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Pre-nuptial, Cohabitation and Separation Agreements - Conflict of Interest (October 2006)

The Professional Practice Committee has approved an amended version of the  Guideline on Acting for Separated Spouses. The changes reflect the consequences of the Civil Partnership Act and the Family Law (Scotland) Act 2006. After extensive discussion and consideration the view of the Professional Practice Committee is that in general there is a clear conflict and the same solicitor should not advise both parties in relation to preparation of a cohabitation agreement. The committee acknowledge that the consequences of this view may be some added expense for cohabiting couples but the priority has to be the independent protection of their interests. However there will be many situations where a couple may be buying property with little or no deposit in which case need for a formal written co-habitation agreement is considerably reduced. 

Separated Spouses/Civil Partners (for the avoidance of doubt reference to "Spouses" includes "Civil Partners "

1.Acting in preparation of Separation Agreement
(a) There is a clear conflict of interest and the same firm of solicitors should not act for both spouses in relation to a separation agreement. Even if the spouses have agreed on matters, a firm of solicitors should act for only one of them in preparing an actual agreement. If the other refuses to seek separate advice, the firm can deal with that spouse as an unrepresented party and follow the appropriate guideline.

2. Sale of jointly owned property
Unless the parties have agreed in writing (i.e. an agreement signed by the parties themselves) how the sale proceeds will be distributed, neither of the solicitors' firms acting for the individual spouses in their matrimonial affairs should act in the sale. A separate firm should be instructed. The agreement to be signed does not have to be a full separation agreement. It may be an agreement about the free proceeds alone. It would not be improper for the firm acting for one of the spouses to accept instructions from both parties to market the property, but unless there is a signed agreement by the time an offer is received, they should not act in the conveyancing.

Where a firm are acting in the sale of jointly owned property and in the course of the transaction it transpires that the spouses have separated or are about to separate, the firm can continue to act in the sale, but cannot act for either of them in relation to their matrimonial affairs. The clients must be referred to other agents for such advice. The firm acting in the sale should distribute the free proceeds in accordance with the title, or in accordance with the spouses subsequent written agreement. The firm cannot advise either of the spouses on such an agreement as there is a clear conflict of interest between them in relation to that. 

3. Sale of property in name of one spouse.
There is a clear conflict of interest between the spouses and the same firm should not act for both of them. The firm acting for the entitled spouse may accept instructions in the sale of the property, but must not act for the nonentitled spouse.

4. Where there is a signed Agreement
If the parties have signed an agreement dealing with the free proceeds, the solicitors acting for one of the spouses may act in the sale but must account to the parties in accordance with the signed agreement. They cannot accept unilateral instructions from one of the parties to alter that. There is a clear conflict of interest between the parties in that event. Where solicitors are not acting in the sale, they are able to accept instructions from their own client to do diligence on the dependence of an action or in execution of an agreement.

5.  Cohabitation Agreements
There is an obvious concern that there is a conflict in situations between two parties who are not married and who are cohabiting or about to cohabit.  The Family Law (Scotland) Act 2006 provides for cohabitation agreements to be prepared, effectively dealing with issues arising relating to property on separation.  These are a statutory creation.

There is a clear conflict of interest in representing the parties in a cohabitation agreement or prenuptial agreement and they should be treated precisely the same as separation agreements under this guideline.

Where parties are subject to a cohabitation agreement which deals with the disposal of the property and the appropriate trigger event has occurred in regard to disposal of the property then this should be treated as a separation agreement for the purposes of this guideline.

Given that a cohabitation agreement may be given effect to possibly years after it is drawn it is inappropriate to provide in such an agreement for a particular Agent to carry out work in the future.