Location, location, location
The stamp duty holiday has loaded huge amounts of pressure on conveyancers, but as Neil Rose reports, there are a lot of other things to think about too
It’s not really the done thing to complain about being too busy, especially at a time when so many people have been furloughed or lost their jobs in the last year, but conveyancers have every reason to highlight just how full-on it has been for them since the property market reopened after the first lockdown.
The government’s decision to stimulate house buying and selling last July by temporarily increasing the zero-rate stamp duty land tax band from £125,000 to £500,000 saw the market roar to life and conveyancers up against it to complete transactions before the holiday ended. This was originally 31 March – which meant a very busy Christmas period – but was then extended in March’s Budget to 30 June, with a tapering of £250,000 to 30 September.
One of the Fellows contacted for this feature had an automated response on his email that highlighted the “high level of conveyancing work and client enquiries” his and other firms were receiving, and that as a result “transactions are taking considerably longer than usual to complete”.
Warning of the risk that completions may be delayed beyond the deadline, he added: “We are doing our utmost to assist our clients in progressing transactions as quickly as possible. However, you should be aware that it is simply not possible for us to guarantee when completion will take place.”
What was a lengthy message neatly encapsulates what life has been like for conveyancers in recent months.
Sustained recovery
Figures published in June by data company Search Acumen showed that the number of property transactions registered in England and Wales climbed 26% in the first quarter of 2021 compared to the previous three months. The figure of 241,916 was the first time quarterly transactions have topped pre-pandemic levels.
This in turn led to “a sustained recovery in the number of active conveyancing firms”, Search Acumen said – from a low of 2,411 in the second quarter of 2020 to 3,962 at the start of this year.
The number of transactions completed by the average firm rose 21% over the last quarter to 61 per month – and approaching double the 34 a month seen during the second quarter of 2020 – “underlining the scale of orders conveyancing firms are having to process amid strong demand in the property market”.
Fiona Baker, a Fellow working in the Watford office of VWV Solicitors, said “it’s been pretty frantic and full-on”. While many people have enjoyed the upsides of working from home – such as enjoying a walk or time with family during a lunchbreak – Ms Baker most definitely has not.
She explained: “We have high service levels as our business is based solely on client referral and agent referrals without entering into referral fee agreements, and therefore we have to work hard to maintain those levels. The increased demand on account of the stamp duty holiday has meant working longer hours to maintain service levels and achieve the 30 June deadline.”
Ms Baker said VWV made it clear to clients that it could not guarantee completion dates, as it depended on the conduct of a number of other parties, and further explained the reasons why its fees would remain payable if the 30 June deadline could not be met, before beginning work for any client.
She added that conduct of some other law firms meant long delays on transactions and made the job much harder, as it caused client frustration.
She has also felt frustrated when her clients have been left having to rush their completion in an attempt to meet the deadline on account of that poor conduct.
Indeed, such have been the pressures on conveyancers that guidance published by the Law Society on managing the run-up to the 30 June deadline pleaded: “We appreciate that everyone is trying to do their best for their clients in unparalleled circumstances, but it would help if everyone tries to maintain a professional manner even though they are feeling very stressed.
“Try to remember that everyone is working to the same end and make sure that you operate fairly and kindly to everybody you deal with in the process in accordance with the Conveyancing Protocol.”
Perhaps it was no surprise that a survey of 338 conveyancers in the spring by property search company poweredbypie found that 80% of 338 conveyancers contacted had experienced a decline in their mental health as a result of the pandemic.
Nearly half said the pandemic had “changed customer expectations” when it came to accessing services online. As a result, a similar proportion (43%) said the situation had “significantly” increased the pressure they were under at work.
But there have been concerted efforts to support the sector during this period. CILEX helped to contribute to sector recovery through the development of joint guidance with the other professional bodies and key players in the sector to effectively coordinate sector response and thereby minimise friction.
Upfront information push
The system may have been better prepared a few years down the line, with lots of work going into cutting the time between a property going on the market and exchange of contracts from upwards of 14 weeks to six to eight weeks.
Progress has been hampered by Covid, with both reservation agreements, designed to lock in buyer and seller financially to a transaction early on, and the Buying and Selling Property Information (BASPI) initiative – a move to present the buyer with a dossier of information at an early stage in the process – about to be piloted when the country was locked down.
This may sound like the ill-fated home information pack (HIP), scrapped in 2010 by the incoming coalition government after three years, and you would not be far wrong – just don’t call it that.
The BASPI, developed by the upfront information working group of the Home Buying and Selling Group (HSBG) – a stakeholder body of around 120 organisations advising the government, including CILEX – hopes that by becoming a ‘single source of truth’ it will significantly reduce the length of time between accepting an offer and exchange of contracts.
