Conveyancing - All the right moves

All the right moves

The property market is changing.

The Lenders' Handbook has been with us for seven months, and electronic conveyancing and the new Solicitors Property Shop are opening new avenues of business

The Solicitors Property Shop is trying to get law firms firmly into the property selling market.

Neil Rose reportsIn the shadow of the headquarters of one of the country's largest estate agency chains, a group of nine law firms will next week step up the battle for the property selling market.There is a certain piquancy that the latest move by solicitor property sellers is happening in Halifax, which is home to the Halifax and its estate agency arm.

And if the Edinburgh Solicitors Property Centre (ESPC), which is behind the venture, gets its way, it could soon be coming to a high street near you.The Solicitors Property Shop (SPS) is the most concerted solicitor property selling effort seen in England and Wales since the 1980s, when the prospect of institutional conveyancing panicked the profession into a response.

This nascent property-selling movement then was blown away by the recession - the Wrexham Solicitors Property Centre is the main remnant of this.

But it has resurfaced in the wake of the big chains of corporate estate agents, led by Hambro Countrywide, employing licensed conveyancers and linking up with large law firms such as Eversheds to offer a conveyancing package for both sides of a transaction.Conveyancing, which in 1967 provided half of the solicitors' profession's income, is in danger of being lost to the high street, and property selling is seen by some as the last and best hope of turning back the tide.

Now around 10% of the profession's income is attributable to conveyancing.The first steps towards solicitor property selling have been faltering ones, however.

Last year, Solicitors Property Centres Ltd, a company to which more than 700 law firms paid a 750 registration fee, collapsed without setting up a single centre.

Hopes are now pinned to ESPC.

In Scotland, a different culture means that solicitor property sellers, particularly in eastern Scotland, are long established.

They have around half the Scottish market and in its home city, ESPC has a staggering 92% of the estate agency market.Anyone who has been through the tortuous property selling and buying process in England and Wales cannot help but be impressed by the Edinburgh set-up.Rather than tramp along estate agent row, in and out of countless shops in different areas, home-seekers in Edinburgh need go to just one shop in the city centre, where they can find every property being sold by local solicitors.

Conveyancing and independent financial services advice are all part of the package.

It is a genuine one-stop shop.ESPC had two reasons for moving south of the border.

There is the business opportunity, and there is also concern in Scotland that the big estate agency chains will mount an attack on solicitors' market share.

So the Scots aretaking the fight to them in England.

Attack is seen as the best form of defence, and Scottish firms are worried enough to help fund this expansion.The SPS has been open in the north east for nearly 18 months.

It has 25 law firm members who between them have 50 offices, among them Ward Hadaway, one of Newcastle's largest firms.

In addition, there is a centre in the heart of Newcastle which advertises all the properties but refers enquiries to the selling firm.

Each firm is strongly encouraged to have property display facilities within its office, where it advertises the other members' properties as well as its own - even if they do not have shop fronts.This is because the SPS branding is key to the whole venture.

Property particulars and 'for sale' boards all have the SPS logo on top with the individual selling firm's logo at the bottom.

In effect, each firm is marketing the others by promoting the generic SPS brand; in time this could work on a national level.Properties are also advertised through Home Pages, a free fortnightly newspaper with a print run of 55,000, local newspapers and via a Web site, which is seeing increasing traffic.

All the SPS services, such as advertising and producing the particulars, are included in a per property registration fee recoverable from the client.One of SPS's most enthusiastic supporters is Les Bindman, a sole practitioner in Whickham, in Newcastle's commuter belt.

He says he signed up 'because of the loss of conveyancing clients and anxiety about the influence of estate agents in referring clients to solicitors'.

Mr Bindman is in a competitive market, with seven other estate agents in a small area.

He has sold 11 properties and let eight more, and has 16 on his books at the moment.

The practice is yet to show a profit because of initial costs, but Mr Bindman is in it for the long haul and sees profit coming within five years.

He does not have to employ anyone to specially handle the property selling side - SPS provided training for him and his staff - and the registration fee for each property is paid as it comes on the books.

So the ongoing costs are low, he says.

'It's beginning to pay off and increased the number of people coming to the office.'He has also found property selling a morale boost: 'I was getting a bit fed up with all the forces surrounding sole practitioners, such as legal aid and the Civil Procedure Rules.

It'srevitalised me.'In its first year, SPS registered 800 properties for sale and achieved more than 20 million of sales.

The Newcastle centre has around 1,000visitors a week, one-tenth of what is achieved in Edinburgh.

