Careful with that retainer

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Professional negligence lawyer Emma Slade, looks at the importance of retainer documents in surveyors negligence claims

The Court of Appeal has placed onerous duties upon surveyors (and by implication, all professionals) when it comes to the duties that they owe their client – even if the surveyor thinks the retainer has been terminated.

The facts of Littlewood –v- Radford & Boston (2009) are relatively simple. Mrs Littlewood purchased a flat in 1996 which had only 35 years left remaining on the lease. However, after a residential lessee has owned the lease for at least three years, they have a statutory right under the Lease Reform, Housing & Urban Development Act 1993 to request their landlord to extend their lease by at least an additional 90 years, provided an agreed premium is paid.

The legal procedure is relatively simple but there are some important time limits that the parties need to watch out for. Firstly, the tenant serves a notice on the Landlord (known by solicitors as a section 42 Notice) requesting the extension and proposing a premium. The Landlord can then serve a counter-notice by the time stipulated in the s42 Notice. Provided the tenant does qualify for the purposes of the Act, the Lessor will have to agree to the extension. The sticking point though is usually the premium. The Tenant will obviously want it as low as possible, whilst the Landlord will want it much higher!

To overcome the parties bickering, the Act states that if the parties do not come to an agreement two months after the Counter-Notice is served, either party may apply to the Leasehold Valuation Tribunal for the LVT to make a decision. This is where the time limits come in: the application to the LVT must be made no later than six months after the Counter-Notice has been served, ie there is a slender four month window. If the application is not made, the Tenant has to wait another 12 months before he or she can serve another s42 Notice – and of course, property prices can always increase. And this is what happened in Mrs Littlewood’s case.

Mrs Littlewood instructed Radford & Boston (surveyors) to serve the s42 Notice on her behalf. This they did on 1 March 2000, proposing a premium of £275,000. The Landlord served a Counter-Notice by the specified date of 8th May, proposing an alternative premium of £400,000. Radford & Boston wrote to Mrs Littlewood enclosing the Counter-Notice and an invoice for their services to date. They also gave her advice about the application to the LVT, how it was to be dealt with and, in subsequent correspondence at the beginning of June, advised her that the application to the LVT had to be made by no later than 8th November 2000.

You may have noticed I mentioned that Radford & Boston sent Mrs Littlewood an invoice. She didn’t pay it and so on 1st August, Mr Radford wrote to Mrs Littlewood and said he was no longer prepared to act for her whilst the fees remained outstanding. They were not paid, Radford & Boston did no more on the matter and the 8th November 2000 deadline sailed past without an application to the LVT being made.

As a result of this, Mrs Littlewood had to negotiate a price with the Landlord direct and purchase the extension outside of the Act. Had she been able to get the extension under the Act, she would only have had to pay £385,000 for her premium; instead, she had to pay £485,000. She blamed Mr Radford and brought a professional negligence claim against the surveyor.

At first instance, the Court rejected Mrs Littlewood’s negligence claim. The Judge felt that the retainer had ended well before the 8th November 2000 deadline and so the surveyors did not owe her any further duty.

The Court of Appeal disagreed.

On appeal the Court formed the view that the letter Mr Radford wrote on 1st August was ambiguous and it would not be clear to a layperson that the surveyors were terminating their retainer. As the Court concluded there was still a retainer in place- even though Mr Radford had already pointed out the importance of the November date- the surveyor was under a duty to repeat it to her again. She was not a lawyer so could not be expected to understand the significance of the date or the consequences of missing it. She was relying on her surveyor to remind her.

This appears to be a harsh conclusion as, for all intents and purposes, Radford & Boston considered that Mrs Littlewood was no longer their client and so the duty to keep reminding her of the date had extinguished along with their retainer. The case highlights two things: firstly, surveyors – and indeed other professionals – are under a duty to repeat important advice, information and dates to their client, especially if the information relates to deadlines or limitation periods. Secondly, the professional must be unequivocal when terminating a retainer. Simply stating that you will not act whilst the fees remain unpaid is insufficient; it must be made explicit that the professional is terminating the retainer and ceasing to act. Only when such clear cut and unambiguous statements are made, will any subsequent duty a surveyor may owe to the client be terminated.

For free initial advice on professional negligence claims please email Emma at [email protected]