Increased complexity, law reform, demanding clients and market volatility are all front of mind for residential conveyancing solicitors.
For press, politicians and members of the British public, the topic of house prices (like the weather) is a source of endless fascination. This is down to the unpredictability of both; and the fact that each variable affects the plans of so many. Property lawyers at the latest Gazette roundtable must adapt their working life and business plans to accommodate such volatility, while taking account of much more than the ups and downs of the market. They reflect here on a transaction that has become vastly more complex in the lifetime of their practices, and where pressure from clients has increased significantly. Neither feature of this practising environment, sad to report, is reflected in the professional fees available to solicitors.
But first to the immediate commercial backdrop. Changes to Stamp Duty Land Tax were introduced on 1 April, increasing the tax payable on second homes and buy-to-let properties. As Richard Atkins, partner at home counties firm Taylor Walton, notes: ‘There’s been a huge distortion in the market in the first six months of this year caused by the higher rate tax, and it almost feels as if we [did] six months-worth of business in three months. After 31 March the market seemed to be almost exhausted and ran out of steam. I think it’s only now beginning to get back to some sort of normality, although we’re finding numbers down on where they were last year.’
Atkins also observes that uncertainty about Brexit introduced a ‘fragility’ into the housing market (this article went to press on the day voters went to the polls). This is a point taken up by Caroline Sherry, partner at south London firm Glazer Delmar: ‘We’ve got a lot of clients who have not wanted to exchange until the results of the referendum are known. They work in finance. They’re concerned that their jobs are on the line, and they don’t want to commit themselves to a 25- or even 35-year mortgage.’
Such observations are coloured by involvement in the housing market of London and the south-east. ‘I would say it’s quite different in the Midlands,’ sole practitioner Sarah Dwight stresses. ‘There are still clients who wish to buy investment properties because, although there is the additional stamp duty, the hike isn’t as large for investment properties in the Midlands as it is for London. It’s a very, very different market. We’re still seeing buy-to-lets coming through, and we’re still very busy with first-time buyers and chains.’
She adds: ‘I think it’s a real north-south divide.’
The data support this analysis, Atkins notes: ‘In some parts of the country, prices are still 25% down on where they were pre-crash.’
The stability of transactional flows is also affected by the value of a property. Michelle Goodrum, associate at central London firm Monro Wright & Wasbrough, relates: ‘I’ve seen a split between the lower value and the higher value, with more uncertainty in the high value and investment [properties]… The lower value has been steadier, and we’re seeing more uncertainty, more withholding and waiting in the high-value residential [market].’
The government-devised help-to-buy scheme has been helpful, notes national firm Simpson Millar partner Lisa Gibbs: ‘We’re still seeing buy-to-let landlords buying outside London, certainly in Newcastle, Manchester and Leeds, but far less than before the stamp duty deadline. It’s good to see so many first-time buyers back in the market.’
At the equivalent Gazette roundtable a couple of years ago, conveyancers reported some difficulties in attracting new recruits into residential.
At the table: Sarah Dwight, Sarah Dwight Solicitor; Richard Atkins, Taylor Walton; Scott Bozinis, InfoTrack; Caroline Sherry, Glazer Delmar; Stephen Whitaker, Anthony Gold; Jonathan Wyles, RPC; Lisa Gibbs, Simpson Millar; Michelle Goodrum, Monro Wright & Wasbrough; Eduardo Reyes, Law Society Gazette; Nicholas Gurney-Champion, Gurney-Champion & Co
The experience of those present in 2016 is mixed in this regard. ‘There’s a little bit of a change there,’ Atkins says. ‘We’re seeing some of our trainee solicitors wanting to go into residential. Some of the CVs we’re seeing [include] a lot of young people wanting to come in, so I think that has changed. The other thing is that in recruitment terms, in the last three months, we’ve found more CVs coming to us from… third-party agencies. Whereas in the previous two years, the quality of the CVs and the number was really down. People seem to be coming back on to the market.’