The centre is a smart, welcoming place with a coffee shop and helpful but not pushy staff.

Simon Fairclough, ESPC's director of marketing, professes himself pleased with progress made so far, but sees plenty of room for expansion, particularly in the number of member firms.He may soon get his wish.

When SPS was first mooted, ESPC required a substantial capital investment by firms, as happens in Scotland.

This did not go down well in England, however, and ESPC has now dropped this up-front demand.

The only capital spend now needed relates to fitting out the office and acquiring the appropriate IT.This low capital outlay is the reason why SPS is now attracting more and more interest.

There are plans to roll it out across Yorkshire this year, with York, Keighley, Bradford Huddersfield, and Sheffield high on the list after Halifax.

There has also been strong interest from the east Midlands, around Nottingham and Mansfield, as well as over the Pennines in Manchester and Liverpool.

In time, ESPC would like to have another crack at London and the south-east.

Its first effort two years ago collapsed when it failed to sign up the 350 firms it said were needed to make a London SPS and city-centre shop viable.

The flip side of this is that SPS may not open Newcastle-style centres, relying instead on the individual firms, but the ESPC model is not reliant on having a central shop.At the moment, SPS seems to work better in smaller, more confined areas.

Darlington, a market town of 110,000 people south of Newcastle, is the prime example of this.

The six Darlington-based members of SPS - which account for half of the firms in the town - are the jewels in the crown, particularly Latimer Hinks, an eight-partner firm away from estate agent row but with a substantial shop front.

There are around 20 other estate agencies in Darlington.

Since it started selling property 18 months ago, Latimer Hinks has sold 100 properties, a figure any start-up estate agency would be more than happy with.'I never had any doubt that solicitors could sell property,' says Latimer Hinks partner Anne Elliott.

'We were referring 50 probate sales a year to estate agents.

I thought clients would be receptive to the idea of a one-stop shop.' She concedes that if the firm had not had so much probate work, it may not have embracedproperty selling so enthusiastically.Ms Elliott says that taking into account the cost of refurbishing the offices, the operation has not yet made a profit.

'Property selling is not a get-rich-quick option,' she explains.

'But it's establishing a new service and giving clients what they want.' She hopes to see a profit by April 2001.

'It's all about penetrating the public perception.

Some clients are still surprised that solicitors sell property.' This was something a couple of the Darlington estate agents jumped on when the SPS started, one leafleting homes to say that solicitors could not sell property.

Indeed, the loss of estate agency referrals is often cited by those cautious about property selling.

But those who have made the leap and lost the referrals often later find that, first, the referrals were never that profitable anyway, second, some referrals come back in time, and third, that they can make more money from the commission anyway, which can be three times what firms make through conveyancing.

And it does not stop there, Ms Elliott points out.

Once the client is in the office, the solicitor can ask whether he or she has made a have a will or done any tax planning and so on.Like most of the firms starting out in property selling, Hodgsons & Mortimer, a three-partner firm with offices along Darlington's estate agents row, relied on its existing client base for work.

'But SPS is now recognised and accepted.

It's easy to convince people because it's a goodpackage,' says partner Richard Hodgson, and there is evidence of more work coming in off the street.

The firm currently has 20 properties on its books and Mr Hodgson says 'we covered our costs in the first year'.Conveyancing is facing a revolution in the next few years with the introduction of electronic conveyancing and the seller's pack.

So now is the time for solicitors to move.

If they delay, they could lose conveyancing altogether.

Others have realised this.

West London solicitors Lawrence Lederman and Tony Bogan, a prominent conveyancingcampaigner who sits on the Law Society Council, have launched London Solicitors Property Services (LSPS), a consultancy to help law firms launch property-selling operations at a basic cost of 1,750.But before they can convince their clients, solicitors need to convince themselves that they can sell property.

'Solicitors have always said that estate agency is money for old rope,' says Les Bindman.

'It's not quite as easy as that, but it's easier than being a solicitor.'X For more details on SPS, call Simon Fairclough, tel: 0131 624 8888.

LSPS is holding a conference in London on 7 June.

For details, tel: 020 7266 4455 or see www.lsps.co.ukElectronic conveyancing could take a lot of the turmoil out of property transactions.

Jon Robins takes a look into the futureElectronic conveyancing looks poised totransform the home-buying process.

But it remains to be seen whether this marks thedawning of an era or the final curtain for many in this besieged sector of the profession.It could go one of two ways.

