The Conveyancing Protocol as outlined by The Law Society

Introduction

The Law Society has announced a new Conveyancing Protocol, due to take effect in August 2024. The protocol aims to transition residential and commercial conveyancers towards a fully modernised digital contract exchange process.

The Conveyancing Protocol Explained

The Conveyancing Protocol provides a structured framework for solicitors handling residential freehold and leasehold transactions, excluding newly built homes. Practitioners accredited under the Conveyancing Quality Scheme must follow the protocol, and all solicitors are strongly encouraged to adopt it.

Why the 2019 Protocol Was Introduced

The 2019 protocol replaced the 2011 version following the Court of Appeal's decision in Dreamvar (UK) Ltd v Mishcon de Reya [2018] EWCA Civ 1082. The case involved identity fraud during a property sale, leading to claims of negligence, breach of trust, and breach of undertaking against both the buyer's and seller's solicitors.

The Court of Appeal held:

• MMS breached trust and failed to verify the seller's identity adequately.
• MdR was not entitled to relief under s.61 of the Trustee Act 1925.
• Undertakings were breached.

The case highlighted serious weaknesses in identity verification and fund‑handling procedures.

Identity Verification Failures in Dreamvar

Key failures included:

• MMS relied on a driving licence and TV licence, neither of which met Law Society anti‑money laundering standards.
• MMS never met the seller in person.
• MdR failed to specify conditions for holding and transferring purchase funds.
• Funds were transferred to another firm, Dennings, without adequate checks.

The fraud was uncovered only when the Land Registry contacted the genuine owner.

The case emphasised the importance of strict compliance with the Money Laundering Regulations, including enhanced due diligence where clients are not physically present.

Why the 2024 Code Has Been Introduced

The new Code for Signing and Exchanging Property Contracts 2024 introduces three protocols:

• Hold to Order Protocol
• Immediate Exchange Protocol
• Release of Contracts Protocol

These modernise contract exchange, clarify deposit handling and support digital signing.

Key Requirements for Sellers and Buyers

Seller's Conveyancer

• Conduct digital identity verification immediately.
• Complete anti‑money laundering checks.
• Review all information for discrepancies.

Buyer's Conveyancer

• Confirm the client has a smartphone for digital signing.
• Obtain details underpinning the offer.
• Understand the buyer's intended use of the property.
• Provide a preliminary financial statement.

The Digital Property Market Steering Group reports a 50 per cent reduction in transaction times where upfront information is provided.

Digital Signing and Legal Compliance

The protocol recognises the increasing use of:

• PDF scans of wet‑ink signatures
• Electronic signatures
• On‑screen signing

Solicitors must ensure compliance with s.2 of the Law of Property (Miscellaneous Provisions) Act 1989 and HM Land Registry's electronic signature requirements. Non‑compliance renders the contract void.

Electronic signing does not make the contract binding. Parties must agree when legal commitment occurs.

Hold to Order Protocol 2024

The seller's solicitor must hold deposit funds to the order of the buyer's solicitor until exchange or return. Holding funds constitutes an undertaking unless expressly agreed otherwise.

A solicitor is not liable for failures of banks or payment systems unless the fault originates from the solicitor.

The article notes that banks also play a crucial role in preventing fraud, as the Dreamvar facts highlight.

Immediate Exchange and Release Protocols 2024

The Immediate Exchange Protocol replaces formulae A and B. The Release Protocol replaces formula C for chain transactions.

Post‑exchange obligations include:

• Paying deposits using the agreed payment method
• Following fraud‑prevention guidelines
• Addressing stamp duty land tax complexities
• Managing lease restrictions and updated lease clauses
• Consulting tax specialists where needed

The protocol anticipates future updates as smart contracts and qualified electronic signatures become more common.

Conclusion

The 2024 Conveyancing Protocol modernises conveyancing practice, strengthens fraud prevention and clarifies digital signing and exchange procedures. It responds directly to the lessons of Dreamvar and prepares the profession for a fully digital property market.