Survival of the fittest: how conveyancers can thrive in the current climate

I was asked recently about the changes I have seen in the conveyancing world since I joined the firm of Boys & Maughan Solicitors as an articled clerk at the beginning of 1976. Having been with the same firm for 38 years is in itself probably unusual these days. Fewer young lawyers aspire to equity partnership, particularly in larger city firms where movement of individual solicitors, including partners, and sometimes entire teams, occurs on a regular basis.

Soft launch

The reflection is even more poignant in the light of the soft launch of the Law Society’s new Conveyancing Portal at the Property Section Conference last October – perhaps the most significant step yet towards e-conveyancing becoming a reality and a herald of the biggest change to the conveyancing process for nearly 100 years.

Looking back to my university days, I recall my land law professor telling us about how the 1925 legislation had affected the conveyancing community. Apparently the changes were perceived so enormous that many conveyancers who were within sight of retirement opted to retire early rather than cope with the consequences of such far-reaching legislation.

Land registration was introduced in different parts of the country at different times. By the time I had begun my career, compulsory registration had been in place in my part of the world for some 18 years and the title of a majority of residential properties were registered, although there was still a sizeable number of unregistered transactions.

By that time, photocopiers had arrived and the comparatively new practice of creating an epitome of title was in use. Many of the old style managing clerks had learned their trade at a time when abstracting a document was a necessary skill. I suspect there will be few conveyancers practising today who could prepare an abstract, although much of the language is remarkably similar to that which my daughters use when sending me a text message.

Perhaps the most obvious contrast between conveyancing then and now is the size of the conveyancing file. In those days of course, building societies lent money on residential properties; banks lent money on commercial properties; estate agents sold houses; insurance companies insured them and solicitors did the conveyancing.

There was no CML Handbook and mortgage instructions arrived on a single sheet of paper. Preliminary enquiries were raised in a standard format which covered three pieces of A4 (including questions about fittings and fixtures) and additional enquiries were rare. There were no FENSA Certificates, Gas Safe Certificates, and few guarantees apart from an NHBC Certificate, and the stamp duty form was also a sheet of A4.

If money laundering and mortgage fraud was happening no one mentioned it and it certainly wasn’t a matter with which solicitors needed to concern themselves. We received post twice a day, clients made appointments and completion took place 28 days after exchange.

Counting costs

The average file was probably a quarter of an inch thick in comparison to today’s one inch plus. Sadly conveyancing fees have not increased in the same proportion and, in reality, the cost of the conveyancing to the client is much less than it was 38 years ago, whilst the volume of work carried out by the conveyancer has increased significantly, as has the responsibility and risk associated with the work.

The expense of carrying out the conveyancing transaction has also considerably increased. Increases in the cost of postage and document exchange fees, together with copying, printing and paper costs, have grown steadily, while the old practice of adding an additional charge for ‘postages, telephone and copying charges’ has long since been outlawed.

Firms who prefer to maintain an entirely paper file and correspond with clients and the other side by post or document exchange might be unpleasantly surprised if they actually calculated the cost of doing so.

Perhaps the most seismic shock since 1925 was the Land Registration Act of 2002 and the demise of land certificates and charge certificates. Although the legislation came into force more than ten years ago, clients still look askance when they are handed a sheet of paper and a small plan as their ‘title deeds’.

Dematerialisation has had enormous benefits to mortgage lenders who no longer have to store large volumes of paper. The panic that used to arise when we couldn’t find a land certificate, which was supposedly held in safe storage in our strong room, no longer exists. A quick download from the Land Registry is all you need to be able to sell a property: something that many criminals quickly discovered.

Quite apart from the growing incidence of fraud, which many attribute to dematerialisation, we have noticed another problem that appears to have grown since land and charge certificates disappeared.

Title deeds

Prior to 2003, we would have either obtained the title deeds from a mortgage lender, or alternatively asked the client to let us have the deeds if there was no mortgage. Occasionally, one would find that there was more than one land or charge certificate because additional land had been acquired at a later stage, or there might perhaps be a separate parking space which was registered separately.

Both titles would have been added to the contract as a matter of course. Now we simply receive instructions from the client to sell a property by reference to its address and the seller has no idea whether or not their property is based on one or more titles.