The IT revolution could be a 'democratic force' for good that will allow law firms to capitalise on the speed of communication and the sharing of information, according to Ian Dunn, a partner at Bristol firm Cartwrights.

But he points out that before firms can reap thebenefits, they have to be able to afford to take part in the first place.'The race is on to see whether technology will increase participation or whether it will restrict it to those who can make the capital investment,' he reckons.

Buying a flash new computer might not be the priority for firms that are already eking out a living on the high street, crippled by the legal aid cuts and under attack from estate agents and bulk conveyancers.

It is the looming presence of these last two, normally working in cahoots, that is casting a long shadow over the high street conveyancer.Cartwrights is one of three involved in the Bristol-based National Land Information Service (NLIS) pilot which aims to provide rapid on-line access through the Internet to all the authorities required for a property purchase.

The ultimate aim for the project is to provide every piece of land with a unique reference point that can be used to search at every authority.

So far, 15million properties are registered electronically at the Land Registry.NLIS is just one of a number of government-sponsored initiatives to cut down on the tortuous house-buying process for the consumer and make electronic conveyancing, in the words of the Lord Chancellor, Lord Irvine, 'a reality'.Earlier in the year, Lord Irvine outlined his ambition for on-line transactions to become the norm.

'In its fullest sense, electronic conveyancing will enable all of that work and registration of title at HM Land Registry to be done without paper and without manual signatures,' he explained.

His plans also include a seller's pack which is currently being piloted, revising the law to make on-line transactions possible and the national roll-out of NLIS.Peter Sizer is the project manager at NLIS and he describes the key aim of the project as providing the delivery of an 'integrated land and property search facility' to support conveyancing.

Putting it more simply, he calls it an 'electronic one-stop shop' capable of quickly and clearly identifying a property.

The project is to be rolled out nationally and currently the government is looking at four bids and will award the contract this summer.

Birmingham-based Wragge & Co is the only law firm involved in the bids.Ian Dunn describes the progress made by NLIS as 'quite triumphant', but adds that the next stage - a national network - will be where the 'quantum leap' will be made.

The scheme will only ease the path for the growing band of large law firms offering bulk, or factory, conveyancing.

For firms to compete in the market, they will have to have the IT infrastructure, Mr Dunn predicts.

'Instead of having eight different forms to send to eight different people, you'll just have someone at a terminal who can do it at one hit,' he says.

He says automation is inevitably the way forward and conveyancing lends itself to a mechanised approach because 'to a large extent' it involves the interrogation of databases.Ed Nally, immediate past chairman of the Law Society's conveyancing and land law committee, maintains that, for all the talk, factory conveyancing has had little impact on the high street.

'Most people are still notcomfortable at dealing with a faceless individual at the end of the phone,' he argues.But he also maintains that themessage from the lenders is so far encouraging.

In particular, he says building societies have not shut out the high street firms from theirpanels.

According to Mr Nally, they still recognise that when it comes to the complexities of chains of transactions, the bulk conveyancing approach is not appropriate.

The government has also promised to drag property law out of the 17th century and into the 21st.

In particular, the Lord Chancellor has promised to scrap the requirement that a deed to convey land must be in writing and signed, which will enable conveyancing to take place in cyberspace.

The government is expected to publish new rules for consultation later in the year which will be incorporated in the Electronic Communications Bill.Meanwhile, Bristol law firms are at the forefront of the pilot of another ground-breaking reform of property selling - the seller's information pack - which is being funded by the government.

Under the proposals, sellers are required to put together a package of information about their property before putting it on the market, in an attempt to slash the time between offer and exchange of contracts.

Ed Nally is a supporter of the pack in principle but he reckons that the government isdetermined to push the idea come what may, in the face of a less enthusiastic response in Bristol than expected.

He describes the inclusion of a survey in the pack as 'fundamentally flawed'.

This was an issue that the Law Society attacked when the pack was announced last October.'The Society doubts whether buyers will be willing to trust a survey arranged by the person selling the property,' said Law Society President Robert Sayer.Cartwrights is involved in this pilot as well, and Ian Dunn reports that seller's packs have speeded up home-buying, but not dramatically.

He has concerns about the government's plans to make the scheme mandatory.

Compulsion could have a negative effect on the housing market as low-income homeowners are forced to stay put because of the cost of the seller's pack.

In Bristol, many properties are selling for 50,000 and the pack is valued at 750.

Also, he asks why sellers cannot choose the way in which they sell their properties.

The counter to this is that few people would run to the expense of a pack unless it were compulsory.The seller's pack is another front the profession will have to defend from the creeping presence of the estate agents, reckons leading conveyancing campaigner Tony Bogan.