Sherry’s experience is more downbeat: ‘One of our conveyancing solicitors moved on in July last year. We knew from the end of March that she was going and we tried desperately to find somebody to replace her. We finally replaced her in February of this year. The quality of the CVs [and] the quality of the people coming through was just dreadful.’
She continues: ‘We suddenly thought, well, maybe we’re being too picky. We’ll start interviewing these people. And we interviewed some of them. [Asked] basic conveyancing questions, they were floundering.’
Gibbs attributes that experience to the way some firms now deal with conveyancing instructions. ‘There are definitely people who think they are fee-earners, but they’re not,’ she notes. ‘They’re assistants, and I think it is down to the different types of structures that firms employ. Some firms employ [a] front-end structure now, where fee-earners will apparently deal with the clients, but a back-room office or possibly offshore [centre] will deal with the title checking. It means that the fee-earner has had no recent experience of title checking, [hence] they struggle at interview.’
The structure Gibbs describes is problematic, others seem to suggest, because the interpersonal skills used by a good conveyancing solicitor are closely bound up with the risks that transactions carry.
Nicholas Gurney-Champion, partner at Gurney-Champion & Co, which has offices in Portsmouth and on the Isle of Wight, explains: ‘There is a real skill required today to do residential conveyancing, and it’s not just having legal knowledge. It’s also having very good people skills. You have to manage your client. You have to manage the expectations. Residential clients are probably the most demanding clients that solicitors encounter, and if you’re not available virtually 24 hours a day, your client is unhappy. Those [client-focused] skills are in addition to actually being able to do the legal work.’
RPC partner Jonathan Wyles acts for lawyers facing professional negligence claims and estimates he has seen tens of thousands of such cases. He relates: ‘From some of the claims that I’ve seen, very often the clients who bring the claims are very demanding clients, and you need the lawyers who can cope with that. On occasion, unfortunately, the personnel weren’t there to cope with it.’
Dwight adds: ‘If you have good people skills, you can tell quite early on, at the point of initial contact, if a client is going to be difficult or not. You can then decide whether or not you would wish to act for this client anyway. If you can deal with people, you can pick that up very, very quickly.’
A comment from Gurney-Champion takes the discussion to the topic of residential conveyancing’s difficult economics. Pricing remains keen for many practitioners. From experience, he advises: ‘The client that rings you up for a quote, says they’re ringing around a lot of other firms, comes back and says, “Oh, will you knock £15 off, because so-and-so [will do] it for £15 less?”. You reluctantly say, “yes, OK” – that is the client that is a complete nightmare from the beginning to the end.’
Gibbs says: ‘I think we’ve recognised that staff retention is associated with workloads as well, isn’t it? If you take on too much work, the staff won’t stay; the clients won’t stay either. We are targeting certain levels of pipeline for each fee-earner to deal with, and so we are not looking to match every quote… If someone says, “Will you knock something off that?” we’ll say no, because we want to keep it a certain level for our fee-earners, otherwise they will leave.’
A different model pertains to high-volume conveyancing businesses. ‘To be honest, there is more than one profession here,’ Atkins begins. ‘Bulk conveyancers are really not the same animal as high street solicitors. They’re not worse, they’re not better, but they’re different. The model is different.’
Still, he adds: ‘We find when we have bulk conveyancers on the other side, there are difficulties, more often than not, in communications. Inevitably we find that we have to spend more time on those cases where there are bulk conveyancers from out of area who have no particular knowledge [of it] and are operating as a team, so you cannot get accountability in the fee-earner. We find it much easier if we’re dealing with a high street firm, maybe a local firm. But that’s not to say that bulk conveyancers are exclusively poor.’
He adds: ‘Often, if you look at their relationship with their client, they get very good client feedback. They do concentrate on that client relationship, but there is another relationship, which is the relationship with the other conveyancer. I don’t think they work hard enough at that.’
