Keeping house

Conveyancing has had a rocky ride post-pandemic. Rising interest rates and inflation have led to the number of property transactions falling year on year.

Data supplier Search Acumen noted in January that property law firms are handling 25% fewer cases than a year ago. The number of active property firms dropped below 3,900 for the first time in August 2023 and has remained there since.

Conveyancers cite burnout, stress and the fear of negligence claims as key reasons for leaving the profession.

Add into this mix the complexities of the post-Grenfell Building Safety Act (BSA), which applies in England, growing scrutiny of the home buying and selling process, and proposed leasehold reform, and it becomes clear why conveyancing as a profession is becoming a great deal more challenging.

‘Buying and selling leasehold in London has become very, very difficult,’ says James Vernor-Miles, partner at central London firm Hunters, by way of example. He notes that the BSA came with a lot of teething problems: ‘[Sales of] maisonettes in Victorian houses were stalling because of ignorance about fire safety regulations, and lenders and buyers were becoming very stringent because the BSA was an imperfect experiment.’

The lenders’ ‘part 2’ requirements, which require solicitors to provide confirmation of whether the act’s provisions have been complied with, became a major sticking point for many conveyancers. Some clarification has since been provided by UK Finance.

‘When the BSA was first passed, a lot of lawyers were saying that we are not going to act on these cases, because of how the lenders’ handbook interacts with the act. That vibe has passed now,’ Vernor-Miles says. ‘The BSA is like any legislation that’s put in place too quickly in reaction to an awful event. It is getting better now, as lenders, managing agents and councils come to terms with what the act was trying to do in the first place, which was to make everyone safer.’

However, problems remain. Obtaining the information needed to complete a transaction is proving to be a slow and onerous process, note property lawyers.

One of the first forms to prepare in a leasehold sale is the LPE1, which is used for collecting information held by landlords and managing agents on matters such as ground rent, service charges and insurance.

Practitioners point out that there were problems with the LPE1 before the introduction of the act. Additional questions were then added to the form last year to take the act into account, including questions relating to whether leaseholder deeds of certificate were served. This is leading to lawyers having to fill in gaps left by managing agents.

Vernor-Miles says: ‘Since the introduction of EWS1 [form which relates to confirmation of structural safety] in 2018 and passing of the BSA, managing agents have had their plates full.’ The LPE1 (now in its fourth edition) requires them to provide essential information for both EWS1 and BSA. ‘A few do not have the information,’ Vernor-Miles says. ‘This is rare in a large block [of flats]; but all too frequent in a smaller block or conversion.’

Zahrah Aullybocus, consultant at Oswestry-based Nexa Law, adds: ‘There are currently lots of difficulties in obtaining correct information from management companies, especially in relation to service charges which are at best set out in opaque terms.’

In its 2017 general election manifesto, the Conservative party committed to ‘reform and modernise the home-buying process’. In 2023, 35% of sales still fell through.

A House of Commons research briefing published in 2022 noted: ‘Despite a large number of successful transactions, the consumer experience of buying and selling property is often criticised for not being as efficient, effective, or consumer-friendly as it could be’. Moving home is widely acknowledged to be among the most stressful of life experiences.

Frustrations pile up

The Commons levelling up, housing and communities committee launched an inquiry into the home buying and selling process in England at the end of March. Its terms of reference include whether sufficient information is available at the right time in the transaction process, what the effect would be if information were provided earlier, and issues around further digitisation of the sector.

Responses closed in April, and MPs have now moved on to the next stage of the inquiry. The opening evidence session heard from industry bodies including the Home Buying and Selling Group and the Conveyancing Association. They spoke of the need to mandate upfront information in order to speed up the process.

The broader inquiry and evidence session have been criticised by conveyancers, concerned about bias in favour of certain membership organisations and the law tech sector, as well as the lack of input from conveyancers at the coal face.

Aullybocus says: ‘The Conveyancing Association does not speak for all conveyancers and therefore they should not be considered as the most reliable source to give evidence. It appears all other submissions were ignored and no one else was called to give oral submissions.’

The Law Society’s latest property information form for England and Wales, TA6, released earlier this year has also come in for criticism. The form was designed to support the National Trading Standards Estate and Lettings Team’s (NTSELAT) guidance on material information required on all property listings, which has itself been denounced by conveyancers.

In an open letter to James Munro, senior manager of NTSELAT, published in March, the Property Lawyers Action Group (PLAG) noted that the obligations imposed on estate agents by the material information guidance indirectly extend to the seller of a property. The letter alleged that ‘the NTS has wildly exceeded its remit by reinterpreting the law and its purpose in this way’.

The PLAG has likened the guidance to ‘the ill-fated’ Home Information Packs that were introduced by the Labour government in 2007 to streamline the process of home buying, with certain documents being provided by sellers’ solicitors up front.

Anna Newport, director of Newport Land and Law, Wakefield, notes the TA6 ‘just feels like HIPs all over again’.

HIPs not only spawned a whole industry of information providers but exacerbated the housing crisis, critics say. One of the first acts of the Conservative-LibDem coalition, which formed in 2010, was to suspend the requirement for HIPs. They were finally abolished two years later, leaving only energy performance certificates as a statutory requirement of property sales.

‘HIPs weren’t a terrible idea, some aspects were good,’ reflects Vernor-Miles. ‘My view is that the emphasis was wrong. The trouble was the HIP companies that were created, so it became all about commercial gain.’

On form TA6, critics claim that the lack of consultation with practitioners means that the root cause of delays in the conveyancing process have not been addressed.

