Case studies

Mr A

Mr A wanted some legal help when buying a new home for him and his family. He used a lawyer who specialises in conveyancing transactions to take care of the legalities and to help with calculating and paying any third party costs. One of the lawyer’s responsibilities was to pay stamp duty land tax to HMRC, which is due on properties above a certain value.

As well as paying costs for overseeing the legal requirements of the transaction, Mr A transferred an additional £10,500 to the law firm’s bank account so that they could pay the stamp duty on his behalf.

The firm’s completion statement confirmed that they had held funds of £10,500 in order to pay the stamp duty. As far as Mr A was concerned then, everything was in order and the house sale was complete. He and his family were thrilled that they could move into their new home.

Four years after moving in, Mr A received a letter completely out of the blue from HMRC. It stated that they had not received the stamp duty he owed them and that he must pay it along with interest. The outstanding amount due was now £12,000. Mr A was completely shocked and upset - particularly as the law firm knew that the stamp duty was due no later than 30 days from completing the purchase. He was also worried where this would leave him financially.

Mr A wanted to complain to the firm but by now it had ceased trading; instead he decided to bring his complaint to the Legal Ombudsman. When we investigated we found that the firm had declared no stamp duty was required since it had declared a lower buying price to HMRC than the amount actually paid by Mr A.

We ordered the firm to repay Mr A the £10,500 he originally gave them, plus a reimbursement to cover interest. We also ordered the firm to pay £200 compensation for the impact of their poor service. As the firm no longer existed, we advised Mr A to contact the Solicitors Regulation Authority to retrieve the money via its Compensation Fund.

Mr and Mrs B

Mr and Mrs B instructed a firm to act for them in the purchase of a new home. The purchase price for the property was £650,000. Prior to completion the firm sent Mr and Mrs B a completion statement and invoice, which confirmed that the stamp duty owed on the property was £26,000 and that the firm required a total of £192,000 to complete the purchase.

Mr and Mrs B transferred the money to the firm as requested and completion took place shortly afterwards. Everything seemed to have gone smoothly for the couple.

However, about six months later they received a letter from HMRC, which advised that the stamp duty had not been paid. As a result, £26,000 remained outstanding and in addition interest was accruing from the date of the completion onwards. The firm had ceased trading since working for Mr and Mrs B, meaning they couldn’t raise the issue directly with the firm. Consequently, they brought their complaint to the Legal Ombudsman.

When we investigated it became apparent that the firm had transferred Mr and Mrs B’s money, intended to cover stamp duty, to its office account rather than making the payment to HMRC. After reviewing the evidence an ombudsman decided that the firm’s service was far below the standard that Mr and Mrs B could reasonably have expected.

We ordered that the firm should repay Mr and Mrs B £26,000 and additionally pay any interest or penalties arising as a result of their failure to make the payment to HMRC. As the firm no longer practised, the money would be repaid via its indemnity insurance provider.

Mr and Mrs C

Mr and Mrs C received a letter from HMRC sometime after moving into their new home stating that they owed £15,000 in stamp duty plus interest. This came as a major surprise to the couple since they had paid a lawyer to settle the stamp duty payment on their behalf.

At the time of making the purchase Mr and Mrs C received confirmation from their lawyer that including fees and stamp duty, £38,000 was required to complete the transaction. They promptly transferred this money into the firm’s account. They were relieved that everything had gone through and excitedly moved in as soon as they received the keys.

However, the firm did not pay the stamp duty on completion and nor did they contact Mr and Mrs C to explain that they had not done so. When we investigated we found that the service provided was below standard.

An ombudsman decided that the firm should repay Mr and Mrs C the £14,700 in unpaid stamp duty together with any costs to cover penalties or interest arising as a result of the failure to pay this on completion. They were also ordered to pay £150 compensation for the distress and inconvenience caused.

Ms D

Ms D had instructed a law firm ten years previously to help her purchase a property. In particular, she had wanted the firm to take care of paying her stamp duty and to complete the land registry forms. Her lawyer seemed helpful enough and shortly after starting proceedings Ms D received a completion statement, confirming that everything was in order.

Ms D moved into her home and lived there unaware of any problems until she was eventually contacted by HMRC. They confirmed that her stamp duty, amounting to £6,000, had not been paid. They wanted the initial payment plus interest, which had accrued over 10 years. In total, she was being asked to pay back £22,000. When Ms D looked into the matter further she also discovered that her property had not been registered with the land registry.

Ms D was extremely distressed and contacted the firm immediately to see what had gone wrong. However, the firm was unhelpful at first, failing to return calls or accept any responsibility for the problems she was facing.
Eventually Ms D brought her complaint to the Legal Ombudsman. An investigator looked at all of the facts of the case and concluded that the firm had not fulfilled its duties; neither paying the stamp duty nor processing the land registry forms.

Once the firm knew that the Legal Ombudsman was involved it was easier for Ms D to broker an agreement on how to resolve the issue. The firm accepted our suggestion of an informal resolution, and agreed to pay Ms D the stamp duty costs plus penalties. HMRC agreed to waive the interest charges once it became aware of Ms D’s situation but we also sought assurances that should the money be required after all, the firm would cover the shortfall. Finally, we recommended that the firm pay Ms D £1,000 in compensation for the distress and inconvenience caused by its poor service.

Mr and Mrs E

Mr and Mrs E used a law firm to help them buy a new home shortly after getting married. The firm sent them a completion statement, which stated that they required £110,000 to complete the purchase. This included a payment of £14,000 (representing 3% of the purchase price) towards stamp duty.

Mr and Mrs E promptly paid the money required to the firm and shortly afterwards received the keys to their new home. They were so excited about the next chapter in their lives that they never thought to check whether the firm had fulfilled all of its responsibilities.
Unfortunately, some time later the couple received a letter from HMRC stating that the stamp duty due on their home was still outstanding. In addition, the couple owed a penalty for late payment and interest was accruing on the outstanding amount. They were completely stunned.

When they went to raise the issue with the firm they discovered that it had become insolvent and subsequently ceased trading. Finally, they contacted the Legal Ombudsman for help.

We investigated and concluded that the firm had provided poor service, ultimately holding onto Mr and Mrs E’s stamp duty money. We ordered that the firm should pay this money back, along with costs to cover associated penalties and interest. Because the firm had ceased trading the couple were advised to contact the Council for Licensed Conveyancers to recover the money from its Compensation Fund.

Mr F

Mr F appointed a law firm in 2009 to act in the purchase of a new property. The purchase price was £400,000; Mr F therefore paid £12,000 to the firm to cover stamp duty in addition to the firm’s costs. As far as he was concerned he had done everything required of him and duly moved into his new home.

About four years later Mr F received a letter from HMRC stating that the stamp duty had not been paid. He was furious and promptly tried to contact the law firm to get to the bottom of the matter. However, the firm had been intervened with by the Solicitors Regulation Authority (SRA) and was no longer trading. Mr F then contacted us.

When we reviewed the evidence we found that he had provided the firm with the correct amount of money intended to cover the purchase price, the firm’s fees and disbursements including stamp duty. A copy of a letter from HMRC to Mr F revealed that the firm had filed an incorrect purchase price for the property and had therefore not paid the correct amount of stamp duty.

We concluded that the service provided was not of the necessary standard and recommended that the firm should pay the £12,000 stamp duty outstanding together with any interest and penalty costs. As the firm had ceased trading Mr F was advised to contact the SRA to claim the money back via its Compensation Fund. Failing that, the firm’s indemnity insurance provider would be able to reimburse Mr F.