The cost of conveyancing was a key focus area in the residential conveyancing market thematic review which the Solicitors Regulation Authority (SRA) published at the beginning of April 2019.
We think this is one of the most interesting parts of the review and have long argued that at the heart of the problem for conveyancers is that conveyancing has evolved into a commoditised service, with significant pressure on fee income.
Cost of Conveyancing
Conveyancers have long been under pressure with regards to the fees charged for conveyancing, not just from their own market, but also from their regulator and consumer bodies such as the Competition and Markets Authority (CMA) who have raised concern about the lack of cost transparency.
An overview of the SRA' thematic review of into the residential conveyancing market
The review says that “legal fees and associated disbursements incurred during a residential conveyancing matter can be significant”. Out of 80 conveyances, which formed part of the review, the highest fee charged was £1,295 for a freehold property and £1,300 for a leasehold property, with an average of £762 for a freehold property and £350 for a leasehold property. The review goes onto focus on transparency with 34% of firms charging additional fees for telephonic transfer, mortgage administration and identity checks. Even taking the additional fees into account, given the average property price in 2018 was £242,286 (HM Land Registry), this puts the price charged into perspective.
Whilst the review (conducted early 2018) was undertaken prior to the introduction of Price Transparency Rules in December 2018, the review found that 75% of firms did not publish pricing. Whilst we do not believe this will materially impact professional indemnity claims experience, it is worth mentioning that fee disputes inevitably result in client dissatisfaction which in turn lead to complaints which then evolve into claims or regulatory issues. Therefore, from a risk management perspective, we would encourage firms to familiarise with rule 1 of the Price Transparency Rules and ensue that they at the very least comply with the best practice guidance in the report:
- Clients are provided with a clear explanation of costs in plain English at the outset.
- Cost schedules are provided to clients at the start which include what the firm will charge for any additional work that arises during the transaction.
- The firm clearly explain what proportion of the TT fee is payable to the bank and what proportion is their administration fee.
- Providing information to clients at the outset about how their matter will be charged if the conveyance does not go ahead
How will the Price Transparency Rules impact your business?
Even without the introduction of the Price Transparency Rules, conveyancing was clearly a highly competitive market with most firms undertaking conveyancing. The review highlights concern which we are sure will be echoed by many firms including, “Clients will judge us on a single screen. This won’t allow them to judge our expertise, skills and service” and “Publishing conveyancing prices may lead to a dumbing down of conveyances and race to the bottom” Our view is the last thing conveyancers need is further pressure on pricing and we are mindful that despite the good intent, putting further pressure on an already highly competitive market will not improve risk.
Interestingly, following the review, the SRA acknowledged that the majority of firms revisited their fixed fee pricing and increased their pricing following the review.
What can we take from this from an insurance perspective?
Be warned, we think it is likely that insurers will ask about your compliance with Price Transparency Rules, and a negative response will hinder the negotiation of renewal in what is a difficult and challenging market.Please contact us should you have any queries or concerns relating to your insurance.