Panel reshuffles present a real threat to small conveyancing firms. We might consider the longer-term implications by reviewing what has happened in residential surveying.
If I need a mortgage to buy a house, I must have the house valued by my lender’s panel surveyor. If I want it surveyed, I am free to instruct any surveyor, but that surveyor cannot provide the lender’s mortgage valuation and so I would have to pay two sets of fees. It is therefore cheaper for me to upgrade my mortgage valuation to a homebuyer’s report or survey through my lender. Their panel surveyor will carry out a single inspection. I am effectively forced by the lender to use their panel surveyor.
The upshot is that local independent surveyors tend not to undertake enough work for clients who need a mortgage to buy a house. The volume of work available to these independent surveyors is therefore minimal and there are very few of them.
Do clients benefit? No. They lose the freedom to appoint a local surveyor and usually end up paying more to the lender. Moreover, their valuation/survey will probably be carried out by a surveyor based miles away.
Do panel surveyors benefit? The shareholder owners might, but individual surveyors often work for large companies only. Even those that share profit are not so well off because they receive only a portion of what clients pay to the mortgage company.
This leaves us with the lenders. They do benefit, by receiving an arrangement fee for every instruction that they insist is arranged though them. They channel all residential work through a limited number of huge panel surveying companies or associations, thereby controlling pricing and arrangement fees. They do not care about service quality, because their interests are secured against people’s houses or by the surveyors’ indemnity insurance.
The Royal Institution of Chartered Surveyors regrettably allowed estate agency to escape its regulatory clutches, and lenders have forced all valuation and survey work towards big panel associations. So ambitious and entrepreneurial surveyors choose not to go into residential. Bright young trainee surveyors are either not interested or struggle to get the necessary training.
And all for what? Because nobody took on the lenders when they had the chance. In a few years time, there will not be many residential surveyors left.
It’s a time bomb made by the lenders which might just blow up in their faces. They need qualified chartered surveyors and always will.
Both the government and Law Society must act. If they do not, in 10 years or earlier, borrowers will be forced to arrange their legal work through the lenders, who will pocket a nice arrangement fee each time. The legal work will be carried out by unqualified case handlers for ever smaller fees, under the supervision of ever fewer experienced solicitors who can actually certify title, from a factory office building in a city miles from the properties they deal with. There might be fewer fraud claims, but there will be far more negligence claims. The interests of solicitors, their clients and, in the long term, the lenders, will not be better served. The insurers also have a vested interest here.
Moreover, given the huge combined market share of the Santander and Lloyds groups, are they not exploiting their position as market leaders? Good, smaller conveyancing practices on the high street will be put out of business or forced to close, followed in years to come by larger high street firms. New practices will not be able to get going if they are only given 12 months to prove they can put ‘significant business’ through the lenders in question.
The cost to firms and their partners who rely on conveyancing and who have been removed from the panels is not just closure of their practices. Indemnity insurance rules require six years’ runoff cover.
The lenders are moving towards control of the conveyancing market, just as they control the survey and valuation market. Neither is satisfactory to the public, solicitors, insurers or, ultimately, lenders.
James Naish , of Naish Estate Agents & Solicitors in York, is a qualified chartered surveyor and solicitor
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