Case ongoing at time of writing (May 2025)
What has happened so far?
This professional negligence claim arises from a failed investment in a hotel room, where it is alleged that the conveyancing solicitors failed to warn of the high risks involved. Temple is assisting the claimant with ATE insurance cover to pursue the claim.
The Taiwan based Claimant decided to purchase a hotel room in a block in the Midlands – a high-risk investment. The mechanics of the deal required a lease for 999 years. The investment was for £58,880.00 with an allowance of £4121.60 and an initial service charge of £1,500. For this the investor would receive guaranteed rental income of 7% for the first four years and then 8% for year 5.
There was also a buyback option after 10 years at 110%. The clause stated that the company shall either purchase the property back or market the property to find a buyer. In addition there was a rental agreement between the claimant and a management company were to cover, at their own cost, the rent via an insurance company for the duration of the 5-year period.
Completion took place, with the Claimant also entering into the Lease and the rental agreement. The Claimant received £4429.09 for first period, little more than the allowance given at completion – and the “hotel room” is now effectively worthless. The Claimant has given credit for these sums in their calculation.
The Lease further states that the Claimant can only assign the Lease before the Notice to Complete – therefore on one occasion only – and it would be highly unusual to assign before completion. Consequently the Claimant would be locked in.
It is to be noted that the Claimant received the allowance referred to above in respect of the first four years of rent – £4121.60. Arguably this was to ensure that the Claimant did not raise any issues in the interim period.
Then the seller and management company went into liquidation.
The claim is being brought against the firm of solicitors that acted in the conveyancing transaction.
It is argued in the Letter before Claim that the Defendant failed to exercise the care and skill expected – that they should have advised that being a hotel room this was a very risky fractional property investment – far more so than just buying a freehold or leasehold interest in a house or flat.
The following points are of note about the Defendants –
- That they failed to advise this convoluted process was not needed to take out a lease for one room if they simply wanted to invest in a hotel scheme.
- That they failed to advise to obtain an independent valuation of the property – particularly given that this was a cash purchase and therefore there would not be a mortgage valuation.
- That they failed to advise or address what happens after the 5-year period – that the Claimant would be responsible for any rent or service charge etc.
- That an SRA warning notice, given in September 2016, specifically highlighted the risks to investors purchasing hotel rooms. The Law Society stated that there is no obvious reason for someone wanting to invest in a hotel to take out a lease and pay for conveyancing for one room.
The defendant firm of solicitors argue that they were not required to provide investment advice and that this was a conveyancing transaction to which the claimant had signed their Letter of Engagement and terms and conditions. They seek to argue that their role was just to facilitate the transaction, even though the Claimant does not live in England and is not familiar with the housing market in the UK, and also that the SRA warning was too generic.
We at Temple are pleased that we have been able to assist the Claimant in bringing their claim for professional negligence against the conveyancing solicitors. The case is ongoing.
The Temple Perspective
Temple understands the challenges faced by individuals investing in unfamiliar and complex property schemes. By backing this claim, we are helping a claimant seek redress for professional advice that fell below acceptable standards and caused avoidable financial harm.
Matter value: £67,000.
Case status: ATE insurance policy issued, case ongoing.
Team members involved: Jamela Collins, Technical Underwriting Manager.
