The conveyancing market appears to be booming once more, but not all solicitors are well placed to benefit from the upturn.
I think you are missing a commercial opportunity if you haven’t already raised your fees,’ says one prominent player in the conveyancing sector. Another says that the volume of transactions is higher now than at the ‘peak of the boom in 2007’.
Other players are less bullish. They point to the Bank of England’s (BoE) recent hint that interest rates may need to rise sooner than forecast, puncturing the ‘housing bubble’ and plunging the market back into ‘tumultuous times’. Others predict the demise of the high street solicitor as ‘conveyor belt’ volume conveyancers attract more buyers with low-cost, IT-led deals.
Some even maintain that the whole conveyancing process is flawed and, despite the advent of the computer age, is ‘slower, more stressful and more tedious’ than it was 25 years ago. Others take an optimistic view, claiming that the Law Society’s new conveyancing portal could be the ‘salvation’ of smaller firms.
Who to believe? The statistics from lenders and estate agents suggest a positive outlook for conveyancers. The Nationwide reports that its mortgage lending surged by 37% to £14bn in the six months to 30 September. That equates to lending £13.2m every working hour.
The Royal Institution of Chartered Surveyors (RICS) similarly reports that the housing market is heating up as interest from would-be buyers outstrips the number of properties for sale. RICS adds that 57% of estate agents nationally have reported rising house prices. Knight Frank predicts that house prices will respond to supply and demand by climbing 7% in 2014 and 5% in 2015, with average prices in London rising £76 per day.
A City Rate of Sale report by Post Office Mortgages, published on 19 November, paints an encouraging picture of increased demand for housing in the north. Liverpool is now the place where one can sell a home most quickly, with houses under offer just 18 days after going on sale, the report claims. There has been a 16% fall in the time taken to receive an offer in Birmingham, where house prices have increased by 2.5% year on year.
Hull bucks the trend. According to the report, there has been a 2% fall in house prices in Hull and a 240% rise in the time it takes to sell a property.
Government initiatives, such as the Funding for Lending and Help to Buy schemes, are said to be helping fuel the housing market’s renaissance.
However, some commentators are dismissive of Help to Buy in particular, saying that what is really needed is a ‘help to build’ scheme that addresses the acute shortage of homes on the market.
The Law Society’s Conveyancing Quality Scheme (CQS) is also shaping the market. CQS is an accreditation mark given to firms that comply with best practice in conveyancing and has so far been awarded to almost 3,000 firms and more than 5,000 offices. Its supporters say that CQS can help shield solicitors from even sophisticated frauds and also makes a firm more attractive to lenders, though there remain those who argue that the brand of ‘solicitor’ should be enough, even in a fast-changing market of commodification and liberalisation.
Law Society deputy vice-president Jonathan Smithers is a partner at Tunbridge Wells firm Cooper Burnett and chair of the Society’s conveyancing and land law committee.
Smithers agrees there is new ‘heat’ in the housing market, but describes the upturn as ‘patchy’. He says: ‘Demand can be fuelled by a diverse range of factors. For example, Kent still has grammar schools, which puts family homes at a premium. You couldn’t sell a flat in Tunbridge Wells during the recession, but four-bedroom houses were never a problem.’
He is enthusiastic about the Law Society’s proposed property portal, expected to go live in 2014, which he describes as ‘an independent electronic solution for conveyancing’. He says it will give smaller firms access to the same sophisticated IT systems that volume conveyancers use. ‘Trusted’ parties in a transaction will be able to view up-to-date information online in a secure ‘deal room’, making it much harder for fraudsters to hack into the process, he adds.
The portal will have embedded compliance and risk management features and, by managing conveyancing online, will save time and money on postage, printing, telephone and faxing. It will also free-up fee-earning time.
Smithers shows the Gazette a letter that the Law Society is sending to conveyancers. Signed by chief executive Desmond Hudson, the letter expresses some reservations about Lender Exchange, the Council of Mortgage Lenders’ selected supplier of a new ‘streamlined’ panel management data and application process, to be owned and operated by a private company called Decision First.
The letter informs practitioners that ‘lenders will mandate this service [Lender Exchange] as the sole means for firms to submit a panel application to them’. However, the letter expresses ‘a number of concerns’, including the inadvisability of allowing Decision First, a private for-profit company, ‘to control the dynamics and cost of the conveyancing market’. The letter adds that there is a lack of transparency around the decision-making process and the criteria against which firms will be measured.
