Property crises may force legal overhaul
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THE fact that two solicitors' practices have been shut down in as many weeks has sent shockwaves throughout Ireland's legal and banking community and may force an overhaul of Ireland's residential conveyancing procedures.
Dublin solicitors Michael Lynn and Thomas Byrne may be just be the first investigated.
Although the banks, who believe they are secured, face the greatest exposure, it is unknown how many ordinary investors or solicitors' clients face losing their money.
There are now widespread concerns that an untold amount of solicitors are using their clients' accounts to fund property deals and other personal transactions. It has also raised concerns that banks, by their complacency, and some solicitors through their dishonesty, are abusing the process of legal undertakings, which allow financial institutions to release mortgage loans on the word of a solicitor.
Charges
In transactions involving commercial properties, banks instruct their own lawyers to make independent checks and verify that there are no prior charges on the property and that the legal title is secure.
This used to be the case for residential properties, but that process of independent verification by the banks of their security was handed over to buyers' solicitors in the early 1990s to reduce duplicate legal costs.
Now, before the purchase of any residential property, a buyer's solicitor provides the lending bank with an undertaking that the deed or title of the property has been verified and undertakes to register the banks security on the property.
On foot of solicitors' undertakings, the mortgage transaction proceeds and the bank releases the funds. But it can take up to two months for deeds of a property to be sent to Revenue to be "stamped" and lodged in the Land Registry.
And because of the high turnover of conveyancing during the boom, many properties have not been registered at all and perfection of security has not taken place. This has seen multiple mortgages drawn on individual properties.
Last month, the legal profession was warned of a "conveyancing time bomb" over the failure by banks and solicitors to scrutinise legal title and other regulations required for property contracts.
- Dearbhail McDonald, Legal Affairs Correspondent
