Unregulated Collective Investment Schemes:
Could my Conveyancing Solicitor be
Liable for my Financial Loss?

Since 2017, concerns have been raised that solicitors and law firms have been involved in “dubious or questionable” investment schemes, in particular:

• Law firms or solicitors being used to add credibility to a UCIS, without undertaking any actual legal work
• Money transferring through a law firm’s client bank account when no legal work was undertaken, in breach of money laundering or improper payments rules
• UCISs being presented as an investment in ‘land’, with ‘routine’ conveyancing procedures
• Legal fees being charged to clients when no real legal work was carried out

The Solicitors’ Regulation Authority (SRA), the regulatory body for solicitors and law firms in England and Wales, issued updated guidance in 2020 to help lawyers understand their regulatory and professional obligations and how to comply with them. It said solicitors must act:

• in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons (Principle 2)
• with independence (Principle 3)
• with integrity (Principle 5)
• in the best interests of each client (Principle 7)

A typical scenario involving conveyancing solicitors in UCIS-related property investments may look like this:

A potential investor is advised to buy a hotel room “off-plan” with promises of high returns. A specific conveyancing solicitor is recommended by the hotel’s developer. However, whilst the SRA-regulated solicitor is obligated to act in the best interests of their client (the purchaser/investor), they fail to:

• Explain that this is not a standard conveyancing transaction
• Flag that the project is a high-risk investment scheme
• Protect the client’s deposit with proper safeguards (eg escrow or trust accounts)
• Warn about the well-established and known risks of UCISs
• Warn about the lack of FCA regulation with UCIS-related transactions and the implications of this if things go wrong

When the scheme collapses or fails to deliver, the solicitor may be liable for:

• Professional negligence
• Breach of fiduciary duty
• Misrepresentation by omission
• Breach of trust

In simple terms, conveyancing solicitors must not approach these investments as routine property or land purchases, and it should be made clear from the outset that the client’s money is being used to fund a high-risk development or refurbishment, in turn putting them at significant risk.

The solicitor must act in their client’s best interests by carrying out a thorough risk assessment, undertake due diligence, including independently verifying all the details of the investment, and refuse to act in any scheme that seems fraudulent, unfair, could represent a conflict of interest or is unconnected to legal services.

1. Duty of care and independent advice

• Solicitors have a legal duty to act in their client’s best interests and to ensure their client understands the nature of a transaction.
• In many UCIS-related property investments (e.g. hotel rooms, student pods, buy-to-let, care homes, overseas developments), there is a risk of conveyancing solicitors failing to give proper independent advice or they simply ‘rubber-stamp’ the transaction, particularly if they are involved in a significant number of related transactions.
• Lawyers, including solicitors, legal executives, barristers etc, have a duty not to act where there is a risk of a conflict of interest arising – for example acting for both a buyer and a developer in a UCIS related property transaction.
• If the solicitor did not warn the client about the risks, did not advise against proceeding with a UCIS related transaction, or refused to act if there was a conflict of interest, then they may be negligent.

2. Breach of trust or breach of fiduciary duty

• A fiduciary duty is a legal and ethical responsibility that requires one party, namely, the ‘fiduciary’, in this case the conveyancing solicitor, to act in the best interests of their client. As this is a relationship built on trust and confidence, then loyalty, honesty, and strictly avoiding any conflicts of interest are paramount.
• If a solicitor handles client money that ends up being used in a fraudulent or illegitimate scheme, they could be held liable as a trustee.
• An example of this could be transferring purchase funds to a third-party UCIS developer without ensuring proper security or legal protections are in place to protect their client.

3. Facilitating fraud

• Some solicitors are accused of knowingly or recklessly promoting or legitimising investment schemes.
• The SRA Warning Notice states that solicitors must not allow their role to be used to create false legitimacy for dubious schemes.

4. Failure to conduct due diligence

• In UCIS-linked property investments, proper due diligence (eg verifying title, confirming developer permissions, checking for restrictions on use or resale) is often not carried out.
• Investors rely on solicitors to protect their interests, not just process the paperwork.

Conveyancing negligence can have serious financial and legal consequences. If you believe that your conveyancing lawyers have made a mistake in handling your UCIS-linked transaction and you have suffered financial losses, then you may have grounds for a claim. Contact our team of experienced professional negligence lawyers for advice on next steps.

Sarah Spruce, Legal Director at TLW Solicitors, says:

“Buying a property or a share in a property that is not yet completed carries substantial risk. The developer could go out of business, or the property may not sell or generate sufficient rental income, leaving investors at risk of losing their capital.

We trust professional people such as lawyers and solicitors to do a good job, offer sound advice, protect us, and generally have our best interests at heart, so when things go wrong, we can feel let down and unsure of where to turn next.

If you have lost money in what you think may be a UCIS-related property investment transaction, then help is available. Even if you are not sure if you have a claim or if you’ve been involved in a UCIS, get in touch with my specialist team. We’ll go through the circumstances of your case on a confidential basis and explore your options, including whether you may be eligible to make a ‘no-win, no-fee’ compensation claim.”

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