Risk management

Check the facts

Jeremy and Paula were moving.

Jeremy had been transferred to his company's London office with a generous relocation package.

The couple found an ideal property that was still under construction.

Jeremy contacted Allister, his solicitor, and explained that the builder was looking for a quick sale.

'He wants an exchange of contracts in a fortnight - apparently the bank are pressing him', Jeremy said.

Contract papers were received from the builder's solicitors.

The builder was selling as a limited company.

It was not a name that Allister recognised.

Enquiries were raised and answered and the results of the search were received.

There was no need to wait for a mortgage offer, because part of the relocation package on offer was a bridging facility from Jeremy's employers.

Jeremy and Paula came into the office to sign the contract.

'The builder says he can finish the work in six weeks,' Jeremy said.

'It looks like there's a lot to do, but he says it will be all right.'

Allister took them through the papers.

'The builder warrants that the property will have the benefit of National Housebuilding Council (NHBC) cover in the contract, so that's all right.

I haven't seen the papers yet but that is not unusual, they will turn up.

By the way, the builder is insisting on a full 10% deposit.'

'No problem', Jeremy replied.

'We have enough money to cover it, I'll give you a cheque now.'

Three days later, Allister exchanged.

About ten days after that Jeremy rang.

He sounded agitated.

'I can't get hold of the builder.

There's no one on site, no answer when I ring his phone and when I went round to his yard it was locked up.'

'Don't panic, I'll speak to his solicitor', Allister said.

Once he'd spoken to the solicitor Allister began to panic himself.

The solicitor had not seen his client since he had come into the office to collect the cheque for the deposit.

'He paid the deposit to him?' Jeremy asked.

Allister said he had, because the contract provided that it could be held as agent.

It transpired that the builder had disappeared with Jeremy and Paula's deposit of 28,000.

They could not recover the money from the NHBC.

Although in some circumstances cover is provided for deposits paid to builders, this builder had never been registered.

The clause in the contract was worthless.

Jeremy and Paula's new solicitors allege that Allister was negligent because:

l He did not check the NHBC documents;

l He did not check with the NHBC that the builder was registered;

l He failed to advise his clients on the difference between holding the deposit as either stakeholder or agent, and;

l He did not examine the financial stability of the company, despite knowing that the builder was under pressure from his bank.

l For information on claims prevention, contact the risk management team at St.

Paul International, tel: 020 7645 6918.