Investors to sue lawyers of failed UK projects: Our takeaways

By The Folks @PropTalk - April 14, 2015 No Comments

Looks like a lawsuit is looming over the failed UK hostel/hotel projects that some 200 Singaporeans had invested a total of $20 million into.

It was reported in The Straits Times today that a group of 30 Singaporeans who invested in the botched real Estate projects are looking to reclaim their losses by suing the lawyers who had represented them in the multi-million venture.

The Singaporean investors said they paid an average deposit of  £ 40,000 for units in seven unfinished hotel and hostel projects built by now insolvent British developer Key Homes.

The investors claim that their British conveyancing lawyers did not tell them that the projects' insurer, Northern and Western Insurance Company, is registered in Caribbean island Nevis instead of Britain. Also, the insurer is not regulated by the British financial authorities.

"The investors would not have put money in the projects if they were told that their deposits were insured by an unregulated and unrated insurer," said the spokesman of the law firm representing the investors in the lawsuit. "Their loss in deposits plus interest is due to the solicitors' negligence."

Three questions came to mind after reading the article:

1. Is it within the conveyancing lawyers' scope of work to ascertain the suitability of the project insurer and make qualified opinions about them to their clients?
Hopefully we have some readers who in the legal profession that can help answer the question. The wife and I had worked with several conveyancing lawyers for overseas property purchases over the years and the subject of who the project insurer was had never came up. Maybe we were just lucky that all the overseas projects that we had bought into thus far are insured by reliable insurers. But it has never occurred to us (till now) that this will become a problem and to ask if the project insurer is credible.

2. Shouldn't any deposit paid for an overseas property purchase be held in a trust account jointly managed by the Seller's and Purchaser's legal agents and only released to the Seller upon the completion of the project? 
We had assumed all along that such practice is mandatory, since this had been the case for all our purchases so far. It is probably prudent to ask the question "at what point the money that's held in trust will be paid to the Seller?" henceforth.

3. Assuming that the deposits were indeed held in a trust account. Can this account be freeze by the governing authority and the money goes into a "common pool" for debt settlement, if the developer becomes insolvent?
If so, does the investors have first right to this money, since it is after all, their money? The wife and I can probably Google this but we will much prefer hearing from our legal-minded readers.

Anyhow, the wife and I wish those Singaporean investors well on their lawsuit and hope that they are able to recoup some (if not all) of their investments.




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