Could vendor disclosure replace caveat emptor?
6 November, 2020
The rapid adoption of technology because of lockdown could move the conveyancing process from an emphasis on the buyer and caveat emptor to one of vendor disclosure, a Council for Licensed Conveyancers (CLC) roundtable has heard.
Vendor disclosure would put the onus on the seller to ensure that they have provided all the information required – and keep it updated – with failure to do so allowing the buyer to withdraw from the deal without penalty.
The roundtable of major industry players was held last month to consider how Covid-19 had impacted the predictions in the CLC’s Conveyancing 2030 discussion paper, published in January. This said that the role of the conveyancer was undoubtedly going to change as much of the administrative side of the role becomes automated over the coming years.
In short, participants indicated that this process was speeding up.
The pandemic has seen the HM Land Registry progress rapidly with electronic signatures, and Deputy Chief Land Registrar Mike Harlow said it was also promoting digital ID checking as part of efforts to “galvanise” the market.
“You would never have wished the pandemic, obviously, but in some respects, it has given us a shot in the arm to actually get on with some of these things rather than talking about them and waiting for the perfect moment to introduce them.
“Of course, we mustn’t rush and do things that are insecure or later seriously regretted, but it is different now from five or 10 years ago. The technology now is so much better. We’re not in exploratory territory now, we know when we look at other markets how readily available it is, how used it is. You look at other jurisdictions and you see how settled they are in using digital conveyancing processes.
“We should just get on with it and harness some of the energy, enthusiasm, and most importantly though, shared sense of purpose and vision that we seem to have now as a result of the pandemic.”
Olly Thornton-Berry, managing director of Thirdfort, which carries out digital identity and source of funds checks, said lockdown led to a huge increase in take-up of its product. “Law firms went from asking questions about how the technology worked to ‘how quickly can we go live with this?’,” he recounted. “People are much more open minded to this type of technology now, because so much has happened in the last six months.”
Rob Houghton, chief executive of reallymoving and The Law Superstore, said lockdown had proven that “conveyancers are absolutely at the bleeding edge of new technology and new practices compared to most of the rest of the consumer legal industry. In most other areas of law that we deal with, they’re incredibly conservative, and any change at all is treated with huge caution.”
Mark Montgomery, chief strategy officer at Simplify, one of the country’s largest conveyancing businesses, said the main drag on adoption at the moment was firms simply being too busy to contemplate it, given how the property market has rebounded since it reopened in May.
But he suggested too that there was “two-speed industry”, with some firms recognising the need to change the way they operate – including home working – and others not. “It’s tough to see where the second group will be in six or 12 months’ time,” he said.
Mike Harlow stressed with wider importance of this shift in the long road to post-Covid recovery: “Being the most efficient, most attractive, best informed property market that we can be will be the right foundation for that recovery.”
Andrew Lloyd, managing director of search provider Search Acumen, highlighted the importance of the work of the Home Buying and Selling Group – a pan-industry group advising the government – in developing common standards so that data can be exchanged across all the different technology.
Scottish solicitor and professor Stewart Brymer said this was all changing the conveyancing process. “The way I was taught to examine a title was that you worked on the basis of caveat emptor: all the information is thrown at the purchasing solicitor who wades through it, raises queries, some of which will be answered, some of which won’t.
“But now this information comes faster and is more accurate, so I think we have to consider moving towards a vendor disclosure process instead. Giving people more information will speed up the process – without it, we can have all the little digital bits, but they’re not connected and they will be used in the old-fashioned way.”
Andrew Lloyd said there was an alternative. He explained how his company had used the lull caused by lockdown to accelerate its machine learning programme, producing a system that can actually understand the information about a property in the same way a conveyancer does.
“It means you don’t have to rely upon a change from caveat emptor, but you can supply in a very early point in the process a list of risks potentially with the property without relying on a vendor to also have to come forward. Because the vendors themselves are not property experts. You might be asking a series of questions or asking them to fill things out that they simply may not know, or may not have access to, or can’t answer. Whereas if you’ve got a trained conveyancing AI that can consume that information about a property, it can.”
Mark Montgomery said Simplify was working on similar technology. For example, it has built an engine that reads mortgage offers instantaneously and generate an exceptions report, “so large volumes of work that would ordinarily be done by lawyers doesn’t need to be”.
He suggested that, “if the technology moves on in the way that we hope it will”, the shift from caveat emptor to vendor disclosure may be moot.
Beth Rudolf, director of delivery at the Conveyancing Association, asked: “Should we think about the idea of vendor disclosure meaning that, actually, you provide what the buyer needs to see anyway, and caveat emptor is really just that tick at the end to say, ‘I got everything that I need to look at to answer the questions of my client’?
“I think we have the opportunity now to start taking stock and saying, ‘What should we be doing as a professional to provide the best possible comfort for the consumer? Should we be asking all the questions that we ask and just telling them that information, or should we be asking them what questions they want us to ask?’
“We do not need to be showing them all the things that do not apply to the property and that do not create a problem for their intended use and enjoyment of it. By only outlining the exceptions, you are simplifying the process and improving the customer experience and understanding. It is the complexity that puts consumers off reading the huge documents that we currently end up sending out simply because they arrive with us as PDFs or paper.”
Participants were clear that conveyancers would still have a central role in shepherding consumer through the process.
Andrew Lloyd said: “In 25 years’ time, when the kids that are 13 now are buying houses, they won’t think twice about using a robot to tell them it’s okay, but for now, through our 2030 window, you need someone to help the consumer, and who’s the most trusted person in this process? Who in this whole thing do you rely on to look after your interests? And that’s always the conveyancer.
“The conveyancer just needs to re-define their role as that person who is going to be the property professional on their behalf, and let the mundane work be done by machines.”
Mark Montgomery agreed that this would be true of straightforward transactions but there would still be more complex cases where the lawyer’s skill and judgment would be needed. “They will also need to understand that a lot of consumers nowadays don’t want to talk to service providers unless there’s a really good reason to. They’re happy to do it electronically.
“I see the role of the conveyancer becoming potentially more specialised and skilful, but probably in terms of hours applied per case, progressively reducing.”
Stuart Young, managing director of Etive Technologies – which creates online property log books – said that, because of the need to interpret the data, he considered that “the role of the conveyancer has actually never more important”.
CLC chief executive Sheila Kumar says: “Covid-19 has made many conveyancers realise that they need to embrace new ways of serving their clients. It is difficult to do with the property market running so hot at the moment, but the roundtable has served to confirm that the findings of our discussion paper that change is inevitable.
“The CLC recognises the importance of supporting this and ensuring that regulation does not unnecessarily get in the way. We will continue to work with those who took part in the roundtable and the Home Buying and Selling Group to ensure our regulation is proportionate and risk-based.”
