Residential conveyancers will look forward to increased business as the home mover market improves following the recession but do they find themselves at a cross roads of choices, the making of which may meaningfully influence their prosperity or will the their future , inevitably, be along the same pre-ordained bumpy road?
In ascertaining where you are going it helps to reflect upon where you have been! In seeking an answer to the above question it must be useful to rehearse the journey taken by this vital but often maligned service.
50 years ago the environment of a residential conveyancer was significantly different to that experienced by today’s practitioners. The marketplace has totally changed.
Crucially, there was no real competition for work. Yes, there were less transactions but only about a sixth of the current number of practicing Solicitors and there were no Licensed Conveyancers. Advertising by Solicitors was prohibited and any attempt to acquire a competitor’s client was regarded as professionally improper.
Lenders offered Solicitors commission for introducing mortgage applications!
Regulation was minimal — you were expected to behave ethically, preferring your client’s interest to your own.
There were no ID checks, no Money Laundering Regulations, no CML Handbook, no insurance mediation, etc. The current plethora of add on responsibilities had not yet arrived. Moreover, there was no bevy of lawyers acting for lenders or clients ready to pounce on the assumption that there is a case of action against the conveyancer for every form of ill that may befall the lender or client.
There were generous fixed minimum scale fees which no one would consider attempting to reduce. There was no pointing shopping round for a better quote.
Moreover, the starting point of what was required of the conveyancer was far less onerous than today. The prime task was to give or receive a valid transfer of title. A couple of pre-contract searches was generally all the extraneous enquiries required. Flooding risk and Japanese Knotweed, amongst many others hazards, were definitely not on the conveyancer’s required check list.
Where did it all go wrong for the Home Mover’s Conveyancer?
As we passed through the ‘70, ‘80s,‘90s and into this century the country experienced virtually non-stop growth in terms of wealth creation as well as population. More people aspired to be home owners and many lender’s moved from being Building Societies, there to serve their members, to being Banks there to serve their shareholders. Lenders in fierce competition sought to lend more and more for less and less. Savings and recoveries became vital. A hitherto unquestioning Home Mover increasingly looked to what could be saved from those servicing the move.
Not insignificantly, but with hindsight, surprisingly, many more conveyancers piled into the industry to service the perceived demand.
Whenever there is pressure on fees there is almost inevitably a drop in standards and quality which in turn lead to errors and or client dissatisfaction which ultimately cause financial downside for the conveyancer. Whichever way you do conveyancing it is a people business where those doing it must be well trained, supervised, experienced and rewarded.
Estate Agents and to a lesser extent Brokers had always referred clients to conveyancers, usually for the price of an occasional lunch. In this period of growth and focus on margins they began to realise that their privileged position of being the first port of call for potential home movers gave a serious opportunity to make real money from referring clients to conveyancers.
Referrals is a sure way to build volume but a price had to be and was progressively paid by conveyancers as the referral fees grew, in some instances to exceed the net fee retained by those actually doing the job!
Not every firm was over reliant on referrals but many were and it is self evident that if you are no longer in meaningful control of you work source you are likely to be squeezed by those who are.
The downward spiral of returns for residential conveyancers was bad enough before 2008 but the onset of the recession added to their woes in no small measure as the number of annual transactions fell by thousands.
This article concerns itself with residential conveyancing in England and Wales but it is telling to reflect on how things prevailed in Scotland. Whilst Scotland’s percentage rise and fall in the number of transaction mirrored that south of the Border and many Scottish conveyancers also lost their jobs, those remaining in practice did not generally accept an erosion of their fees, which have stayed far higher than those in England and Wales.
Whether, and if so to what extent it is relevant, the fact that many Scottish Solicitors, especially those in the east of the central belt of the country, are also Estate Agents is unclear.
So it looks as though our canny brethren north of the Tweed reached a cross roads some time ago and made the right choices!
Before we address the questions posed at the commencement of this article we should remind ourselves that all conveyancers do not operate in identical circumstances —not all have suffered in the why described above.
There are small practices relying on the return of old clients and recommendations by them, supplemented only by limited referral work. There are those who operate in affluent areas where property values and customer wealth effectively insulates them from the ravages of fee pressure. There are medium to volume firms who rely overwhelmingly on referred cases who have faired less well from the factors outlined earlier.
All are now seeing opportunities for more work as the recession recedes and from the increased demand for more homes. There can be sufficient confidence for most that new or extra business will be available as we go forward. All must ask themselves, carefully, if the financial rewards are going to be adequate? Especially, they must remind themselves that in an opportunistic marketplace, it is essential to guard against over trading. All experienced managers know that if you seek to grow a conveyancing business there is a long pay back period from getting the new work to receiving the benefit. You are perpetually chasing your tail, financially, until the staff are fully experienced and the level of instructions plateaus.
We all know that competent conveyancers cannot be created without a long apprenticeship, the process cannot be de-skilled beyond a certain level — its about people who must be properly trained, supervised and motivated. You need to have the people on board well before the work arrives and that is likely to be a significant cost.
At last we can return to the Question. The answer appears to be “Yes”, Conveyancers are at a cross roads of meaningful choice in addressing the opportunities. The choice is to make the right decisions on the kind of practice you want to have and whether you can get to where you want to be on a basis which is realistically prudent.
Having answered “Yes” to the Question we can lay off our bets by acknowledging that even though choices can be made the road will still be bumpy and sometimes tortuous for all practices (leading to more choices):-
– Even in the more congenial climate that is arriving there will be no turning back the tide of high client and lender expectations in terms of quality and security;
– Conveyancers who do not seek have their relevant body’s special conveyancing accreditations will do so at their peril — costly training and experience acquisition cannot be avoided;
– Regulation of the industry will not materially abate;
– Growth (other than by acquisition) is not possible overnight;
– Growth means investment- can it be afforded?
– Conveyancing will remain complex, incapable of complete de-skilling and technology will continue only to assist not replace people;
Will there be a place for one or two partner practices? Progressively they are likely to diminish. In this the attitude of lenders will remain critical.
Investment, even for “must have” technology may be impossible for smaller practices. It may be unrealistic to expect trade body promoted portals to be the panacea for technological advancement of the many.
For many discontinuance or amalgamation of their Home Mover Conveyancing practices may be the right or the only route forward.
Medium sized practices, especially in prosperous areas relying on personal reputations need to evaluate how they keep “ownership management and delivery” at the core of their offering.
For the larger practices, whilst considering much of that required of the smaller and medium sized practices, there is also a special need to ensure discipline in ensuring that its not just the volume but the net income from referred cases that matters. More leverage means more supervisory costs. The exercise of experienced judgment cannot easily be leveraged.
For all practitioners in every branch of the law, and very much in residential conveyancing, those responsible should be asking themselves, “How (now or later) do we Exit this business? That’s a whole new Question for another day!!!!!