Abortive transaction protection – conveyancing considerations
The number of new companies offering abortive transaction protection for your conveyancing clients grew dramatically in 2014.
Abortive transaction insurance is a service offering that was launched in 2013, and many of the providers are regulated under the Financial Conduct Authority (FCA). The main providers of this type of cover are Searches UK, Box Legal, OneSearch Direct and Northcott Beaton.
Within the last 12 months, there is estimated to have been 1 million residential property transactions within the UK. Some of the abortive transaction policy providers say the fall through rate is in the region of 10%, however some experts suggest the level is even greater.
The most common reasons for a fall through in transactions is reportedly due to financial issues, failings within surveys, or simply if a party within the chain pulls out of the transaction. Conveyancers are advised to be aware that cheaper abortive transaction policies often don’t include these common concerns within their strict parameters. Taking out bespoke cover will ensure you gain the right level of cover for your clients, which is particularly important should they suffer abortive transactions on numerous occasions. Cover providers recommend a policy indemnity level of around £1,500, as even though cover is often relative to the transaction amount, costs incurred are seldom above this amount.
Abortive transaction protection should be arranged as early as possible within the transaction, which is usually a week or two after instruction at the very latest. If you experience a suspected fall through, policy providers state you will not be able to take out cover should this happen, no matter what stage of the transaction.
Policy providers state there aren’t seasonal trends for abortive transactions in particular – the rates tend to coincide with the property market. When there is a high level of activity, this is usually followed by increased rates of gazumping according to experts. On the other hand, they note when the market cools, difficulty in selling property also leads to failing transactions.
The policy companies argue that conveyancing firms should note that abortive transaction protection can be seen as an effective business strategy in the eyes of consumers, as it represents you are taking into account their best interests. It may also allow for earlier searches to take place and speed up the transaction overall, as it is essentially providing a safety net.
About the policy providers
Searches UK provide cover for consumers who use their search services and work with many firms nationally who wish to provide protection to their clients. According to Searches UK, conveyancers have actually seen an increase in instructions having introduced this protection, due to the excellent benefits it provides.
The Searches UK “Buyer Protect Reimbursement” scheme focusses on the home buyer and they were the search company to introduce this into the search market. Cover is provided under a guarantee in the form of a contract between Searches UK and the consumer, which is therefore subject to general laws regarding contracts. Searches UK state the guarantee does provide comparable protection to typical abortive transaction insurance policies, though as it’s not an insurance product, Financial Conduct Authority (FCA) regulations do not apply.;
Searches UK were instrumental in helping Legal Eye set up their quality standard, which they have been awarded annually since 2012. The Buyer Protect Scheme offers the highest level of cover currently on the market, which was recently increased to ensure buyers have the correct level of cover and is also approved by compliance specialists, Legal Eye.
Another provider of abortive transaction cover is After The Event (ATE) insurance provider, Box Legal. This company has made its mark within the personal injury market, and has now introduced an abortive transaction insurance policy to the conveyancing sector.
OneSearch Direct’s “Assured” protection solution was launched a year ago and includes regulated searches and free abortive transaction cover underwritten by DAS. This cover is said to be the first of this type, and is approved by compliance specialists, Legal Eye.
As the business is said to have been developed through strong relationships built over time with solicitors, Northcott Beaton claim to have their finger on the pulse of the industry and are able to identify optimum levels of cover required. They also provide additional Search Indemnity Insurance – now a legal requirement under the Property Codes Compliance Board (PCCB) for all personal and regulated searches.
Northcott Beaton have also partnered with a number of businesses who provide various levels of their abortive transaction cover alongside their own service provision. These include TM, PSG, Legalinx, PIE, Oddie Dalton, Redbrick Solutions, and PSSW Conveyancing Solutions.
Do you think that this type of protection benefits conveyancing clients and do you offer it to your clients? We are keen to hear your views. Please share your comments.