Relaxation of restrictions: Under practice rule 6, if a conveyancing firm was associated with a solicitor's property selling practice which negotiated a sale, it could not act for the buyer.

On 9 October the Council amended practice rule 6 to relax that restriction, when four or more solicitors' firms join together to undertake property selling through a Solicitors' Estate Agency Limited (SEAL).

The new version of practice rule 6 came into force on 13 October 1997.What is a SEAL? A SEAL must be owned by at least four solicitors' practices.

It must be a company (ie, a recognised body or solicitors' incorporated practice).

It must not itself undertake conveyancing.

It must be seen to be separate from any associated conveyancing practice.What are the relaxations? If four or more conveyancing firms set up a SEAL, then provided there is no conflict of interest, and the seller is not selling as a builder or developer, the SEAL may undertake property selling for the seller and give mortgage related services to the buyer; and one of the firms may undertake the buyer's conveyancing; and another of the participating firms may undertake the seller's conveyancing.Are there any new restrictions? Nothing has changed for those solicitors who do not undertake property selling.

So far as property selling solicitors are concerned, the rule only relaxes previous restrictions, and applies no new ones; but the changes are limited, for the present at least.

Those solicitors who do not wish to set up a SEAL are still prohibited from acting for buyers.

Because the rule relaxes a previous prohibition, some safeguards have been introduced for clients, which apply only when solicitors take advantage of the relaxations.

The solicitors must get the seller's and buyer's consent in writing after giving them certain advice.What about solicitors who sell property but do not want to set up a SEAL? Further deregulation will be proposed in December, to relax restrictions for solicitors who undertake property selling, but not through a SEAL.The new r ule 6 now 'rolls together' all provisions which apply to a property selling solicitor acting for both seller and buyer.

Chapter 26 in The Guide to the Professional Conduct of Solicitors should be read in the light of this change.

The full text of the amendment rule is set out below.