'It's a good thing for the profession - as long as solicitors recognise they must move quickly and get the market sown up before the estate agent chains take it in-house,' he says.

Mr Bogan, who is also on the Law Society Council, runs his own solicitor estate agency, Barber & Co, in west London.Brian Marson, senior partner of Bromley-based bulk conveyancing firm Marsons, is behind the government '150%'.

He visited Copenhagen in November to have a look for himself at the system that government advisers had used as a model.

The problem with the UK system is that it is reactionary, he argues.

The house-buying process can take eight weeks to get to exchange and another four to reach completion.

He understands the consumer's frustration when, for example, in London one-third of all deals break down before they can reach completion.Marsons is running its own version called the property transfer pack.

The firm does not call it a seller's pack because it believes the title implies that there is nothing in it for the buyer.

The pack is for the good of everybody, Mr Marson maintains.He says that in most cases, the firms can put the pack together within five days of taking instructions.

But he says that the profession - with less than 10% of firms having direct access to the Land Registry - is missing an opportunity.

'The idea that conveyancing in the 21st century still relies on two firms writing letters to each other and putting them in the post is appalling,' he says bluntly .But Tony Bogan says it is wrong to present the profession as resistant to the brave new technological world.

The problem is that many firms on the high street are too busy 'keeping the wolf from the door' even to think about these issues.

He argues that solicitors need the support of the Law Society to appreciate the benefits of IT.Ed Nally warns conveyancers that they cannot afford to be the Luddites of this revolution.

'Unless solicitors get in there and get geared up to responding, they'll lose their business,' he says bluntly.The Lenders' Handbook and the new rule 6 have now been around for seven months.

Bibi Berki looks into their effectsIt may just be wishful thinking, but a decrease in claims made to the Solicitors Indemnity Fund (SIF) is being linked to the introduction of the Lenders' Handbook and the new practice rule six.Those in the know say that it is far too early for these reforms in conveyancing practice to show up in indemnity fund figures.

But the effect on morale can only be a good thing, especially after so many years of wrangling over the rightsand wrongs of joint representation of lender and borrower.The new rule 6 (designed to eliminate potential conflicts of interest between lenders and borrowers when the same solicitor is acting for both) and the Lenders' Handbook were born in October last year, accompanied by a series of well-attended roadshows.Their creation and arrival were relatively swift and pain-free considering the stumbling history of solicitor/lender relations throughout the 1990s.

It took around four years for the Law Society to hatch, debate and finally to kill off the standard mortgage instructions (SMI).

The handbook came along to fill the void.By the time the practice rule came into force, 89 mortgage lenders had signed up to it - 93% of the lender industry.

Nearly eight months have passed since then, and another six lenders have since signed up to the handbook and the Council of Mortgage Lenders is about to update it with five amendments.So how are both sides coping with the new regime? Ed Nally, immediate past chairman of the Law Society's conveyancing and land law committee and a partner at Fieldings Porter in Bolton, says that thanks to the new rule and handbook, 'we all know where we stand'.'When you're dealing with an institutional lender, now you have a Lenders' Handbook set of obligations.

You know what's required,' he says.

Before, there were as many sets of instructions from each lender as there were institutions, he explains: 'The solicitors doing the job properly would have to make themselves familiar with all those instructions.'When problems arose, as they inevitably did, 'lenders were suing left right and centre,' says Mr Nally.

'There was a feeling out there that it must stop.' But now, says Mr Nally, indemnity fund claims are tailing off, although he admits that it might be too early to link the decline directly to conveyancing reforms.He also points out that there are still some problems facing conveyancers, such as leasehold titles where wording changes by lenders have caused confusion.

There has also been an upsurge in indemnity insurance, which adds to the costs of clients, he says.Helen Davies, as well as being a Law Society Council member, is also a property lawyer based in Cornwall.

Ms Davies says she is having to plough through considerably more paperwork, but that the outcome is 'worth the price we pay for it'.

She explains: 'I think, in many ways, lawyers are much more aware of their obligations than perhaps they were before.'Ms Davies says that, although the Council was told that the proportion of indemnity fund claims relating to conveyancing was getting smaller, it was too early to make a definite connection with the handbook.

She says other factors could include an increase of claims during the property downturn when lenders were looking at other ways of recouping money, as well as firms'tendency to use junior conveyancing staff at the height of the last property boom.A spokeswoman for the Solicitors Indemnity Fund confirmed that it was impossible to find a definite correlation between the introduction of the handbook and a drop in negligence claims.

