Property-related claims against solicitors: insight from new data

The financial year 2024/2025 saw a modest but meaningful increase in property-related notifications. This trend underscores the growing complexity of property law practice, an environment marked by regulatory change and demanding client expectations highlighting the necessity for practitioners to remain vigilant to areas of potential exposure.

Highlighting key themes and underlying causes of property claims

Negligent advice and failure to advise

The most common cause of notifications is related to allegations of negligent advice or failure to advise. In property transactions, the consequences of such oversights can be substantial. Notably, stamp duty issues have featured prominently in recent notifications. Matters cited include missed deadlines for payment of stamp duty on off-the-plan purchases, and incorrect property transfers necessitating rectification, often accompanied by consequential stamp duty complications. These issues illustrate the intricate and evolving nature of the stamp duty regime, highlighting the imperative for practitioners to maintain current knowledge and implement rigorous procedures to ensure accurate advice.

Another significant theme in property claims over the past year involves strata title transactions. Notifications reveal an upward trend in claims related to alleged failure to advise on the payment of strata levies or to explain restrictions on use imposed by relevant by-laws.

Consistent with previous years, a significant number of notifications stem from misunderstandings around surcharge duty implications, particularly where discretionary trusts are used for property acquisitions and where such trusts do not irrevocably exclude foreign beneficiaries.

Not checking documents

Allegations of failure to check documentation is a recurring theme. Allegations include transfer mistakes. For example, instructions are given for property to be transferred from one spouse to that spouse and the other spouse but in error the property is transferred in its entirety to the other spouse, thus necessitating rectification. Other issues include uncertainty about whether the purchase price is GST inclusive or exclusive, overlooking zoning compliance for current or future property use and failure to identify problems with access to the property.

Not following client instructions

Another significant cause of notifications in property law claims relates to allegations of failure to follow client instructions. Lawcover has identified issues around incorrect title registration. A classic example is where the parties intend to hold the property as tenants in common but are registered as joint tenants or vice versa. Lawcover also sees issues where the parties are assigned incorrect shares. Rectification can be problematic and can involve stamp duty implications.

Cyber

Cyber fraud continues to cause concern. The cause of these notifications is predominantly related to business email compromise.

Lawcover has a suite of cyber related resources available on its website which help practitioners respond to cyber risk.

Allegations of conflict

Conflicts in property cases often arise from representing more than one party in a transaction. Allegations of conflict commonly arise where the solicitor represented several parties in a joint venture, or both parents and children in property sales or transfers. Conflict can also arise when a solicitor acts as agent for another party on PEXA, or represents both lender and borrower on loan agreements or in vendor finance agreements.

Risk management tips:

The causes of claims in property matters are multifaceted. However several practices are key to managing risk exposure in this area, including:

• keeping up to date with legislative change;
• clearly identifying for whom you act;
• taking steps to identify client objectives and manage expectations; and
• providing competent advice, and checking and double-checking documentation.

The regulatory environment continues to grow in complexity. The impending AML/CTF regime, which is due to commence next year, will only add to this complexity. A proactive, detail-oriented and systematic approach remains the best way to minimise professional liability in property matters.

Glenda Carry is Legal Risk Manager at Lawcover.