Harriet Strevens & Anna Gee relay the effects & dangers of sham partnerships
The current economic climate has meant a substantial increase in the number of claims made against solicitors and other professionals, especially claims by lenders looking to recover losses incurred due to the fall in the residential property market. Not surprisingly, insurers are looking more closely at coverage issues, especially when faced with a single insured practice against which numerous claims are made, with quantum often running into millions of pounds.
Most lenders will require their panel firms to have two or more partners in the expectation that this will reduce the likelihood of fraud. However, arrangements which may appear to outsiders to be a partnership may simply be two sole practitioners each lending their name to the other’s practice.
Partnership matters
Under the Partnership Act 1890, a partnership is defined as being: a business; carried out by two or more persons in common; and with a view to profit. Historically, there has been much debate as to whether there was a further fourth necessary condition for a partnership: that