‘Where they score with the clients is because they market themselves on being available seven days a week,’ Stephen Whitaker, head of conveyancing and probate at central and south London firm Anthony Gold, observes. ‘So that client can phone on a Sunday afternoon and get an answer. All we get is an e-mail on a Sunday afternoon, and are then berated on a Monday morning when we haven’t answered it. So they are good at serving the clients in the main, although I think that you’ll find clients sometimes can get frustrated for the same reasons we get frustrated with them, [not least] that you never speak to the same person twice.’
Gurney-Champion raises another difference: ‘There is an issue with acting for buyer and seller. I think the regulation of solicitors is much stricter than the regulation for licensed conveyancers, [though] both sets of rules are not entirely clear. Both can be interpreted in different ways, but I think most solicitors would accept that in acting for buyer and seller in the same transaction – there is potential for conflict, and therefore you don’t do it. That’s not, I think, the same with the licensed conveyancers, who in my experience will act for anyone.’
That remark prompts nods around the table. There is a variety of views on a point put by Wyles: ‘What about acting for buyer and lender?’ he asks. ‘My own view, seeing the claims that have come out over the years, is that it would remove a large number of claims, or a large number of potential for claims, if that [scenario] was removed.’
Gurney-Champion counters that in cases Wyles has seen, the solicitor dealing with the transaction was likely ‘not competent’. On separate representation, Atkins adds: ‘I think it’s a very difficult thing to sell to the consumer… We find where we do have a lender’s solicitor on the other side, sometimes it creates a huge amount of additional work, and it does lead to delays, and in the vast majority of cases, I don’t think that it is justified. But there is a reasonable minority where I could see entirely the reason for having it.’
Relevant here are lender policies on representation, specifically the use of panel lists. Several present allude to the lobbying carried out by the Law Society to persuade lenders to ditch plans for a mass cull of smaller firms from panel lists. ‘The Law Society did a very good job in respect of HSBC,’ Atkins notes. ‘[The Society] said, “No, you know, you must not behave in this way,” and I think that really fired a shot across lenders’ bows… they cannot act in the way that excludes the vast majority of solicitors.’
Accepting the Law Society’s conveyancing quality standard (CQS) was key here, with CQS accreditation qualifying many smaller firms for membership of lender panels. ‘That’s generally now accepted as standard, and the lenders are happy with that,’ Whittaker says.
Administrative delays in renewing accreditation are acknowledged by those around the table as an important matter to address. Gurney-Champion – like Dwight and Atkins a member of the Society’s conveyancing and land law committee – notes that a streamlined process for firms that have had few changes since their last accreditation date should help here. Dwight also notes that accreditation is not universally accepted by smaller lenders, though says that these are lenders ‘one does not necessarily come across on a daily basis’.
Central to the economics of running a residential conveyancing practice is the increased time now taken to complete it – extra time that fee increases have not compensated for. Gurney-Champion observes: ‘I reckon when I started 25 years ago, an average conveyancing file would be four to five hours. An average conveyancing file now is at least ten hours, and I’m not charging very much more. I would have been charging, on average, probably £450-£500 25 years ago, and I’m now charging £650-£750.’
InfoTrack’s Scott Bozinis, whose company provides technology to consolidate all the key tasks involved in conveyancing, asks: ‘If we broke down that time, where is the time going?’
‘Trying to achieve exchange of contracts, trying to get the chains together; and you can have ping-pong phone calls going backwards and forwards,’ Gurney-Champion replies. ‘That takes a lot of time. Dealing with the minutiae of electrical certificates, gas certificates, FENSA certificates, all the regulatory paperwork you have to get in order to keep the building society or bank happy. The client couldn’t give a damn, but we have to do it, because the [Council of Mortgage Lenders] lender’s handbook says we have to.’
‘It’s not because the law has changed particularly,’ Atkins adds. ‘The process hasn’t changed, but what has changed, I think, is all the regulatory issues, the fraud [and] ID [checks], the things you have to refer to lenders, and the whole paraphernalia of certificates on title. Now you’re almost scared of doing anything, because of the amount of regulation that’s around.’
