Sir Michael Pitt the Chairman of the Legal Services Board (LSB) – the ultimate regulator for all lawyers – has today reiterated that the LSB are seeking to prioritise the removal of lawyers holding client funds. If this was to go ahead, what will this mean for conveyancers?
Conveyancing is predominantly centred on the client buying the house, and a primary aspect of the process that ultimately triggers the release of the keys is the receipt of the purchase price.
In addition to the purchase price, a considerable amount of the conveyancing transaction as a whole rotates around money: the deposit, the mortgage advance, the costs of the disbursements, the estate agents costs, to name but a few. Therefore the essence of the conveyancing process will always be related to the risks associated with holding and transferring clients’ money. This however is all part of the cost of the deal.
Yesterday at the Modern Law Conference, Pitt reminded delegates that it was a priority for the LSB to prevent conveyancers from holding client accounts, much like the French system and that of the Bar Council’s Barco scheme.
“Misuse of client money is one of the biggest regulatory risks. It is a risk to clients and to the public’s confidence in the legal profession.” Pitt stated.
“Any system that involves one person holding money on behalf of another will have risks attached. However, each year solicitors hold money in a very large number of transactions yet the actual number of problems is low and the profession’s client protections mean that consumers do not lose out.
“Any system is capable of improvement, but we have yet to see a solution proposed which will avoid all the difficulties of this complex and important area.”
So what effects could this have on conveyancing?
Some of the benefits this change may bring for conveyancers include a more limited opportunity for criminals to infiltrate the system and commit fraud during a transaction. Faults which occur that are associated with holding client money are also likely to decrease, resulting in a possible reduction of professional indemnity (PII) premiums.
On the other hand, the risk and cost of the transmission of client money is a chargeable commodity for conveyancers, so will this mean the price of conveyancing will take a hit?
Interest, although on low levels, is also earned by conveyancers through client accounts which could have a negative impact on smaller firms, and lessen the likelihood of achieving better banking terms.
Either way, if the LSB is able to uphold an escrow-type model, conveyancing is expected to require adaptation and, if simplified, conveyancing will be further deskilled.
