of trust and had indemnity insurance to cover the loss.
Mishcon De Reya has been granted permission to appeal and the decision of the court is stayed pending the outcome of the appeal.
This is not the first time this issue has been litigated as a result of a scam in which rogue tenants pose as owners to sell a property and the legal profession will be keen to learn the result of the appeal as clarity on this issue is required.
In the meantime Colman Coyle would advise all home owners, but in particular, absent landlords, to sign up to the Land Registry’s property alert service, which can be accessed via the Land Registry’s website at https://www.gov.uk/guidance/property-alert. The Land Registry will send out free notifications if certain activity occurs on a registered property to try and prevent fraudulent activity from taking place.
