Residential property update

More than ever before, residential solicitors and conveyancers are agile and flexible thinkers, demonstrating versatility as they accommodate all the changes experienced over the last few years in the relevant legal framework and the changing professional landscape. We have certainly been called on to exercise flexibility a great deal recently in our field of expertise. We implemented the Land Registration Act 2002 with heart; rolled with the punches of the Finance Act 2003 and the new form of SDLT; listened to Sir David Clementi's report in 2004, discussed his ideas and proposals and attended the various seminars on them; roller-coastered through the HIP phase and emerged relatively unscathed; are presently surfing along riding the waves and keeping afloat during the present extended credit crunch and economic troubles; and now we are going to respond innovatively to the arrival of the alternative business structures and Tesco law, with our usual aplomb. Should they be considered a threat, or could they be considered a positive opportunity?

When Sir David Clementi reported in 2004 that liberalisation of legal services could allow new practices to evolve which in turn would improve access to justice for the public by offering more competitive prices in certain fields of law, and making legal processes more transparent and easier to deal with, there was both a frisson of excitement and shiver of trepidation. This concept must be one of the largest and most far-reaching defining developments in legal services introduced to certain fields of law in England and Wales for centuries.

As I understand it, the purpose of the ABS is to open the ownership of legal service providers to anyone deemed 'fit or proper'. New external owners of law firms and practices will be able to enter the legal market and compete on an equal footing with the present traditional law firms. This concept is believed to be positive and beneficial for both solicitors and the users of legal services in England and Wales, and that it will further our leadership as global providers in selling legal services to the world. Whether this is a threat to the legal profession as it presently stands, or an opportunity to move into a mature and well-defined market with added value, is entirely up to us.

Professor Stephen Mayson believes that the Legal Services Act does not deregulate the legal services market at all, but rather gives power for the previously reserved activities to be changed. This will be done by means of an ABS licensing framework which should be operative in January 2012. People who were not previously authorised to provide legal services will be able to apply to become members of legal disciplinary practices, or members of ABSs, and able to provide legal services under the terms and conditions of a licence. The licence will set out certain regulations which must be adhered to for such applicants to enter into and practise within the legal services field.

I understand that these new external legal providers, in applying for such a licence, will be able to offer such legal services only while complying with three essential protections, embodied in the licence. Not only will there be a requirement to comply with the rules applying to law firms generally, but there will also be strict controls over 'fitness to own' so that the disreputable will not be able to gain control of other law firms. Further the law firm part of such a business must be ring-fenced from the rest of the enterprise, to clearly define what is and what is not covered by legal regulation. Finally it is important that any duties to shareholders are subordinate to the new firms' duties to comply with regulatory responsibilities set out by the ABS licences, including to the court and to their client.

What are we so afraid of? Surely we have not forgotten that we are part of an industry which has many years of learning, expertise and a solid and trustworthy reputation behind it? Solicitors carry with them a brand of trust and confidence, which should stand us in good stead. We should be confident in our abilities to provide an excellent service to clients, and should be able to move forward in the confidence that we are highly trained and should be able and keen to provide our clients with the best possible legal advice and assistance.

Although this is a new concept, we must remember there is a large legal services industry operating already which includes business carried out by costs draughtsmen, insurers, referrers, online service providers and legal process outsourcers, in addition to traditional law firms.

Adapt and innovate

This does not mean we can rest on our laurels. Rather we should see this as an opportunity to streamline, innovate and adapt ourselves to the changing times, and maximise our potential so that we can competitively embrace the changes ahead. Innovation will be the key. In my opinion it is the lower-value, high-volume work which will be largely affected by ABSs and Tesco law and we have to look again at what we are offering the public and how we are do it. This is our chance to revisit our present systems, streamline them and offer our package in a much more efficient and cost-effective way. I believe that the market will always gravitate to the professional, confidential and trustworthy brands. This is particularly true with residential conveyancing services, as we are dealing with what must be the largest and crucially most important purchase a person can make during their lifetime '“ whether it is their first, or subsequent, houses.

This is not to say that there should be no place for ABSs and a form of Tesco law. These services will still be regulated under the ABS licence, and we should not lose sight of this. There will always be those clients who may prefer the simple, 'no frills', basic legal service to suit their needs. It simply means that, as solicitors, we must offer a more attractive and trustworthy personal service than ever before.

If we objectively view the changes, the Legal Services Act is also not really that innovative when you consider that the financial services industry was modernised as long ago as 1986. Accountants have led the way, and have also undergone a radical change in the way they offer services to the public. We may be bringing up the rear in the professional field, and perhaps we can look at these other services and learn from them how best to offer a competitive, professional and effective service to our clients, and what the pitfalls of extended competition may be.

Set the pace

It will be interesting to see which law firms do take up the gloves. The Co-operative Group has already thrown its hat into the ring, and launched a pilot scheme offering free legal advice in three of its Bristol bank branches. The term 'Tesco law' at present is a bit of a misnomer, as Tesco itself has not yet indicated whether it will take advantage of the LSA.

Another early indication of participation is the proposal from WHSmith, which has entered into a partnership with QualitySolicitors. QualitySolicitors hopes to be active in the 300 WHSmith locations within a short time.

Irwin Mitchell has indicated it is likely it will raise fresh capital for acquisitions of other law firms to strengthen its operations. This financing may be sourced by means of ABS, but its participation will have to wait until January 2012 so it can obtain an ABS licence.

Pannone has also signalled an interest. Most of the other large London firms appear to be quietly sitting on the fence at present, possibly sizing up the effect the LSA and its implementation will have.

Solicitors simply cannot afford to view the arrival of ABS as a threat, but rather have to seize the opportunity with both hands and work with it, to move forward positively in an increasingly competitive arena. As solicitors, we are traditionally conservative and prefer the tried and established ways of handling matters. Now is the time, however, to step up to the mark and provide the professional expertise, innovative client-based service, incorporating those qualities which we deem to be admirable. We must not leave the field entirely open to new entrants: we can again set the pace in our new and ever-changing business environment.