We had a solicitor stuff up our conveyancing 3 1/2 years ago and cost us - I'd estimate, in lost rental income, extra financing fees, extra construction costs etc - somewhere near $300K. On a $720K purchase.
I paid the solicitor for a consultation during my due diligence prior to purchase, telling him specifically what my intentions were for the property and what enquiries he felt were necessary. One of those, a particular search, I requested and paid for on 18th November, and he didn't conduct it until 5 weeks later, when we'd already gone unconditional. He knew, from our interview, that we needed all the searches done prior to going unconditional.
Even then, when the search turned up disastrous information (with respect to our plans for the property), we weren't given the search results, but just told "nothing showed up, everything was fine".
The first time we knew there was a problem was 6 weeks after settlement, when we found out we'd potentially purchased a $720K property which couldn't be made habitable, nor could we demolish and sell for land value because it was character-listed. That was fun.
We had a chance - we got a great consultant who said if we applied for a particular waiver, we just might get it, but it would cost approximately $100K in works and fees. We felt we had no option but to go for it. We went back to our lender and said "you know that IP we just bought? Well, you'll never believe what's happened, could we please have another $100K?" Well, they not only said "no", but they threatened to call in the loan because they were now aware that the asset was worth much less than the valuation upon which the purchase and finance were based.
They said if we could refinance within 6 months they'd "look the other way" and pretend they hadn't noticed.
The fact that we were already highly leveraged at $720K, the valuation had dropped now that this search issue had come to light, and we had to find another $100K, meant that we were now at a VERY high LVR and had to take whatever finance we could get. We refinanced and with construction costs, ended up with $980K loan at about 13% pa.
And the construction blew out by 6 months while we waited for the waiver to come through, meaning we had to find about $70-80K to cover holding costs above what we'd estimated.
The assets now worth about $1.4M and we've managed to refinance at a reasonable LVR and are probably going to be cashflow neutral for the first time this year - when we'd anticipated being cashflow neutral from day 1. We've been playing financial catch-up nearly every day since that disastrous day when the conveyancing error was uncovered. I often wonder if our solicitor - who'd probably done about 8 transactions for us over 7 years - has any idea how devastating his oversight has been to us the past 3 1/2 years.
We sought legal advice but were told that whilst he would clearly be found guilty of professional negligence, the difference between tort law and contract law would mean we'd get nothing.
In other words, if the vendor had assured us that the title was clear (ie and that formed part of the contract), then we'd be entitled to be restored to the position that we'd be in if the titling problem hadn't existed, and we'd probably get about $300K in damages from the vendor.
But under tort law, which is when a 3rd party to the contract stuffs up, you're only entitled to be restored to the position you'd be in if the error hadn't been made. In other words, if he hadn't stuffed up, we wouldn't have bought the property. Because we've bought the property and the market's going up significantly, we have at least a few $00K equity in the property (though we'd have had a lot more without this screw-up). So the court looks at it that we've benefited from our solicitor's negligence, because even though it was traumatic, we ultimately ended up better off by buying this property, than if we'd let it go.
I try and remind myself how lucky I am and how much I've "benefited" from the solicitor's negligence, during those months when it's difficult just to stay afloat. It doesn't help that we've had 3 years of zero to slightly negative growth during this time.
One more good year of growth and I'll be feeling a lot happier and we'll be able to emotionally and financially put this incident behind us.