The data is intended to be made accessible to all the parties in a transaction, cutting down on the need for duplication of tasks and information gathering, and reducing the time between acceptance of an offer and exchange.
Following a pilot last year, the HBSG announced earlier this year that downloads of the completed dataset were available.
One intriguing issue that this raises is whether the longstanding principle of caveat emptor could be displaced by vendor disclosure
The HBSG said conveyancers and other property professionals would now be able to “add the required questions into their technology which will allow home movers to fill in all the necessary information”.
Kate Faulkner, chair of the HBSG, said: “Far too often sales fall through after an offer is accepted due to a lack of information provided to the buyer and part of the reason for moving home taking 20 weeks is that we don’t collate enough information upfront.
“The BASPI, together with the [HSBG] pledge recommending sellers instruct legal companies on day one of marketing, can go a long way to improving the home-moving process for consumers and also for the daily lives of those in the industry.”
Alongside this, is work being done by the Bold Legal Group, a body representing several hundred conveyancing firms, to create a national panel of law firms to allow estate agents and members of the public to find conveyancers prepared to provide buyers with upfront property transaction packs.
Chief executive Rob Hailstone says: “Estate agents are saying that they can’t get lawyers to provide upfront information, and lawyers are saying the same thing about estate agents. We’ve got to get the process embedded in everyone’s psyche.”
There are some who do and will, however. He says the key is “not being prescriptive” about what goes into the sellers’ packs, which can range from onboarding the client and carrying out ID checks, to providing title deeds and the property information questionnaire, and even providing searches and a review of the pack.
Panel firms can use the BASPI dataset if they want, but he suggests most conveyancers will use the Law Society forms. It will be up to firms to decide how much they charge sellers for producing the packs.
One intriguing issue that this raises is whether the longstanding principle of caveat emptor could be displaced by vendor disclosure, putting the onus on the seller to ensure that they have provided all the information required – and keep it updated – with failure to do so allowing the buyer to withdraw from the deal without penalty.
Many moving parts
One of the problems with speeding up conveyancing is that there are so many moving parts in each transaction – it only takes one to go wrong to foul up the whole process.
For example, there has been a particular problem in recent months with some local authorities producing searches in a timely manner. Even before the pressures of Covid took their toll, there are tales told of one council on the south coast where everything is paper based and when the person running the service goes on holiday, everything grinds to a halt.
Fiona Baker says some councils have been routinely reporting five-week turnaround times. “It’s difficult to explain to clients that there are other parts of the transaction that we have no control over.”
Change is coming, but again not in time. In May, the government unveiled a £26m fund to support local authorities in migrating to the national local land charges register, run by HM Land Registry. The plan is to create the central register, bringing together information from all 336 local authorities, by 2025. Only 17 have joined so far.
A plethora of other digital solutions, from both government and the private sector, are on or coming to the market, reflecting how many areas of potential improvement there are.
HMLR has been leading the way with ‘Digital Street’ a research and development project exploring how land registration might work in 2030 and supporting private sector innovation alongside its own.
It has made the direction of travel very clear. Writing in HMLR’s annual report last year, its chair, Michael Mire, said the impact of Covid would be “a greater desire to make property transactions more digital. There are still too many paper-based processes in conveyancing compared with other markets”.
He went on: “This has been tolerated by consumers up until now but the potential threat of a future outbreak will change those expectations. I think those not yet embracing digital technology in the sector will change the way they work and the current early adopters will want greater adoption, integration and a greater reduction in physical steps.”
The report noted how the pandemic has accelerated HMLR’s digital plans – notably in relation to identity and digital signatures – and said its upcoming activities included a “digital end-to-end process” for one of the most common register updates, a typical residential sale with a mortgage.
It said: “This will bring together all the strands of our digital programmes and will demonstrate the scale of our ambition and be a catalyst for transformation across all our services.”
Frictionless digital conveyancing needs structured data to automate fully the transfer of property ownership without the need for manual information retrieval or verification. As a result, HMLR’s digital transformation focuses on receiving verified digital data from customers.
In March, HMLR published its first Digital Identity Standard, offering conveyancers a ‘safe harbour’ if they use it to verify their client’s identity digitally.
This means HMLR will not seek recourse against conveyancers who comply with the standard in the event their client is not who they claim to be. It applies to both residential and commercial clients.
The registry hopes the standard will act as a “catalyst” for the market to embrace digital identity verification tools.
Soon after, Convey Law became the first law firm to join the government’s Document Checking Service pilot, meaning it can check information contained in UK passports against government records. The South Wales law firm said it hoped the initiative would have a significant impact in reducing property crime, with criminals unable to impersonate property owners.