Good practice would mean that the buyer’s solicitor would send a copy of the title plan to their client, asking them to check that it is accurate and correctly shows the extent of the property which they are buying.

However, it would seem that in many cases clients either don’t look at the plan very carefully or simply don’t bother to check at all. The problem only comes to light some years later when a subsequent buyer checks the plan more carefully, but by that stage the original seller has moved out of the area.

The original charge that was removed from the main title still remains on the title relating to the additional piece of land and is an administrative nightmare to have removed as the bank or building society no longer has any records associated with it.

Communication, or rather the lack of it, is one of the biggest complaints laid against conveyancing solicitors. No matter how hard the solicitor is working on his client’s behalf or how much work he is doing behind the scenes to move the transaction forward, failure to communicate that effort invariably means the client is dissatisfied. At the same time, the conveyancer is exasperated that the client shows little appreciation of his efforts.

More and more clients are used to a form of communication which is more immediate than the traditional letter. Twice daily deliveries are a thing of the past and most people won’t see their mail until they return home from work at the end of the day.

The use of letters inevitably protracts a process where delay is much easier to create than to eliminate. The cost of postage and document exchange fees should in themselves be a strong incentive for solicitors to move towards electronic communication and yet a number still resist or even refuse to use email.

Small firms hoping to survive in a market place which is becoming more and more dominated by bulk conveyancers need to seize the opportunity of adopting, where they can, those working practices used by larger organisations which help to cut costs, improve efficiency and speed up the transaction.

However, the cost of the latest IT solutions adopted by the big players can be prohibitive for small firms to acquire and to manage.

Equal terms

The Conveyancing Portal envisaged by the Law Society would enable firms of all sizes to compete on more equal terms. Three quarters of those at the 2013 Property Section conference were either ‘highly supportive’ or ‘supportive’ of the Law Society’s proposal.

The portal is designed to “streamline the process and improve communication between solicitors, conveyancers, clients and stakeholders including Land Registry and HMRC.” It envisages documents being lodged electronically; a standard form of contract based on the Law Society’s Conveyancing Protocol; a chain view showing the transactions involved in any particular conveyancing chain; the ability for clients to access relevant documentation easily and electronic communication between all parties enabling the transaction to move more quickly to an electronic exchange of contracts in a deal room scenario.

For some, the prospect will be seen as more 1984 than 1925, but progress tends to be relentless and as Charles Darwin put it, “it is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change”.

Doubters will reflect on the Land Registry’s ill-fated ‘Chain Matrix’ and subsequent attempts to create an electronic transfer. There will be a natural reluctance to change tried and tested procedures. Either we’re too busy to develop new systems or there is insufficient work to justify them. Will it be compatible with existing case management systems? Will a further move towards an electronic system create further opportunities for fraudsters?

The proposal unveiled at the October conference envisaged a staged development. Increased functionality would be developed incrementally. The opportunity to manage risk and demonstrate compliance could be a major benefit to firms with limited resources.

Many large firms already have their own ‘portal’ or ‘platform’ for interacting with their clients. To take that one step further and enable that interaction to take place with all relevant parties is arguably no more than the next logical step. Electronic document registration (EDR) is already with us. Change will happen. It is just a question of who controls that change.

Many small firms have for some time been fighting a rearguard battle to stay in business. Big may not be beautiful, but in the eyes of many lenders and professional indemnity insurers small is a risk they would rather not take.

The announcement by the Council of Mortgage Lenders in the middle of November of the plans by a number of large lenders to use a new, single panel management data and application process will have inspired little confidence that life will become any easier for them.

Certainly there are merits in a process that avoids the existing duplication and payment of multiple fees to individual lenders but the ways in which the new scheme will operate is cloaked in uncertainty. The basis upon which lenders will make a decision as to who remains on their panel and who does not remains a closely guarded secret.

It is stated that each individual lender will make their own panel management decision based on the data collected. Inevitably fears will arise that removal from one panel will be closely followed by removal from another.

A growing number of lenders have already moved to a system which requires the conveyancer to log on and download instructions and documents. A universal platform which links together all steps of the process must inevitably emerge at some stage. Whether the Law Society portal can become that platform remains to be seen.