Risk management for conveyancers — Putting PCCs in the spotlight

What are professional consultants’ certificates (PCCs) and why do they matter?

Risk management and planning for the future remain high on the agenda for all involved in the provision of legal services. The increasing focus on artificial intelligence (AI) and digitalisation is an ever-present feature of the post-Covid landscape. For those involved in residential conveyancing in Scotland, such issues remain a key area of interest, particularly with respect to increased scrutiny of anti-money laundering and fraud prevention processes, and ever-evolving client demands and expectations.

In the context of risk management, claims continue to arise in more ‘traditional’ areas, such as failures to register deeds. But conveyancers also face pressures from client expectations in relation to fees and, of particular interest in this article, ‘scope creep’ – increasing attempts to widen the scope of services and duties said to apply to solicitors acting in conveyancing transactions.

We are seeing an increasing number of claims against conveyancers where it is argued that the client should have been given advice beyond the transactional assistance which the solicitor in question had contracted to provide. Essentially, the allegation is that the conveyancer ought to have advised on potential future risks.

In this article, we highlight one particular area which has become a frequent source of claims against conveyancers – namely, transactions involving a professional consultants’ certificate (PCC).

What are they?

PCCs are sometimes referred to as ‘architect’s’ or ‘CML’ (Council of Mortgage Lenders) certificates. A PCC is a legal document issued by a qualified, suitably experienced professional in relation to a new-build property (ie one that has been built or converted within the past 10 years).

The professional, who has the benefit of professional indemnity insurance, certifies that the property has been constructed in accordance with relevant building regulations and industry standards. Conveyancers will be aware of PCCs in the context of lender requirements. Lenders will generally only lend on a new-build property which is covered by a warranty scheme or a PCC.

What they are not

For the conveyancer, understanding what PCCs are not is important.

Conveyancers are likely to come across PCCs relatively infrequently, being more familiar with NHBC (National House-Building Council) or similar warranty schemes. PCCs are often obtained where smaller builders have been involved with the construction of the property, and where the more established and expensive warranty schemes may not be available.

It is essential that conveyancers understand and duly advise their client that a PCC is not an insurance-backed structural warranty.

PCCs do not provide any form of blanket guarantee with respect to property construction. PCCs do not therefore offer the same level of comfort as that provided by established housebuilders via warranty schemes, such as the NHBC Buildmark scheme.

A PCC does not remain ‘in force’ for the same period of time as an NHBC warranty, which lasts for 10 years. PCCs are typically enforceable for a period of six years from the date of issue.

The issue of a PCC is no guarantee of (i) a property that is defect-free, or (ii) a right of claim in the event that any defects do arise.

Why do they matter?

If a defect is identified post purchase, the owner will seek to establish their right of recourse. If a PCC was obtained, the owner will seek to understand what rights they have against the professional who issued the PCC. If the owner’s rights against the professional are unclear or their ability to seek recourse is questionable, the owner may direct their attention to their solicitor.

Clients who find themselves unable to hold the issuer of the PCC liable for their losses are increasingly looking to their solicitor to compensate them. They argue that the conveyancer either failed to procure a suitable PCC or failed to explain the nature of the PCC obtained and the limits on the protection that it offers. They suggest that the solicitor ought to have warned them about the potential obstacles that they may face if they require to rely on a PCC.

Risk management: key takeaways

There are steps that conveyancers can take to reduce their exposure to claims of this nature.

The importance of a clear and well-drafted letter of engagement cannot be overstated. The letter should detail the services that the solicitor is agreeing to provide. It is important that conveyancers protect themselves from the ‘scope creep’ which appears to be an ever-present feature of the current legal landscape (for more on these topics, see previous Journal articles: ‘Don’t let scope creep up on you’ and ‘Letters of engagement – why they matter’).  

Crucially, the advice that is provided with respect to an applicable PCC should be clearly drawn to the client’s attention and recorded in correspondence and file notes. It is important that the conveyancer expressly draws to the client’s attention that the PCC is not equivalent to a full structural warranty.

By managing a client’s expectations in this way at an early stage in a transaction, practitioners will be taking positive steps to avoid misunderstandings that can lead to a potential complaint or claim.

Lindsay Ogunyemi, Partner, and Eileen Sherry, Senior Associate, Beale & Company Solicitors

This is an article provided by Lockton, the official insurance broker responsible for placing and administer the Master Policy of the Law Society of Scotland. Lockton is the direct point of contact for anything related to the Master Policy, including claims, practice changes and general enquiries.