Giving conveyancers greater freedom to switch regulators could harm clients, a consumer watchdog has warned, urging approved bodies to collaborate.
The Legal Services Consumer Panel says approved regulators must work together ‘to ensure that gaps or loopholes do not result in consumer detriment or lack of clarity’.
‘Shopping around’ for a regulator ‘is likely to exacerbate the issue’, it warns.
The watchdog was responding to a snap consultation by niche regulator the Council for Licensed Conveyancers, which is hoping to boost its appeal to property law firms currently regulated by the Solicitors Regulation Authority by changing its arrangements for professional indemnity insurance.
Meanwhile the SRA is presently consulting on waiving its requirement for firms to buy six years’ run-off cover at the point of leaving the regulator’s regime.
In a letter to the CLC, panel chair Elisabeth Davies (pictured) says: ‘It is uncertain how regulators plan to deal with situations where a firm with a mixture of portfolios, for example family, conveyancing and probate switches regulators, from the SRA to the CLC for example.
‘Such a firm may obtain the necessary PII and run-off cover for the conveyancing and probate arm of its business, but not the family law work, as this would fall outside the CLC’s regulatory oversight.’
The CLC has said that if the SRA obligation over run-off cover is retained, its own reforms will increase the ease of potential transfer between watchdogs.
The limit on claims in the six-year run-off period under the CLC plans will be £2m in aggregate, which the niche regulator says would be ‘more than sufficient’.
Davies says the panel supports the CLC’s proposal to move away from its master policy arrangements and, instead, ask insurers to sign up to a participating insurers agreement, a move that would ‘enhance choice and competition’. She says the panel is also ‘broadly supportive’ of accompanying provision relating to run-off cover.
But she warns that the £2m aggregate may leave consumers in multiple negligence cases ‘out of pocket’.
Acknowledging the CLC’s evidence suggesting the £2m aggregate cap is sufficient, Davies says ‘it is plausible’ for multiple claims to exceed the aggregate, especially in property law.
She says: ‘In 2013 our research on financial arrangements noted that stakeholders broadly agreed that residential and commercial property conveyancing, wills, estate administration and probate are the [highest-risk areas] of law with the potential for larger sums of money to be involved.’
Should larger SRA-regulated firms move to the CLC, Davies says there is likely to be an ‘accompanying’ increase in liabilities and risks, which may affect run-off cover.
The panel suggests changes to the regime are reviewed two years after implementation.