Industry Insight: PII and mitigating SDLT risk
Mitigating risk in your conveyancing business was on the agenda at the latest Today’s Conveyancer industry roundtable.
Welcoming Marc Rowson of Lockton Companies LLP and Hannah Mackinlay of SDLT Compass, the discussion centred on the ways in which firms can demonstrate to their insurers how they are taking a proactive approach to client service and risk management.
Against a backdrop of significant increases in professional indemnity insurance for many conveyancers, in some cases in excess of 20%, the insight from Lockton’s Marc Rowson was a useful reminder of the challenges for law firms, brokers and insurers.
The latest round of renewals saw the continuation of what is known as a “hard” insurance market; typified by large scale claims, the eroding of capacity as insurers exit, and rate rises. Indeed Marc highlighted the continued use of personal partner guarantees from some Insurers, for unpaid excess or run off premium as evidence of insurers adopting an even more cautious approach.
An increase in the frequency and severity of claims, alongside larger asset values (having seen house prices increase nearly £30,000 over the last 11 months) means claims are much larger
We are yet to see the full impact of the industry’s switch to home working and the associated professional and personal challenges. Juggling working from home, childcare and home learning commitments, alongside the increase in workload caused by the SDLT holiday may yet see claims rise. Marc identified that supervision and the absence or lack of peer review contributed to claims.
When it comes to the future, insurers are very interested to understand how firms are managing staff, ensuring the relevant supervision and risk mitigation is in place where firms continue to embrace remote working.
“You can be sure,”
“should claims start to arise with remote working at the core, insurers will be delving deeper into this particular topic.”
One area of risk is the misunderstood area of Stamp Duty Land Tax, a misleading name in itself, according to expert Hannah Mackinlay.
Too many conveyancers don’t fully understand SDLT, says Hannah. The rate of taxation is dependent on more than the purchase price. There are 49 different SDLT reliefs.
For Hannah, too many conveyancers jump to conclusions, making assumptions about the property, and those involved.
“The reliefs are as relevant to individuals as they are the bricks and mortar. Where is the buyer resident, or if it’s a company where is it resident? What other property is part of the deal? Could there be linked transactions either before or proposed? Do they get hit for Higher Rates for Additional Dwellings (HRAD) or are they joint owners of other residential property anywhere in the world?”
“For me trust arrangements, family businesses and connected parties, and partnership arrangements are just some of the examples that open up a can of SDLT worms!”
She describes the current attitude toward SDLT as a human tendency to just keep doing the same thing whereas in fact conveyancers could be putting themselves at risk of claims by ignoring the risk.
In one case, SDLT Compass, an automated SDLT risk mitigation tool for residential property practitioners, identified a £1m SDLT over payment.
As Marc pointed out in his conclusion in our modern, more litigious society, this is not a risk that insurers have the appetite for.