The ‘cottage industry’ nature of the conveyancing market makes the failure of conveyancing service In-deed Online ‘unsurprising’, the Gazette has been told.
AIM-listed In-deed Online announced last week that it is to sell for £1 a law firm alternative business structure (ABS) that it acquired, along with intellectual property in the online business.
The residential conveyancing service was set up two years ago by Harry Hill, the founder of Rightmove and former chief executive of estate agency Countrywide, with the intention of making sales simpler and more transparent.
However on Friday last week the loss-making company announced that it had signed a contract to dispose of national property firm Runnett & Co, licensed by the Council for Licensed Conveyancers as an ABS, to co-founder Matthew Lewis for £1.
Included in the sale is the intellectual property relating to the online conveyancing business. As part of the deal, In-deed has agreed to pay £325,000 upon completion to fund working capital and restructuring costs.
The transaction is subject to shareholder approval at a general meeting and a circular will be sent to shareholders with details of the disposal and setting out the company’s future plans.
In a statement, In-deed said that following completion of the disposal Indeed will hold net cash of £900,000 and no debt as well as losses amounting to approximately £2.8m.
It said that the assets to be disposed of contributed the majority of the company’s last reported loss before tax.
The company said: ‘The directors will hold discussions with shareholders as to whether the company will invest the remaining cash or be wound up with cash distributed to shareholders.
‘Following this consultation, the company will set out details of its investing policy in accordance with the AIM rules in the shareholder circular.’
Chairman of the Conveyancing Association and senior partner at Liverpool firm Goldsmith Williams, Eddie Goldsmith said it was ‘no surprise’ that the venture had been unsuccessful.
He said that conveyancing is still a relatively small ‘cottage industry’ with 20% of the work being done by big companies, such as MyHomeMove, Premier Property Lawyers and Countrywide, and 80% by around 4-5,000 high street firms.
‘To build a national brand from scratch is a mammoth task, because there is not enough margin and the market is too small,’ he said.
Goldsmith said: ‘As the recent survey by the Legal Services Consumer Panel showed, people do not shop around, so it is hard for someone to come in and take market share, unless they came in at a ridiculously low price, which would not be sustainable.’