Reveal referral fees early but don’t ban them says conveyancing body
The body that regulates conveyancers says controversial referral fees should be disclosed earlier in the house buying process – but they should not be banned.
In its submission to the government’s call for evidence on improving the house buying process the Council for Licensed Conveyancers also says “transformational change” of home buying is within reach but no new law is required to make the change a reality.
On referral fees, the CLC recommends bringing forward the moment at which the client is informed of the fee.
The CLC said:
“Currently, that is generally at the point at which the conveyancer is confirming their instructions with the client. At this stage, the client is unlikely to consider whether they wish to continue to instruct that conveyancer or seek another who has not been referred because they will be focused on moving their transaction forward.
“If estate agents and other referrers were to be required to inform clients of the referral fee – that it will be paid and its value – when they first take instruction from the client, that client would then have time to shop around if they wished.
“This approach would be much more likely to allow the industry as a whole to evolve as consumer behaviour changed over time. Unlike a ban, it would allow consumers to rely on the advice of an informed player in the industry, taking into account the fee attached to that referral.”
The CLC suggests that, in the event of a ban, any savings could be largely wiped out by conveyancers increasing their marketing spend. It claims a ban would also “destabilise the conveyancing market by forcing firms to rewrite their business models overnight.”
More generally, the CLC also claims that making more of the relevant information available much earlier in the process – when a property is being marketed – is “a reasonable ambition and would achieve transformational improvement in the process”.
It says:
“That may require significant upfront investment if it is to be achieved sooner than the 2030 envisaged by the Land Registry. But that investment would deliver a significant public good.
“Government should play a key leadership role, working alongside conveyancers, regulatory and representative bodies, lenders, HM Land Registry, HMRC, established software suppliers and LawTech, PropTech and FinTech start-ups to galvanise the industry to deliver the transformational change that looks to be within reach.”
The council also urges conveyancers to be allowed to act for both buyer and seller subject to appropriate safeguards – which is its current regulatory position – and allowing all parties in a chain to track its overall progress, and improving the speed and security of the completion stage and post-completion work, from transfer of funds between the various parties, to updating the title at Land Registry and making the SDLT payment to HMRC.
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