CILEX has been on HMLR’s advisory council for many years, and has been feeding into its thinking on digital delivery of conveyancing services, including the safe harbour approach advocated in the digital identity standard. CILEX says the safe harbour standards “demonstrates a proactive and measured approach to the emergence of legaltech, promoting phased standards that operate on a voluntary basis”.
CILEX has also been contributing to HMLR working groups on topics such as electronic deeds and digital signatures, as well as the HMLR industry forum, to embed new ways of working and input to thought leadership on how digital solutions might re-envision the conveyancing market.
High-risk area
There are many other issues for conveyancers to consider. Ground rents and cladding have made life more fraught for those dealing with leaseholds. Professional indemnity insurers still look at conveyancers with a wary eye.
Fraud and cybercrime are never far away from practitioners’ thoughts – the most recent National Risk Assessment of Money Laundering and Terrorist Financing, produced by HM Treasury and the Home Office shortly before Christmas, said conveyancing remained a high-risk area for money laundering, although there was “no evidence” that it had got worse since the previous national assessment in 2017.
Fraud and cybercrime are never far away from practitioners’ thoughts
While it was “likely” that the majority of properties in the UK were bought with legitimate funds, it was also “likely that thousands of properties in London have been bought with illicit funds over the years” and “hundreds of millions are laundered through conveyancing across the UK”.
‘Red flags’ included clients seeking anonymity by buying property through complex corporate structures based in “secrecy jurisdictions”, clients buying property without a mortgage and no “verifiable source of income”, and transactions involving multiple law firms.
Other long-running issues include the tension between ‘traditional’ conveyancers and volume operators – for example, Simplify, the private equity-owned group that has the biggest share of the conveyancing market, is now one of the largest legal businesses in the country with a turnover of £139m last year.
Both Simplify and another private equity-backed practice, O’Neill Patient, have been growing through acquisition, and HMLR data shows how the largest conveyancing firms are slowly taking bigger and bigger market shares.
Shopping around
Then there is the contentious issue of referral fees. Last autumn, a report from National Trading Standards’ estate and letting agency team called for the mandatory disclosure of referral fees, instead of a ban. The government has asked it to keep monitoring the situation.
Speaking in the wake of the report, James Munro, the team’s senior manager, said around three-quarters of home buyers would go with the conveyancer recommended by their estate agent.
He said he had seen instances, albeit in a minority of cases, where agents driven by the referral fee would put up artificial barriers to force consumers’ hands, such as not allowing them to view a property until they have agreed to agree to use a particular conveyancer or financial adviser.
It was, he said, key that consumers should be able to shop around, even if it was just seeing if it was cheaper to go direct to the same provider.
Speaking at the same event, Matt Prior, lead official at the Ministry of Housing, Communities and Local Government, said the government considered this an important issue because home buyers were in a “uniquely vulnerable” position where they may feel they have to agree to an estate agent’s demands because of their desire to secure a particular property.
But he recognised the importance of referral fees to some business models and said referral arrangements could lead to a good overall service.
“It’s absolutely vital to us that consumers know in advance so they have a choice,” he said. “If you shine the light of transparency on referral fees, you’ll find that some of the most outrageous practices will disappear… Bringing this conversation out in the open will change practices.”
Mr Prior added that, if referral fees were banned, the concern would be that “some sort of system of referral” would still be in place but hidden from view.
This also gets into the issue of price transparency and efforts across the profession to make it easier for consumers to choose their lawyers – CILEx Regulation is currently involved in a pilot with the Solicitors Regulation Authority and Council for Licensed Conveyancers to test how lawyers and comparison and review websites can best work together.
All of this adds up to a lot of on the plates of conveyancers. The Land Registry, with the support of bodies like CILEX, is seeking to utilise the power of design thinking and input from both public, private and tech organisations to truly innovate.
In fact, CILEx Regulation held a design sprint last year, in conjunction with a consortium of universities, that was specifically focused on how best to leverage technology to minimise risk to the consumer and practitioners in the home buying and selling process.
And the pressures will only ramp up. A discussion paper last year from the Council for Licensed Conveyancers said the role of the conveyancer was undoubtedly going to change as much of the administrative side of the role becomes automated over the coming years.
Looking ahead to how the work would look in 2030, it predicted conveyancers would bank both time and cost savings, to be reinvested in improving the quality of service, upgrading technology and ensuring cyber security. Property lawyers would focus on advisory work where the quality of service – as rated by external comparison or feedback websites – would be decisive in where instructions go.
“Technology will radically improve transparency for consumers about what they are buying and the progress of their transaction. Because of the Internet of Things, properties will maintain up-to-date logbooks with little human intervention,” it said.
But the conveyancer will not be replaced by a robot. “Property is very personal,” reflects Fiona Baker. “The human element is vital. I’m all for advances in technology and helping matters forward. But I can’t see a fully automated system ever happening. These are things that need explaining to people and they want that from a lawyer.”