Back in play

For many years conveyancing solicitors have bemoaned the fact that estate agents have been the first point of contact for clients, and agents have not been slow in using this fact for their commercial advantage.

In his recent article, 'The price is right' (Solicitors Journal Property Focus, June 2009), John Cook of Cinnamon Property Lawyers advocated the production of home information packs by HIP preparation companies who could pass these HIPs to estate agents to market and retail at an uplifted price. This decade has seen the growth of third-party marketing companies who liaise with agents to refer work to their panel solicitors for payment of a fee which is then shared with the agents. This in turn has seen the growth of volume-based conveyancing factories on a high-turnover, slim-profit model. Additionally we now have a further overlay of HIP providers working with these marketing companies.

These trends have been disastrous both for the profession and for all but the most cost conscious of clients. Personal face-to-face service should never be confused with a luddite approach to IT and the most modern methods of communication. A first-class speedy service can be provided together with the face-to-face contact that will ultimately lead to the client becoming an established repeat client and not a one-off.

So why have HIPs suddenly provided the answer to this conundrum?

It is clear that the technical functions within HIP production require a degree of legal expertise. The interpretation of search results and the deduction of title have long been the preserve of lawyers. The balance of HIP production, that is, the obtaining of an energy performance certificate and compilation of forms completed by the client, are functions that are purely clerical. It follows therefore that if the solicitor is prepared to obtain the searches and an EPC from a search provider, and more and more are taking on qualified consultants to provide EPCs, then they are in a position to market the HIP at the disbursement-only cost. The payment for their own work is simply deferred until completion as has always been the case.

On your terms

As solicitors we should be interested in conveyancing instructions on our terms and at our rates. If the cost-price HIP production is tied in with the conveyance services then HIP production provides a glorious marketing opportunity.

Which client faced with the requirement of obtaining a HIP would rather pay upwards of £400 and £500 to an estate agent, than as little as £149 to a solicitor? This proactive view to HIP production has entirely removed the necessity of referral scheme panel membership and has the added benefit that the client can be offered advice on the range of local agents. When you have been in an area for some years there is little doubt that you will have firm views on which agents offer the best service.

Solicitors must grasp the opportunity to take instructions on day one and undertake HIP preparation at a disbursement-only cost. It is impossible for a HIP provider to undercut this price; the best that they would be able to manage is the deferment of fees, which often leads to their increase.

Is there anything to fear?

There is absolutely nothing to fear from the solicitors' aspect of their undertaking the production of the HIP. If marketed properly they will quickly see an increase in instructions received. This will more than outweigh the potential loss of referral from particular agents who require clients to use their own HIP.

There have been many arguments justifying the commercial necessity of marketing companies and the role they play in the 'interface' between agents and solicitors. But it could equally be argued that they perform no function at all. Which client truly understands that the solicitor to whom he is referred is actually paying a proportion of the client's fees to the third party who has introduced the solicitor to them? Unless the client's fees are equal to or less than that obtainable on the market there can be no benefit. If the fee is less than that obtainable on the market then the solicitors' net return after payment of the referral fee is non-existent.

A history of indemnity insurance will prove the increase in claims that arise from high-volume work at low-cost margins. How many cases would you have to buy in to repay £6,000 deductible on a claim that was brought about purely by oversight in a factory environment?