'It won't be for several years before any trend can be measured,' she says.

'It's usually when the house gets sold again that a claim gets made.'On the other side of the rule 6 and Lenders' Handbook equation has been the Council of Mortgage Lenders (CML), which was also involved in the negotiations over the aborted SMI.

Its senior legal adviser, Fiona Hoyle, says the CML has been pleased with the take-up of the handbook.However, five amendments are about to be made, following queries from the legalprofession and feedback from the CML's monitoring exercise.

The amendments, which will apply to new instructions received on or after 1 June 2000, are aimed at making the handbook clearer and take into account recent changes in legislation.

These amendments:X Deal with the situation where confirmation of payment of ground rent from the ground landlord cannot be obtained but where the security will not be prejudiced by the absence of the receipt and there has been no breach in the terms of the lease;X Set out what interest in land a management company should have where the company is required to maintain or repair a leaseholdproperty;X Recognise the changes to s25 of the Trustee Act 1925 by s7 of the Trustee Delegation Act 1999 and that a joint borrower cannot appoint the other as his attorney;X Allow for the monitoring of the development of a new property by a professional consultant employed by the builder and/or developer, and require the consultant to complete a professional consultant's certificate provided by the lender; andX Introduce new requirements for the retention and security of the conveyancing file in line with the seventh data protection principle set out in the Data Protection Act 1988.Even before these amendments, the CML saw the handbook as a huge success.

By September this year, similar publications will come out in Scotland and the Isle of Man.

Northern Ireland also gets its own version later in the year.

Even if these other jurisdictions do not have a rule 6 of their own, they will benefit from having astandard handbook to refer to, says Ms Hoyle.She agrees that it is probably too early to tell if the rule and handbook have contributed to a decline in negligence claims, but says the results will be positive in the long run.'It's hoped that with the publicity surrounding the instructions linked into rule 6, that theprofession is far better informed now about what's required of it, so hopefully the incidence of negligence will greatly diminish and standards will be pushed up.'X For amendments to the CML Lenders' Handbook, see Gazette in Practice,

THE COST OF SETTING UPExample A: creating a branded display area for up to 100 propertieswithin a waiting or reception area of 100 sq ft, including the cost ofplastic display holders and racking system:PC, modem and QMS magicolor 2 printer 2,000Office fit-out and branding 2,500Total set up 4,500Example B: Creating a dedicated showroom in existing ground floor premises, with external signage, window and internal displays for up to 100 properties, assuming 200 sq ft, allowing for redecoration and new reception furniture:PC, Modem and QMS magicolor 2 printer 2,000Office fit-out and branding 10,000Total set up 12,500Neither example accounts for time dedicated by one partner to establish policies and procedures, identify suitable existing staff, or recruit new staff, and to develop an in-house marketing strategy for existing and potential clients.ANNUAL COSTSBased on three partners registering and selling 50 properties per annum, and a full-time property manager for negotiation, telephone enquiries, and SPS liaison:SPS subscription (250 per partner capped at five partners)* 75050 properties registered at 165* 8,250Local newspaper advertising (say four weeks @ 30)* 6,000Property manager salary costs 18,000Car, if required 5,000Part-time administration assistant (if required) 6,000In-house marketing material 3,000Total annual costs 47,000* Costs may be reclaimed from client on saleANNUAL INCOMEExample A: Assuming sales of 50 properties during the first full year's trading at 1.5% commission:50 property sales, averaging 60,000 @ 1.5% 45,000Share of IFA commission, based on 25 SPS referrals @ 200 5,000SPS registrations and advertising (reclaimable from clients) 14,250Total annual income 64,250Example B: Assuming sales of 50 properties during the first full year's trading at 1.75% commission:50 property sales, averaging 60,000 @ 1.75% 52,500Share of IFA commission,based on 25 SPS referrals @ 200 5,000SPS registrations and advertising(reclaimable from clients) 14,250Total annual income 71,750Example C: Assuming sales of 100 properties during the first full year's trading at 1.75% commission:100 property sales, averaging 60,000 @ 1.75% 113,000Share of IFA commission,based on 50 SPS referrals @ 225 11,250SPS registrations and advertising(reclaimable from clients) 28,500Total annual income 152,750

NotesX Figures are based on one full year's operation.

It may be five to six months before a firm begins to generate an income stream.X Average commission in the north east is 1.75%X Property sales should double in two years.

In Edinburgh, most firms sell around 200 properties a year.