‘The forms are too long for “Joe Bloggs” to understand,’ says Aullybocus. ‘It’s now become “seller beware” rather than “buyer beware”. Added to this, the time frame issue hasn’t been addressed. Is this really the solution to speeding up transactions?’

Newport and others believe the so-called ‘conveyancing factories’ are partly responsible for current problems. ‘The delays in the conveyancing process are not being caused by SRA-regulated professionals. I am surprised by how many unregulated people are involved in the sector; we are dealing with people who are not even sure how to properly exchange contracts,’ she says.

The perceived lack of consultation was also addressed by the PLAG in an open letter in April: ‘We are of course aware that the Law Society has been consulting with NTSELAT as well as the members of the steering group behind the material information guidance; however, the Law Society has no mandate from its members to impose the outcomes of these consultations with third party organisations’.

The new TA6 form will be compulsory for Conveyancing Quality Scheme (CQS) firms from 25 June, and the PLAG’s open letter claims that this may ‘drive a wedge’ between those who adopt CQS practices, such as licensed conveyancers, and some non-CQS lawyers who have indicated they may refuse to adopt the new edition.

Law Society president Nick Emmerson recently addressed these issues in an article for this magazine (tinyurl.com/5n7suyuv). He noted that the TA6 form was developed by a working group of conveyancers ‘with a wealth of experience of working on transaction forms’.

The guidance, Emmerson added, ‘seeks to establish what a potential homebuyer will want to know about a property before making arrangements to view… Sellers may wish to engage with their conveyancer at an early stage before a property is marketed.’

If the TA6 is completed at the same time as the estate agent starts preparing sales particulars, the information from the form can include the material information ‘which the estate agent may not be able to easily obtain from other sources’, he added. It will also ensure that the information provided by the seller’s solicitor matches that provided by the seller’s estate agent when marketing the property.

Fear of the new

The push to digitisation of the conveyancing process is another, even more long-standing, preoccupation of conveyancers.

A draft protocol was unveiled by the Digital Property Market Steering Group (DPMSG) for consultation in March. It sets out how estate agents and house builders can satisfy their obligations to provide material information, and how sellers’ conveyancers can act in the best interests of their client and reduce risk by collating information up front.

The steering group noted that those ‘who have collaborated in the collection and delivery of upfront information have seen transaction times halve and failed transactions plummet’.

By contrast, sceptics argue that the growing digitisation of the sector is dumbing down the profession.

‘The people who ultimately want to make money out of conveyancing are still thinking “pile it high and reel them in”,’ says Aullybocus.

Sceptics are adamant that changing the conveyancing process for the better will require a far more pragmatic approach across the board, assimilating the experiences of those on the front lines.

‘We need to put this back in the hands of qualified professionals,’ warns Newport. ‘This has effectively been done without consulting the profession. If we were consulted, we could say how things could be speeded up.’

Leasehold limbo

The government’s long-awaited Leasehold and Freehold Reform Bill aims to make it easier and cheaper for leaseholders to extend or buy the freehold. With a general election announced for 4 July, the legislation may still pass if it is included in parliament’s ‘wash-up’ period – a time of frantic horsetrading between the parties that sees some legislation rushed through before parliament is either prorogued or dissolved.

While the bill’s aims are laudable, the devil has been in the detail. Practitioners and their clients have been left in limbo as the legislation makes its way through parliament. Proposed reforms have been scaled back since the bill was first introduced.

Ground rents are a case in point. They were initially meant to be reduced to a peppercorn in the hope that this would encourage freeholders to sell up and so help phase out leasehold naturally. But the plans have since been scaled back following pressure from landlords, with suggestions that up to £40bn could be wiped off pension fund investments. Currently, ground rents are expected to be capped at £250 annually.

‘There is enough political traction now for the bill to pass, but how much of it stays we are not sure of,’ says James Vernor-Miles, partner at central London firm Hunters. ‘The political climate is moving in favour of leaseholders. It seems likely that some of the urban estates are going to challenge it in the courts.’

For now, the lack of clarity around which elements of the bill are staying and which are not is adding to frustrations both for solicitors and their clients. Forsters senior associate Caroline Wild says: ‘The amount of to-ing and fro-ing and last-minute amendments is making it hard for us. There is so much uncertainty.’

The abolition of marriage value is one such political hot potato. Paid by the leaseholder to a freeholder when a lease of less than 80 years is extended, it is designed to compensate the freeholder for their loss of interest.

For now, its abolition remains in limbo. This has left lawyers and their clients wondering whether to adopt a wait-and-see approach or to continue with lease extensions.

Tenants who choose not to extend their lease in the meantime could save money. But if abolition does not happen, failing to extend their leases will mean additional costs.

‘I find it incredibly difficult to advise clients other than to tell them what is proposed. It’s like looking in a crystal ball,’ notes Claire Allan, director at London firm Lawrence Stephens. ‘I have a situation where the section 42 notice, which starts the formal process of lease extension, is served, and we’ll play it by ear. If the abolition goes ahead, it will have a huge impact on the real estate sector. A lot of prime central London flats are not occupied by their owners, and the bill could lead to a massive transfer of wealth.’

‘At the moment, we are advising on a case-by-case basis,’ says Wild. ‘If a lease is above 80 years, if you don’t have any other reason to get this done now, it’s a good idea to wait. You’ll be able to get a 990-year lease, although even that has valuation implications. With anyone approaching 80 years it’s tricky, because if they wait and it goes below 80 years, it could work in their favour if marriage value is abolished, but there is no certainty. Sometimes we serve the notice and try and string it out, in the hope that if things get better, you can withdraw the application. It all comes down to the client’s attitude to risk.’

Maria Shahid is a freelance journalist