Conversely, Smithers welcomes government initiatives to kick-start the housing market, such as Funding for Lending and Help to Buy. The former, begun in July 2012 by the BoE and HM Treasury, encourages banks and building societies to lend more by providing them with funds at advantageous rates for an extended period.
Help to Buy is directed at consumers, in particular first-time buyers, and gives loans, with zero borrowing fees for the first five years, of up to 20% of the value of the property being bought. This enables buyers to put down a deposit of 25%, made up of the 20% loan and 5% of their own money, securing a 75% mortgage at non-punitive rates. ‘But if interest rates start climbing again, any upturn might prove short-lived,’ cautions Smithers.
‘There has been a major upturn, with conveyancing firms reporting higher volumes than at the peak of the boom in 2007,’ claims Peter Rodd, chair of the Law Society’s Property Section and senior partner of Margate firm Boys & Maughan. ‘Some firms have even increased their fees to highlight the Rolls-Royce service they provide.’ He adds that this is a risky strategy, but it is always difficult for consumers to distinguish between good and indifferent firms. ‘Many consumers rely on the advice of the estate agent, who picks up a big referral fee and so is hardly disinterested,’ he says.
The CQS accreditation scheme is one way that firms are seeking to assure prospective clients of their high skill and service levels. Rodd says: ‘CQS is beginning to get through to consumers. The profession now needs to raise the bar still further with more intensive training.’ CQS, he adds, can help firms retain their places on lender panels, detect and avoid mortgage fraud and money laundering, and cope with the burden of regulation.
Rodd concedes that some people will always go for the cheapest option. He mentions a case where the purchaser of a property complained about the service received from a volume conveyancer. ‘The Legal Ombudsman (LeO) was unsympathetic, saying that you get what you are paying for. The LeO has a point. Those firms that advertise conveyancing “from £199” are either quoting a headline figure before extras are added to the bill or promising a shoddy job. The Solicitors Regulation Authority should Google those firms and have a close look.’
Rodd maintains that there is still a place for the traditional high street firm. ‘It’s horses for courses,’ he says. ‘Some clients are happy with telephone contact only, others prefer face to face with a named transactor who handles the deal from beginning to end. The face-to-face model works for us. We have a 99.7% satisfaction rate where clients are happy to use us again and refer us to others.’
So what is it like to work for one of those much-maligned volume conveyancers? Anne (not her real name) tells the Gazette that it is law practised on a ‘conveyor belt basis’. The volume conveyancer for which Anne worked gave her an annual billing target of £100,000, which does not sound too intimidating until you know the figures involved.
She says: ‘We would maybe get paid around £600 for each transaction, of which around £300 would go straight back to the estate agency that referred the deal to us. So to hit £100,000 we needed to complete around 330 deals at £300 a time. Take off days for weekends, holidays, bank holidays and the rest, and you have to complete several transactions every working day to meet your target.’
Anne says that before 2004, when the Law Society lifted its ban on referral fees, she used to secure the goodwill of estate agents by ‘trotting around’ at Christmas with bottles of wine. Many of the smaller high street firms still rely on this way of currying favour, but they are a ‘dwindling’ breed reliant on old clients or high-value properties, she says.
She can understand why volume conveyancers are frequently accused of giving poor customer service. ‘The post would often sit on the corner of your desk for a week because you were too busy to open it,’ she says. ‘You rarely got to speak directly to clients. When they phoned in, you were usually busy on another transaction and so a colleague, who knew nothing about the deal, would field the call.’
Prices and volumes – the latest data
Most recent data from the Land Registry, for September, revealed that house prices were higher in every English region than in September 2012 – though some boroughs recorded falls. The latest snapshot of the market showed prices rose 3.4% on average, though Wales recorded a 1.7% annual decline.
September’s average property value in England and Wales climbed 1.5% on August to £167,063, still well below the November 2007 peak of £181,839. In Wales, prices fell 0.4% month on month.
There was more good news on transactions.
House sales increased by more than 15% in the spring and early summer months, with an average of 62,034 each month from April and July, compared with 53,698 over the same period in 2012.
In July 2013, the number of completed house sales in England and Wales increased by 17% to 69,140, compared with 59,141 in July 2012. The number of properties sold in England and Wales for over £1m in July 2013 increased by 34% to 1,143 from 852 in July 2012.
Land Registry figures do not include new-build homes.
Source: Land Registry
Conveyancing firms are ‘missing a commercial opportunity’ if they fail to increase their fees immediately, claims the chair of a group that represents many volume conveyancers. Eddie Goldsmith leads the Conveyancing Association (CA), which he says represents ‘serious conveyancers’ that are ‘well-resourced firms with IT at the heart of what they do’ and typically have sufficient transactions to remain on lenders’ panels.
