SRA Transparency Rules: a better residential conveyancing market?

14/12/2018
All residential conveyancing firms had to comply with the Solicitors Regulation Authority SRA Transparency Rules from 6 December 2018 under threat of enforcement action; but will these new rules mean a better residential conveyancing market?

NB The rules affect residential conveyancing clients rather than commercial clients but they also concern wider areas of law such as wills, probate, motoring offences and immigration advice.

This article only considers the rules in terms of their effect on residential conveyancing clients (and related wills and probate matters).

This article examines:




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    1

    What issues have residential conveyancing consumers faced up to now and why has the SRA published compulsory Transparency Rules?

We've frequently commented on the variety of ways in which residential conveyancing clients can be misled by conveyancing solicitor firms, right from the quote stage.

A potential conveyancing client can obtain an online conveyancing estimate for £99 but not realise that this is in no sense an accurate quote until or unless they read the small print. If they get this far, they often find out that what they'll actually pay is many many times more than they thought.

One of the knock-on effects is that some of these potential clients who are wary of the above practice might then rely on recommendations via word-of-mouth and by-pass further research into what respectable property lawyer firms have to offer to their gain. 

This can result in a lack of value for money or a sub-standard service; quite often, that recommendation might come from a friend or family member whose home move occurred perhaps years ago, making their knowledge out-of-date.

One law firm quoted in press reports wasTransparency rules to lower conveyancing fees and improve service levels? seeking to charge clients £200 to prioritise their files in order to achieve a Christmas completion in one particularly bad example of cynical opportunism. Both regulators and the media condemned the firm for acting in the way.


The Competition and Markets Authority (CMA), which was heavily involved in the consultation resulting in the new rules, summarised the situation as:

"A lack of clear and comparable information which limits the ability of consumers to shop around and compare legal providers."

First-time buyers are often pushed through to solicitors linked to estate agents and mortgage lenders who may earn referral fees; these buyers might think that they'll get better service or even just that it's less hassle, but it's clear to see a potential conflict of interest when an estate agent - acting for a seller - recommends a conveyancing solicitor to the buyer.

After a wide-ranging consultation between various stakeholders and regulators which concluded in August 2018, the Legal Services Board empowered the SRA to draw up new rules to eradicate these flaws in the market. The SRA drew up and published the new rules, which came into force 6 December 2018.


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SRA-Transparency-Information-at-a-glance


    2

    What are the SRA Transparency Rules and what sanctions can it use to enforce compliance?

Regarding pricing this must be 'clear and easy to understand', conveyancing solicitor firms must:
  • Provide total cost or if not possible an average or range of costs
  • Have to explain basis of charges, incl. any hourly rates or fixed fees
  • Have to 'highlight' 'likely disbursements and their costs'
  • Be clear on whether VAT is included
  • For conditional fees, explain when clients may have to make payments
Regarding services, conveyancing firms must:
  • Explain what services are included for the quoted price
  • Highlight any services not included within the price, which a client may reasonably expect to be charged for
  • Include information on key stages and typical timescales of these
  • Firms without a website must have information available on request in other formats

The SRA gave further advice that a firm's overheads should not be described as disbursements in their advertisements, examples including annual subscription costs and transaction fees for using online solutions to manage business processes, for example Veyo.

It stated that this would not preclude such costs being passed on to clients, for example through an administration charge (as opposed to as a disbursement).

Firms failing to comply face enforcement action, with, according to an SRA representative, 'all sanctions available', including for example fines and ultimately disqualifying them from providing conveyancing services.



    3

    Why do some residential conveyancing solicitor firms' fees fluctuate?

It's fair to say that conveyancing matters can vary considerably from case-to-case because in simple terms, no two home purchases/sales are the same and here are just a few of the ways in which they differ.

Price of property/ies involved

Fees are invariably priced according to the sale price of the property involved, so you get charged more if your property/ies cost more.

Freehold or Leasehold

You'll always get charged more for a transaction involving a leasehold rather than a freehold property because of the extra legal work involved in factoring in the freehold information (including for example, the accounts, major works etc.) and the resultant lengthier and more complex contracts of sale.

