Recent controversies regarding dishonest solicitors have left small investors uncertain about their rights, writes Caroline Madden

Picture the scene. You're enjoying your morning coffee, perhaps daydreaming about the luxurious Portuguese apartment on which you've just put down a deposit. Flicking though the paper, an unusual headline catches your eye: "Solicitor's practice is shut after assets are frozen". Your heart plummets as you read on and discover your trusted adviser stands accused of acts of dishonesty in relation to clients' money and taking out multiple mortgages on a number of properties.

For many small investors, this nightmare scenario became a reality recently when the Michael Lynn controversy broke. This was quickly followed by the Thomas Byrne affair. Since then, public attention has focused heavily on the staggering sums many of the country's largest lending institutions are trying to recover from the two men and their businesses.

But what about the individuals caught up in this tangled financial web? What are their options? Is anyone fighting their corner?

"They have to go to their solicitor if they can't sort it out themselves," advises Tina Leonard of the European Consumer Centre in Dublin.

"When you're buying property it doesn't come under any specific consumer legislation, which is why it doesn't come under our remit."

However, the National Consumer Agency (NCA) is sizing up the situation and may yet take up the cause. The agency's chief executive, Anne Fitzgerald, spoke to Ken Murphy, the director general of the Law Society (which is responsible for regulating solicitors), last week on this issue.

John Shine of the NCA explains that the purpose of this discussion was to request clarification on the situation from a consumer perspective.

"The banks are getting all the headlines. They're in the High Court every second day - but what about the consumer?

"At this stage, our view on it would be there is considerable uncertainty out there among consumers and we're hoping the Law Society will issue whatever clarification they can," Mr Shine says.

"We may or may not get involved at a later stage, but I think at this stage it's a question of trying to get information out there to consumers. We'll see where we go in relation to it."

It is possible that investors may be entitled to compensation from the Law Society's compensation fund, which aims to protect clients who have lost money due to the dishonesty of a solicitor. Claims for compensation are dealt with by the society's regulation department, and forms can be downloaded from the society's website, www.lawsociety.ie. It is understood that a limit of €700,000 applies to each claim.

So how are investors reacting so far in this environment of uncertainty?

One investor, who did not wish to be identified, told The Irish Times that she visited her property in the Algarve's Costa de Cabanas development - which was promoted by Michael Lynn's property company, Kendar - a week ago and is satisfied that her investment is secure.

The property was bought during the first phase of the development and it is now completed. She was informed by the Kendar office in Portugal that her rental income guarantee with them is not affected, as it is a completely separate company to Kendar's Irish operations.

However, some of Mr Lynn's former client investors are not so complacent. Stefano Lucatello, head of legal firm International Property Law Centre in the UK, says that he has been hired by about 20 former clients of Mr Lynn.

"We're dealing with quite a few agents in Dublin. They're sending us clients who are in this predicament, more and more every day," Mr Lucatello says.

Some of these clients are embroiled in the Costa de Cabanas development, but the majority have invested in the Punta Perla development in the Dominican Republic, Mr Lucatello explains.

"The problems are varied. The situation differs as to whether they gave him [Michael Lynn] money to hold and that money is still within his client account, in which case his assets having been frozen means this money is safe.

"If, however, the monies were given some time ago and he has dealt with them, then we don't know what he has done with them," Mr Lucatello explains. "In some cases, yes, the money might have gone to the developer. But in some cases I'm dealing with, it's quite clear that the developer has not received the money."

According to Mr Lucatello, most of his clients who invested in the Dominican Republic development are keen to complete the transaction and the developer has agreed to honour their contracts. So for some individuals there could be a happy ending on the horizon.

As regards Portugal it's slightly different, Mr Lucatello adds. "We're still trying to get to grips with what's happening there."

Once he receives letters of authority from his clients, Mr Lucatello will request the release of their files, which were seized from Mr Lynn's firm by the Law Society for safekeeping. It is hoped that these files will help to piece together the details of this very complex financial puzzle.

The Michael Lynn debacle has undoubtedly rattled the nerves of many prospective overseas investors. Is there anything they can do to safeguard future investments?

Unfortunately the overseas property investment market is almost entirely unregulated, so investors have very little protection and therefore must carefully weigh up the risks involved.

However, property speculators can get some degree of reassurance by going through a member of the Association of International Property Professionals (AIPP), as all members have voluntarily signed up to a code of conduct.

A list of the association's Irish members can be found at www.aipp.org.uk.

"If they don't follow the code, then you can take a complaint against them through us and it costs people nothing," says Paul Owen, AIPP's chief executive.

"If we uphold that they have breached our code of conduct, there are four things that can be done: we can reprimand them, we can fine them up to a month's net profits, we can suspend them or we can expel them."

However, the association does not have the power to award compensation.

A key element of the code of conduct is that agents and developers who are AIPP members must always recommend the use of an independent lawyer for international property transactions.

If every buyer took that advice, 95 per cent of the problems in the market would be avoided, Mr Owen says.

"People plough ahead and just spend money without using a lawyer. It's madness."

This advice is echoed elsewhere. "Unfortunately, some property purchases run into difficulties long before reaching the final deed, although a large part of the price may already have been paid.

"If you have not appointed a lawyer who will fight your case? Be very wary of developers who offer their own lawyer's legal services - you will certainly not get independent advice."

Wise words indeed. Interestingly, this advice comes from the website of Overseas Property Law (OPL) - the very company that Michael Lynn reportedly referred his clients to, even though he was a director.