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Newsletter - May 2007
 
Conveyancing - A High Risk Business
 
The latest Law Society Annual report shows that despite a booming property market, a third of claims in 2005-6 were conveyancing- and property title defect-related. In poor property markets such as during 1998-99, the percentage of claims relating to conveyancing by value reached 90%. In the absence of other protection, and until the full implementation of the Land Titles Ordinance (perhaps 13-14 years away), solicitors in HK continue to bear the financial brunt of the territory's imperfect land title and conveyancing system.
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This kind of practice-level risk should be considered in light of the Law Society's current review of the structure of the professional indemnity scheme. As the Law Society stated in a Legco progress report in February 2007, it is considering introducing risk banding for the calculation of contributions to SIF - this would significantly increase the cost to firms with conveyancing business.
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Title insurance protects property purchasers from title losses via a financial indemnity and protects their solicitors via a waiver of subrogation rights. This means that the solicitor is immune to title-related negligence claims. Taking a portfolio approach, solicitors' clients who purchase title insurance in strong markets will not make claims against their solicitors in falling markets when they experience difficulties with selling due to potential or real title defects.
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Title Insurance
 
First American's title insurance policy insures that an owner owns the property free from encumbrances & defects. Lenders can also be covered both for the underlying ownership of the property collateral and the validity, enforceability and priority of their mortgage. Under our policy, we pay for any loss suffered if the property is lost or found to be subject to any encumbrances. The indemnity extends to cover legal costs incurred in defending any title related claims. The premium is a one-off payment and it protects the insured as long as he owns the property. When First American issues a policy, it waives all rights against the solicitors.
 

 
For more information on how title insurance can protect you and your clients, please contact us.