An alarming proportion of conveyancing firms are failing to explain the difference between freehold and leasehold ownership, research by the Solicitors Regulation Authority has found. According to a thematic research report published today, 23% of firms handling leasehold purchases did not explain the difference between freehold and leasehold. 'Several firms said that they saw no reason to do this because they assumed the client would know the difference or the estate agent would have explained it to the client,' the report notes. 'We consider this a dangerous assumption.'

The finding is likely to add fuel to the political row about the alleged mis-selling of leasehold properties with excessive ground rents. The report states: 'We expect all firms to clearly report in writing to clients on whether a property is offered on a freehold or leasehold basis, and what the implications of this are to the buyer.'

Overall, the research found that 76% of clients were satisfied with the service they received from their conveyancing solicitor. Among 'several areas for improvement' were: 

  • inaccurate initial cost estimates: 34% of firms failed to include all the services/fees a matter could reasonably expect to attract in their initial quotes; and
  • not being open about the real cost of third-party disbursement and their firm's mark-up on these - specifically telegraphic transfers. In 37% of cases firms failed to do this, with some charging up to 10 times the actual bank charge for processing the transfer.

The research involved visits to 40 law firms offering residential conveyancing services and a detailed review of 80 case files. As a result of the review the SRA referred six cases to its  disciplinary processes. These included: anti-money laundering (AML) issues arising from a failure to investigate source of wealth and listing telegraphic transfer fees as a disbursement rather than a profit cost.

'Whether its providing unrealistic or incomplete quotes, or failing to make sure contractual information has been fully understood, solicitors are potentially leaving their clients exposed to significant risk or potential financial hardship,' the report concludes.