360 Legal Group is a business consultancy for law firms, helping its members to understand the difficult and fast changing trading conditions facing the profession, take advantage of forthcoming deregulation and manage and market their practices more successfully as businesses.
For the full article see below:
How commoditised is conveyancing?
I’ve been asked to write an interesting regular article for 360 Legal on the “commoditised conveyancing sector”!
The word “interesting” presents some challenges. Conveyancing is hardly the sexiest of subjects, and for many the perceived horrors of commoditised conveyancing make the blood boil. There is so much change in this market that conveyancers can’t just put their heads down and ignore it. Each firm needs to understand the market, the changes that might happen and have a strategy. Many just hope that when the market improves things will get better. I believe that when the mortgage market improves the structure of the conveyancing market will be different and only those firms that understand that will adapt.
I have worked in the commoditised conveyancing sector for over 14 years. During that time I have worked as the Legal Services Director of one of the largest panel managers in the country. I have tried to buy conveyancing firms, built a licensed conveyancer and been into UK conveyancers of all flavours. I`ve also formed friendships with lenders and insurers who are making decisions about conveyancers today.
Now I write a website called Today’s Conveyancer (www.todaysconveyancer.co.uk) which informs and helps conveyancers make sense of the market. I also provide consultancy to firms to help them adapt to the changing market.
So what are the key issues that have happened over the last few months and what is likely to happen next?
Let’s start by taking a quick look at the market itself. How big is it? How commoditised is it really?
What is the size and shape of the market? How commoditised is it?
CML figures show that there were 50,000 purchase mortgage advances in September and about 29,000 remortgages. HMRC statistics show that there were 67,000 residential property transactions in September.
Presuming one purchase means one sale this implies between 100,000 and 135,000 conveyancing and 29,000 remortgage files per month.
These figures are painful as they are so low but let’s not dwell on the past.
Remortgage market — how commoditised is it and why?
We can estimate how consolidated the remortgage market is by using the total number of applications each firm makes to Land Registry and deducting from that the total number of transfers for value for each firm.
This shows that two large firms dominate. Enact and Optima in September processed over 10,000 cases or 33% of the market between them with Enact being slightly larger. Behind them 8 firms processed just over 10,000 cases between them. These firms were Breeze and Wyles, Grindeys, Barnetts, Gordons Property Lawyers, Shulmans, Hugh James, O`Neill Patient and Salans.
So 66% of all remortgage work is processed by 10 firms. The balance of the work is held between a small number of other firms but very little work finds its way to non commoditised firms.
The average remortgage firm must do nearly 1000 remortgage files per month.
How does the transactional market compare?
We all know the situation is very different but how different?
Land Registry statistics show that there were 54809 applications for transfers of value in October with 5488 firms making those applications.
This implies that the mean average firm is making 10 applications to Land Registry each month for a transfer for value and has a market share of 0.01%.
There were only 30 firms that made more than 100 transactional applications to Land Registry in October the largest firm being Countrywide Property Lawyers with 804 applications (or 1.47%).
The smallest 2500 firms only processed 5035 applications or to put it another way nearly half the firms only processed 9% of the work.
Residential Conveyancing isn’t commoditised yet. It’s a cottage industry where the average firm has only enough work for one conveyancer never mind the overheads such as insurance and adequate risk and compliance monitoring.
What does this predict for the future?
The differences between the sectors are stark. A dozen do remortgage, over 5000 do transactional.
In 1996 lenders launched fees free remortgages before then all firms did remortgage work.
Today lenders are dissatisfied with the service they get from the cottage industry of transactional conveyancing and they are taking control. Fees free transactional exists, lender panel culls are common, insurance provisions and separate representation brings more woe. All to play for, say the progressive firms. All is doomed say the rest.
In 5 years will lenders have taken control of transactional? And what is your strategy if they do?
The threats and changes this sector faces are considerable but so are the opportunities.
So is conveyancing interesting? I think so and I seem to have lots to write in future articles. I hope you enjoy them.
Why wait for my next article? Go to www.todaysconveyancer.co.uk and register now or email me at chris.harris@todaysconveyancer.co.uk
Today’s Conveyancer, bringing you the latest conveyancing news and updates.
