Top Tier Legal Firms - Major Error at Settlement

Hi All
We constantly see major errors in litigation from top tier law firms, some of them fatal to their case. I would love to outline them but generally they are too specific to place in a public forum.

An awesome one today on a conveyance.

A top tier representing a large developer doing prestige developments that are settling tomorrow. We send over our settlement requirements today, one of which was the ATO clearance certificate as property is >$2m. Law firm writes back and asks us what an ATO clearance certificate is. Of course they only have admin staff doing all the work but still you think somebody might have bothered to make sure they keep up with the law.....

We now have to submit 10% of purchase price to ATO so they can settle tomorrow. Estimate that their client is going to be about $6m short tomorrow on settlements. They will get that money back but still a hit to the cash flow when not expected, no matter how big of a developer you are. And for that amazing incompetence they get to pay 4x what we charge also.

 

What about the saying 'if you pay peanuts, you get monkeys'?

People feel if they go with an expensive firm they will get competent service. People should seek competent service then ask about the price.

 

W

Wow !

In saying that, is it usual practice amoungst lawyers to only send settlement requirements the day before settlements ? maybe a bigger buffer would help ?

 

no surprise there really.

 

There's 41 lunches to be had before settlement paperwork is due. You can't rush these things

 

Not sure about that. It's not like settlement requirements are an unknown. Mid last year I settled a complex deal in Perth as a buyer and my settlement agent had all settlement requirements satisfied 21 days before settlement. We were the ones springing surprises on the seller because the sellers settlement agent didn't have all the requirements complete until the day before settlement.

 

You would think so, but the mortgagee will only give the amount needed to discharge the loan at the last minute and this is needed for cheque directions.

 

Spot on. Many banks on the way out won't give pay out figures until the day of settlement, some of them aren't ready to midday for a 2pm settlement that day. It would be awesome if the banks were ready earlier, but rarely happens more than the day before settlement.

 

Outgoing bank doesn't provide payout figures.

You might buy from bob smith for $500k

a week before settlement we might have back rates, water and land tax figures from searches for settlement.

day of settlement or sometimes day before settlement the out going bank will tell seller's lawyer that they need

bank cheque made out to CBA for $329,252.27
bank cheque made out to SAI global for $87.50

then seller's lawyers sends settlement figures over adding the following additional cheques
cheque needed for BCC for 212.12
cheque needed for Urban Utilities for $76.50
cheque needed for Re/max for $12,500
cheque needed for certus legal for $495
bank cheque needed for bob smith for $157,376.61

And if the money is held in the buyer's solicitor's trust account they then cut personal trust cheques for all the personal cheques and cash trust cheque to their bank for the bank cheques.

If part or all of money coming from the buyer's bank then the buyer's solicitor has to send cheque directions to the buyer's bank's settlement company to the bank (by 11am if you don't want them to get upset).

Then once buyer's solicitors has all those cheques they turn up at settlement along with a check title search (showing a settlement notice has been registered on the title if the buyer's bank requires it and nothing else has been registered on title) and meets the buyer's bank (if they have one) and the seller's lawyer and the seller's bank for settlement.

 

Hopefully e-conveyancing can make life easier. My partner is super excited.

 

That's what we did. It made the whole process a lot simpler.

The surprise we sprung on the sellers settlement agent should not have been a surprise at all. It was like... so, you know that xyz has lodged a caveat on the title? And the sellers settlement agent is like . Really? Is it so hard to do a title search and look for caveats?

I can tell you funny stories about settlements too. Like the time I sent cheque instructions (as a buyer) to my bank's settlement solicitor to get a phone call from her saying "this can't happen, this won't happen". That was a nightmare to sort out. She got the loans and the securities all mixed up even though I emailed her the correct information a number of times. Seems like she had a problem reading . Anyway, turns out I was correct all along and we did settle... 2 days early!

 

This is a professional negligence issue. If the matter fails to settle, or the vendor suffers a loss, due to the solicitors not being up-to-speed with the law, their solicitors/insurer will cop it.

 

This was a massive boo boo......Australian investor was selling one of his US properties and the owner listed on this property was my LLC (Limited Liability Company), so I got a free property.

Did not realise this had occurred until the property was ready to settle and then the mistake came to light.

MTR

 

Omg.....

 

A title search is only done when the contract is prepared and then a few hours before settlement. They are easy to do but it would be pointless other than at these 2 times.

 

Does not surprise me, many people hire or have incompetent on the front line.

 

No need to do a final check search Terry, if there's a title alert already set up.

 

I don't do conveyancing Kate - is this something with the new electronic settlements? Otherwise who would the incoming mortgagee know there is clear title?