Around 80 conveyancing firms will eventually shoulder the majority of the cost of fees to the Legal Ombudsman, after regulatory reforms were rubber-stamped today.

The Council for Licensed Conveyancers has won approval from the Legal Services Board to overhaul how it calculates and collects fees from those it regulates. The upshot will be that it can recharge more of the cost of the ombudsman to the firms that generate disproportionate levels of complaints.

The CLC says that 83 firms will initially be required to stump up 30% of the £686,511 paid in 2021/22 for LeO’s services, based on how often they are complained about. The plan is to increase this to 80% over the next four years. As of next year, two practices will pay an extra £16,000 and £12,000 respectively, 16 firms will pay between £5,168 and £1,044 more, and 33 practices will pay between £821 and £25 more.

CLC-regulated firms generated an average of 256 cases in each of the last three years – just 4% of the total handled by LeO – but the levy is a significant cost of regulation. More than half of CLC practices (62%) do not generate any complaints which are referred to the ombudsman.

This issue has become increasingly pressing with the LeO’s budget jumping 16.5% to £14.5m as it deals with longstanding performance issues exacerbated by Covid. The CLC says this move will incentivise firms to improve their complaints handling, serving the client interest and potentially reducing firms’ regulatory fees.

Until now, all CLC-regulated firms have paid the LeO levy through their practice fees, which are calculated purely on the basis of turnover. The decision to separate the cost of the LeO is the first of its kind in the legal sector and is intended to reduce practice fees by an average of 23%. The SRA, which regulated solicitors, has already said it has no plans to change how it charges firms for ombudsman costs.

CLC chief executive Sheila Kumar said: ‘Despite the CLC reducing its own operating costs in a sustainable and steady way over the past five years, the LeO’s costs – which are beyond our control – have grown, and continue to grow, very substantially.

‘While it is right that all regulated practices should contribute to the costs of complaints handling to ensure availability of the service, introducing a usage fee is fairer, builds in better proportionality into meeting LeO costs and will encourage improvements in complaints handling.’