Cash or mortgage

Any transaction which includes a mortgage involves more work because of dealings with at least one lender and so will result in a higher fee.

Other schemes and variants

These include, among other things, Shared Ownership (extra work dealing with a housing association), Right to Buy (extra work dealing with a local council), Help to Buy (scheme involves dealings with Target as well as with a property developer), Help to Buy and Lifetime ISAs (work involved in getting funds released) and New Builds.

Routinely, if one property lawyer firm has not had previous dealings with another property lawyer firm, a client is charged for the former firm carrying out a Lawyer Checker to ensure the bona fides of the other firm and it will charge the client for this.

Notwithstanding these legitimate differences in costing, conveyancing solicitors can still be clear about charging after they've taken all the correct information from a prospective client, however, and detail all items transparently without burying charges within the small print.



    4

    What is the average fee for conveyancing?

Conveyancing fees vary and reasonably so, as explained in the previous section, however, according to research from one prominent media source, it typically costs about £1,000 in legal fees to sell the average home, and around £1,200 when buying, with stamp duty on top, making the total around £2,200.


    5

    Is the issue just about fees?

No. As printed above, the SRA rules concern service levels as well.

Firms must explain what services are included in a quote, but they must highlight services not included which a client might reasonably have to pay for.

This, for example, would include charges for disbursements (transfers of money made by the solicitor on behalf of the client) and even charges for administrative work, which might even include for photocopying

Conveyancing solicitors vary greatly in this regard, with some including these services within a fixed fee but others burying them deeply within places like the terms and conditions.

Where property solicitors might have a legitimate concern is the ruling about including information on 'typical timescales': conveyancing is notorious as a branch of law for how difficult it is to predict how long any matter might take to complete.

Because there are many different 'players' involved, such as the buyer, seller, their respective solicitors, possibly lenders, possibly housing associations, possibly Government agencies (e.g. Target), possibly surveyors and so on, and because each has their own tasks to complete and are reliant for some activities on things like the Royal Mail, it's easy to see that timescales can vary considerably.

So although it's commonly said that a freehold transaction should take 6 to 8 weeks, a leasehold transaction should take 8 to 10 weeks and a shared ownership transaction should take 8 to 12 weeks, any particular person's transaction might fall outside these 'typical' timescales. 


According to some estimates, perhaps one in three conveyancing transactions actually never complete (because, for example, a buyer pulls out before exchange).

The key, however, is for firms to be transparent about their typical timescale while explaining, truthfully, what the variables are.

Firms can do much for themselves in this regard by explaining which tasks clients themselves have to achieve to 'do their bit' in keeping timescales as small as possible.



    6

    How has SAM Conveyancing (always) complied with the regulations?

We've only ever offered fixed fees with a No Sale No Fee guarantee within a transparent quote where ALL costs are broken down and in which all services are explained.

Our online quote is returned to you after asking all the questions for which we need answers in order to make our quote to you as accurate and transparent as possible.

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    7

    How has the industry reacted to the SRA Transparency Rules?

Given that there perhaps 1 million home owners moving every year, any rule changes which result in a better conveyancing experience for clients should be greatly welcomed.

Sheila Kumar, the Council for Licensed Conveyancers' chief executive, welcomed the rules, saying:

"We can now move ahead with the changes to make sure consumers will have access to additional and clearer information to help them make an informed choice when deciding which lawyer to use."

The Law Society stated:

"Solicitors and conveyancers should be wary of trying to entangle more prospective clients  by quoting a lower figure than the one they charge."

However, comment from individual conveyancing solicitors in media reports has been mixed, with some arguing that the rules will encourage 'a race to the bottom' with qualities of service suffering alongside firms cutting costs.

During the preceding consultation, the Law Society notably stated that 'one size fits all' pricing did not suit legal services, because of the complexity of legal services. and that the regulatory approach was 'inflexible' and risked pushing the focus onto price competition alone.

According to one media estimate, the number of legal firms offering conveyancing has dropped by 700 to 4,100 in the last 5 years and more pessimistic commentators predict that this trend might well accelerate as a result of the rule changes.



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