Conveyancing: dual representation of buyers and sellers off the table

Buyers and sellers will not be encouraged to use the same conveyancer as part of the government’s plans to fix what it considers to be a ‘broken housing market’.

However, a referral fee ban is still on the cards after a call for evidence highlighted differences of opinion on whether a ban would be beneficial.

The Ministry of Housing, Communities & Local Government floated dual representation last year. More than three-quarters of 754 respondents on this issue said there would be no advantage to buyers and sellers.

According to the ministry’s response paper to the call for evidence, published yesterday, some respondents thought a single conveyancer might speed up the process. However, the advantage of fewer delays did not outweigh potential conflicts of interest. ‘They felt that as the current buying process was built around the concept of Caveat Emptor (buyer beware), having a conveyancer who was clearly working for your interests was an integral part of this process. It was felt that having a conveyancer working for both sides would lead to reduction in consumer confidence, increase the risk of fraud and increase the cost of audits faced by firms,’ the ministry said.

Those respondents who felt dual representation should be encouraged did raise conflict of interest concerns. But they felt these issues could be overcome through the use of ‘Chinese walls’ or by a physical separation of buyers and sellers within firms, with buyers represented by one team and sellers by another. Very few thought it was a good idea for one person to represent both sides. It was noted that this might make it difficult for smaller firms to compete.

The ministry said it was ‘not minded’ to take steps to encourage dual representation. However, it agreed with suggestions that conveyancers should be encouraged to communicate with each other on the same digital platform and have a chain view, and ‘will be working with industry to make this happen’.

The ministry said there was ‘no clear-cut answer’ on the likely impact of banning referral fees. A third of respondents supported a ban and said estate agents would refer customers based purely on service levels. One in 10 respondents thought consumers would end up paying more. Around 3% of respondents thought a ban would delay the homebuying process as homeowners are forced to find a conveyancer. Some thought a ban would discourage conveyancing firms from investing heavily in IT due to income uncertainty.

Greater transparency around referral fees should be a minimum, the ministry said. It will ensure buyers and sellers are aware of any commercial arrangements before they enter into an agreement.

The Ministry said:

‘We will also want to give further consideration to the case for banning referral fees. In particular we want to look at referrals for new-build properties and those instances where buyers are being referred by estate agents rather than sellers with whom agents have an established contractual relationship.’


Kindly shared by The Law Society Gazette