Can technology help deal with that increased complexity? Bozinis asks. Undoubtedly. Some note they have seen the dividend that wide use of email has produced in transactions. ‘I used to hate e-mail when it first came out,’ Gurney-Champion recalls. ‘I love it now. I do far more e-mail conversations than I do by telephone. It’s all recorded. I mean, in my firm, we have to print off e-mails and put them on the file, so although we have an electronic file, we also have a paper file at the moment.’ He then asks Wyles: ‘Do you find that negligence claims are less likely now, because conversations are more by e-mail and recorded? You can prove what you’ve told the client.’
Wyles gives a considered response: ‘Conveyancers never do attendance notes and the [genuine] excuse is, “well, we’re just too busy”. The advantage of an e-mail is that it is very quick and easy to ping an e-mail to the client to say, “I refer to our conversation and I said X, Y and Z”. That’s marvellous. The problem with e-mail in itself is, yes, you can ping it to the client. Hopefully it’s correct in what it said, but sometimes they can [have] mistakes. You could actually, unfortunately, ping it to the other side, which I have seen.’
Wyles adds: ‘In one sense I agree with you about going online, and it’s marvellous and it’s the right technology, but you’ve got to have the security.’ In addition, he says: ‘The problem I find with everything on the electronic file is [that] the [negligence] claims inevitably are a couple of years down the line. When it comes to it, you say, “Well, can I have the file please?” and it’s gone. It’s not been stored. So security and archiving are key… Unless you’ve got proper back-up procedures, it may not be there in a couple of years’ time.
‘Personally,’ he adds, ‘I am in favour of as many paper files as possible, because I pore all over them and we are, at our firm, paperless. I’m not, but our firm is.
‘With the right security, I’m sure electronic [communication] is the way to go with things there.’ Fax machines, several attendees confirm, remain the fraud-proof technology of choice in many transactions.
While little has changed in decades for the legal framework governing conveyancing, a current ‘call for evidence’ by the Department for Business, Innovation & Skills provides an opportunity to reform the way homebuying is conducted. Atkins’ main focus is on getting greater certainty into the process.
‘We’ve talked about the conveyancing process actually taking a lot longer than it did 10 or 15 years ago,’ he notes. ‘But there are things that can be done, and I think that as solicitors, when we’re responding to a government’s wish to improve things, we need to be putting some ideas on the table.’ These are not necessarily new ideas, Atkins adds, but he believes they would make a difference: ‘For example, non-refundable deposits (paid by a party when an offer is accepted). It’s amazing, if you put down £2,500, how your commitment rises.’
The second idea he would like to see explored is ‘early binding contracts, conditional contracts, because… when you make an offer to buy a house, really it’s not backed with anything. There’s no money being put down. There’s no legally binding agreement until that last minute, when every last detail in every chain has been resolved’. That, he says, is ‘the real frustration’.
Such contracts would have to reflect an industry-wide standard, Gurney-Champion argues. Without a standard, based on his experience ‘you spend hours negotiating the terms of the lock-out agreement, before you even get onto the conveyancing’. He adds: ‘It can double the cost of the job, because you’re spending so long on deciding the wording of precisely when the deposit is lost, when it isn’t, when you have to pay costs, when you don’t. So it would need to be an industry standard… so that there’s no negotiating about it. Everyone signs this, and that’s it, and it could be signed at the estate agent’s office.’
‘The process seems very fragmented now,’ Bozinis adds, arguing that there are knock-on effects for time taken on transactions and therefore profit. ‘There are lots of different systems and people to please, and a lot of different things have been introduced in the process, but nobody’s tied it back together – something that we at InfoTrack are currently working towards.’
With such refinements to improve the conveyancing system, do attendees feel they can make a confident case to young and aspiring solicitors to go into residential property? Yes, is the short answer. As Goodrum puts it: ‘The nice thing about conveyancing is hopefully, whoever you act for, they’re happy. The seller wants their money and the buyer wants to buy.’
Despite many variables, there’s a bright future for conveyancing, Whittaker maintains ‘We just have to make it a little bit more 21st-century in so many respects.
- This roundtable was kindly sponsored by InfoTrack.