SOLICITOR'S PRACTICE (JOINT PROPERTY SELLING) AMENDMENT RULE 1997(Rule dated 13 October 1997 made by the Council of the Law Society with the concurrence of the Master of the Rolls under section 31 of the Solicitors Act 1974 and section 9 of the Administration of Justice Act 1985.)Delete rule 6 of the Solicitors' Practice Rules 1990 and substitute:'Practice rule 6 (avoiding conflicts of interest in conveyancing, property selling and mortgage related services)'(1) (General)This rule sets out circumstances in which a solicitor may act for more than one party in conveyancing, property selling or mortgage related services, in connection with:(i) the transfer of land for value at arm's length;(ii) the grant or assignment of a lease, or some other interest in land, for value at arm's length; or(iii) the grant of a mortgage of land.The rule must be read in the light of the notes.Notes:(i) 'Solicitor' (except where the notes specify otherwise) means a solicitor, his or her practice, and any associated practice, and includes a SEAL; and-- 'associated practices' are practices with at least one principal in common;-- a 'principal' is a sole practitioner, a partner in a practice (including a registered foreign lawyer partner), a director of a recognised body, a member or beneficial owner of a share in a recognised body, or a recognised body; and-- a SEAL means a recognised body which:(a) does not undertake conveyancing;(b) is owned jointly by at least four participating practices which do not have any principals in common; and(c) is conducted from accommodation physically divided from, and clearly differentiated from, that of any participating practice; and-- a 'participating practice' means a practice one or more of whose principals is a member or a beneficial owner of a share in the SEAL.(ii) 'Property selling' means negotiating the sale for the seller.(iii) 'Mortgage related services' means advising on or arranging a mortgage, or providing mortgage-related financial services, for a buyer; and-- 'seller' and 'buyer' include lessor and lessee.(iv) Whether a transaction is 'at arm's length' will depend on the relationship between the parties and the context of the transaction, and will not necessarily follow from the fact that a transaction is at market value, or is stated to be on arm's length terms.A transaction would not usually be at arm's length, for example, if the parties are:-- related by blood, adoption or marriage;-- the settlor of a trust and the trustees;-- the trustees of a trust and its beneficiary or the beneficiary's relative;-- personal representatives and a beneficiary;-- the trustees of separate trusts for the same family;-- a sole trader or partners and a limited company set up to enable the business to be incorporated;-- associated companies (ie where one is a holding company and the other is its subsidiary within the meaning of the Companies Act 1985, or both are subsidiaries of the same holding company); or-- a local authority and a related body within the meaning of paragraph 6(b) of the Employed Solicitors' Code 1990.(v) 'Mortgage' includes a remortgage.(vi) Nothing in the rule allows a solicitor to act in breach of rule 6A(5) (acting for seller and one of two prospective buyer s), or any other rule or principle of professional conduct.(2) (Solicitor not acting for seller in property selling -- restrictions on acting for seller and buyer in conveyancing)This paragraph applies when a solicitor does not act for the seller in property selling.(a) The solicitor must not do conveyancing for both seller and buyer:(i) without the written consent of both; or(ii) if a conflict of interest exists or arises; or(iii) if the seller is selling or leasing as a builder or developer.(b) Otherwise, the solicitor may act for both seller and buyer in conveyancing, but only if:(i) both parties are established clients; or(ii) the consideration is £10,000 or less and the transaction is not the grant of a lease; or(iii) there is no other qualified conveyancer in the area whom either the seller or the buyer could reasonably be expected to consult; or(iv) seller and buyer are represented by two separate offices in different localities, and:(A) different solicitors, who normally work at each office, conduct or supervise the transaction for seller and buyer; and(B) no office of the practice (or an associated practice) referred either client to the office doing his or her conveyancing.Notes:(i) if a builder or developer acquires a property in part exchange, and sells it on without development, he or she is not, for the purpose of this rule, selling 'as a builder or developer'.(ii) The test of whether a person is an 'established client' is an objective one; that is, whether a reasonable solicitor would regard the person as an established client.-- A seller or buyer who is instructing the solicitor for the first time is not an established client.-- A person related by blood, adoption or marriage to an established client counts as an established client.-- A person counts as an established client if selling or buying jointly with an established client.(iii) The consideration will only count as £10,000 or less if the value of any property given in exchange or part exchange is taken into account.(iv) 'Solicitor' in paragraph (2)(b)(iv)(A) means any individual solicitor conducting or supervising the matter.(3) (Solicitor acting for seller in property selling -- restrictions on acting for buyer)This paragraph applies when a solicitor acts for the seller in property selling.(a) The solicitor must not also act for the buyer:(i) without the written consent of both parties; or(ii) if a conflict of interest exists or arises; or(iii) if the seller is selling or leasing as a builder or developer.(b) Otherwise, the solicitor may also act for the buyer in conveyancing and/or mortgage related services, but only subject to the following conditions:(i) the solicitor must not act for both seller and buyer in the conveyancing; and(ii) the solicitor must provide any property selling service to the seller through a SEAL; and(iii) the solicitor must not act for both the seller in conveyancing and the buyer in mortgage related services, unless the mortgage related services are provided through the SEAL; and(iv) different persons must conduct the work for the seller and the work for the buyer; and if the persons conducting the work need supervision, they must be supervised by different solicitors; and(v) the solicitor must inform the seller in writing, before accepting instructions to deal with the property selling, of any services which might be offered to a buyer by the SEAL or any participating practice; and(vi) the solicitor must explain to the buyer, before the buyer gives consent to the a rrangement:(A) the implications of a conflict of interest arising; and(B) the solicitor's financial interest in the sale going through; and(C) if the solicitor proposes to provide any mortgage related services to the buyer through the SEAL, that the solicitor cannot advise the buyer on the merits of the purchase.Notes:(i) Normally, a solicitor who does property selling for a seller may not also act for the buyer; but a SEAL may act for the seller, and provide mortgage related services to the buyer; one of the participating practices may do the buyer's conveyancing, and another participating practice may do the seller's conveyancing.(ii) 'Solicitor' in paragraph (3)(b)(iv) means the individual solicitor supervising the transaction.(4) (Restrictions on acting for both lender and borrower)(a) A solicitor must not act for both lender and borrower on the grant of a mortgage of land:(i) if a conflict of interest exists or arises; or(ii) on the grant of a private mortgage of land at arm's length.(b) A solicitor who proposes to act for both lender and borrower on the grant of an institutional mortgage of land must first inform the lender in writing of the circumstances if:(i) the solicitor or a member of his or her immediate family is a borrower; or(ii) the solicitor proposes to act for seller, buyer and lender in the same transaction.Notes:(i) An 'institutional mortgage' is a mortgage on standard terms, provided by an institutional lender in the normal course of its activities; and-- a 'private mortgage' is any other mortgage.(ii) 'Solicitor' in paragraph (4)(b)(i) means any principal in the practice (or an associated practice), and any solicitor conducting or supervising the transaction, whether or not that solicitor is a principal; and 'immediate family' means spouse, children, parents, brothers and sisters.(iii) The lender must be informed of the circumstances, in accordance with paragraph (4)(b) so that the lender can decide whether or not to instruct the solicitor.(iv) A lender's instructions may require a wider disclosure than this rule requires; and a solicitor must assess whether the circumstances give rise to a conflict.

For example, there will be a conflict between lender and borrower if the solicitor becomes involved in negotiations relating to the terms of the loan.

A conflict might arise from the relationship a solicitor has with the borrower -- for example, if the solicitor is the borrower's creditor or debtor or the borrower's business associate or cohabitant.CHART TO SHOW HOW PRACTICE RULE 6, AS AMENDED BY THE SOLICITORS' PRACTICE (JOINT PROPERTY SELLING) AMENDMENT RULE 1997 AFFECTS SOLICITORS WHO SELL PROPERTYIf you, your firm or an associated practice is not acting for the seller in the property selling, this flowchart does not apply1) Set up your SEAL-- recognised body-- owned by 4 firms-- visibly separate-- does not undertake conveyancing2) When seller approaches you-- arrange to do the property selling through the SEAL, and-- give 'health warnings' to the seller3) When buyer approaches you-- check whether the seller is selling as a builder or developer;-- check whether there is a conflict of interest-- give health warnings to the buyer, and-- get both parties' written consent4) If you are doing the seller's conveyancing-- provide any mortgage related services to the buyer only through the SEALYOU MUST NOT ACT FOR THE BUYER IF:-- there is a conflict of interest, or-- the seller is selling as a builder or developer; or-- it involves doing conve yancing for both partiesYOU MUST COMPLY WITH THE SAFEGUARDS:-- health warnings-- separate persons dealing with each partyYOU MAY ACT FOR THE BUYER IF YOU:-- use a SEAL; and-- act in accordance with the rule