Alluding to the economic downturn, he says: ‘We thought things couldn’t get worse, but they did.’ He stresses that even at the very depths of the recession neither his firm, Liverpool-based Goldsmith Williams, nor other CA members made misleading statements about conveyancing ‘from £199’. He says: ‘Such behaviour is deplorable.’ The challenge now for all CA members is to ‘recruit the right standard of staff’ to make the most of the upturn, he says.
Goldsmith is the most optimistic of those interviewed. ‘Regulation is a fact of business life,’ he tells the Gazette. ‘Outcomes-focused regulation has breathed new life into the process. It is a refreshing change of focus that gives the profession the discretion to take a sensible and mature approach to compliance.’
He adds that when he first started in the profession, firms only had to tell lenders that they had a fireproof safe for protecting deeds. These are now generated electronically, but the burden of regulation has not diminished, he says.
‘CQS,’ he further asserts, ‘is the only game in town.’ The property portal also comes in for praise. ‘The Law Society is doing exactly what is needed by placing solicitors at the core of the conveyancing process. You can gripe and snipe from the sidelines, but the portal is a brave move and the Society should be congratulated for doing it.
‘The Help to Buy scheme is also a great fillip for the housing market. Anything which allows some flexibility is a good thing for first-time buyers.’
Is there nothing that gives him pause? His reply rather shoots the messenger: ‘Stories in the Gazette about firms in financial difficulty that undermine insurers’ confidence in the legal sector and make it difficult for some practices to obtain professional indemnity cover.’
Angela Neale, partner at London firm Comptons, is also keen to pick up on the question of perceived service levels. She says that clients usually blame solicitors for delays, when it is the lenders who are slow.
‘Dealing with banks and building societies is perhaps the most frustrating part of the job,’ Neale says. ‘You live in constant fear of being struck off lenders’ panels, and yet if you query something with them, they can take weeks to get back to you.’ Searches are also delayed. ‘Home Information Packs used to speed up the government’s end of the deal, but now they have gone, a local authority like ours, Camden, takes at least a 20-day turnaround.’
Neale says that CQS is a boon to the profession because it is no longer necessary to raise so many standard enquiries, some of which are irrelevant. ‘Pre-CQS, there would be 40 queries, now there are usually just 10,’ she says. She adds that solicitors used to be paid for checking titles, ‘but now we need to check the insurance policy on the washing machine as well’.
Neale is not afraid that alternative business structures will kill off ‘traditional firm structures’ such as Comptons. ‘We just need to concentrate on client service,’ she says, ‘getting quicker and better at communicating.’
Sam Cherry, a director of Conveyancing Liability Solutions, which provides title indemnity insurance and other products to conveyancers, says that property transactions used to be regarded merely as a ‘driver for [the cross-selling of] family, probate and other services’, and so employing trained and experienced practitioners was not always a priority. ‘But with new searches,’ he says, ‘services and automated title-checking products, the trend is likely to be towards qualified conveyancers doing only the higher-end chargeable work and less-qualified staff using technology to carry out less-complex tasks.’
Cherry adds that housebuying and selling are consumer-based transactions, so there are always high expectations of good customer service. ‘With the resurgence of the property market, the margin for error, delay and frustration is likely to grow. Those practitioners that make best use of products and services to improve efficiency are likely to increase their market share as the conveyancing landscape continues to evolve.’
Bold Group founder Rob Hailstone runs a legal network of around 180 conveyancing firms that have joined together, he says, ‘to combat the many threats and issues that high street firms face now and will face in the future’.
Hailstone tells the Gazette: ‘If ever a system needed fixing, it is the conveyancing process. The bottom line is that any chain will only proceed as quickly as the slowest link, and there are many reasons why a particular link may be slow.’ He lists issues that cause delays, including arguing about planning and building regulations, carrying out more and more searches, opening files and checking identities, and complying with mortgage fraud and money laundering requirements.
He adds: ‘Despite the fact that most land is now registered at the Land Registry and work is carried out using computers, the conveyancing process is probably slower, more stressful and more tedious that it used to be [25 years ago].’
The Law Society’s proposed conveyancing portal and Decision First’s Lender Exchange may provide ‘some light at the end of the tunnel’, says Hailstone.
And so there you have it. Should we be marvelling at the brave new world of the economic upturn, CQS and the property portal? Or should we surrender to despair as ABSs and lenders conspire to destroy the profession and deprive clients of access to law? The debate will run and run. As it has done for so long.
Jonathan Rayner is a Gazette staff writer