It’s coming for homes
28 September, 2022
The annual CLC stakeholder roundtable found that the property market continues to run hot – and that leadership is needed to ensure that the conveyancing process is modernised to cope
The period from the housing market reopening in June 2020 after the first lockdown and the end of the stamp duty holiday in September 2021 delivered an unprecedented surge in work for conveyancers. The chance to pause for breath since has only confirmed that the old way of operating needs to change.
The key questions at the CLC’s annual roundtable – attended by 14 practitioners and stakeholders – was what needed to be done and by whom.
Record year
Search Acumen’s analysis of Land Registry data found that conveyancers enjoyed their busiest year on record in 2021/22 – with around 600 law firms coming back into the market to help meet demand, taking the number of active practices back above 4,000 – with the average firm seeing a 60% rise in transactions.
Andrew Lloyd, managing director of Search Acumen, said fees also increased, making it “a bit more financially viable – I say that, rather than profitable – to be in conveyancing”. Rob Houghton, chief executive of reallymoving, suggested this was a “normalisation” rather than an inflation: “There is a good argument that fees were too low before lockdown anyway.”
Eponine Pearce, risk manager (property risk) at Nationwide Building Society, said it had an interest in fee levels to the extent that they threatened a conveyancer’s ability to do a good job. “This is something we are trying to look at from a panel management perspective: ‘Well, actually, you might be the cheapest, but are you the best for extending our brand, because that is what we are asking you to do?’” This could lead to lenders’ large panels being somewhat pruned to reflect the quality being seen.
While these returning firms helped the market flex, they brought problems with them. Mrs Pearce said the number of often quite simple queries it received from conveyancers during the pandemic “just skyrocketed”. Sally Holdway, director of legal technology specialist Teal Legal, said both the “manic element” of the workload more generally and a lack of experience among returning firms both increased the risk of mistakes.
Eponine Pearce said Nationwide had seen this in practice, with several cases of conveyancers overlooking key tasks, such as obtaining consents. “When you discuss it with them, they say ‘We are so sorry. We are so busy, we overlooked this’.”
Stephen Ward, director of strategy and external relations at the CLC, said there was some evidence of more regulatory issues arising, with “procedures that should be followed not being followed quite as tightly as they might be because of the demands on those doing the conveyancing”. At the same time, noted CLC council member Teresa Perchard, there has been no spike in complaints about conveyancing to the Legal Ombudsman.
This might change, though, with Mark Montgomery, chief strategy officer at Simplify Group, saying that the greater understanding clients showed during Covid and the stamp duty rush had evaporated: “They are, understandably, back to being very demanding.”
Many participants reported that a lot of firms remained near capacity as the market continues to run hot. This, combined with difficulties in recruiting both conveyancers and estate agents, was pushing up already long transaction times. Beth Rudolf, director of delivery at the Conveyancing Association, said: “We are also hearing that there are an awful lot of inexperienced people, so a lot of unnecessary additional enquiries are flying backwards and forwards.”
Also, rising prices and a lack of homes on the market means people are holding onto properties with defects in title which at other times may have ended the transaction. Instead, they are trying to fix the defect, with a knock-on effect on timescales. This work also requires conveyancers with experience. For Mark Montgomery, a big part of the extension of timescales came down to the lack of choice, leading to slower chain formation.
It was, reckoned Etienne Pollard, chief executive of conveyancing firm Juno, “very easy to say ‘This is all marvellous, fill your boots’, but if you want to provide a service that people perceive is quality, you have to take a very firm line and say ‘We can take on these many clients and no more’. But that does not really solve the markets problem. It just means that one or two firms are doing the right thing for their clients, but where do the rest of them go? Probably to other players who don’t.”
Recruitment troubles
Mark Montgomery went on to suggest that the recruitment problems across the market came in part from experienced lawyers burnt out by the pressure of the last two years deciding to leave. “We have recruited a number of those into non-conveyancer roles because they have just said, ‘I cannot work that much’.”
He continued: “The other pressure in the market, in terms of capacity, is actually the level of churn, because smaller firms have been desperate to take on people. The uplifts, in terms of salaries that people have been offering, have been significant, and obviously some people have moved, but you do not move out of one job and into another job without a loss of capacity on both sides.”
This all puts even more focus on where technology can help. Mike Harlow of HM Land Registry – general counsel, deputy chief executive and deputy chief land registrar – said: “So much of conveyancing is basically just an information-exchange process and a risk assessment, and a lot of that can actually be done in an automated way. This means that, if the volumes are up, the machines can cope because they can run overnight. Our focus is on making sure that this is secure, and everyone’s interests are protected.”
One problem with being so busy is that firms do not have the time to look at the technology that could help them with that. But, said Rob Gurney, managing director of Ochresoft: “Now there is a lack of volatility in terms of volumes, they are now looking for those efficiency gains, particularly on the basis that recruitment is so hard. How else can we get that work done, if not by putting more bums on seats?”
A lack of technology could affect recruitment in another way, argued Andrew Lloyd. “If a conveyancer from a more tech-enabled practice comes to look at your firm and goes, ‘I am not going back to working like this’, you cannot recruit. They have experienced a more efficient process and way of working.”
More positively, the need to embrace at least some level of technology during the pandemic – CLC research indicates that virtually all of the firms it regulates now use digital ID verification tools, for example – meant those conveyancers previously resistant to digitisation saw the benefits and were more open to it. Indeed, technical skills may in time become part of the CLC’s competency framework for practitioners.
But for Andrew Lloyd, this was not a choice. “This is inevitable. You either do it, or you go out of business. Part of the way you can go out of business is no one will work for you if you are still operating like you did five years ago.”
Information demand
Beth Rudolf predicted that the material information guidance project begun by National Trading Standards’ estate and lettings agents team – fuelled by digital property data – would drive significant change in the home-buying process despite market inertia.
The first of a three-phase process took effect in June; phase A requires the inclusion on all listings of a property’s impact on the buyer’s finance, the council tax band or rate and its price and tenure information. Phase B and C will require the upfront disclosure of utilities, parking and non-standard material information, such as restrictive covenants, flood risk and other specific factors that may impact a property.
Ms Rudolf said this would reduce the risks law firms faced, as “the buyer knows what they are getting” from the off. Lenders would be able to make quicker decisions, speeding up the process, and post-valuation queries – currently based on assumptions that valuers will not in future have to make – would be reduced.
“That is where the digitisation of this data will make a huge difference: being able to transfer it across all of the stakeholders in the home-moving process and then also being able to suck it out and create exception summaries for clients and conveyancers.” A similar scheme in Scotland reduced the fall-through rate of transactions to 11% – it is up to 34% in England and Wales.
Sally Holdway highlighted the opportunities upfront information offered conveyancers too. “We are seeing around 20% of properties that we vet against the Phase As coming up with something which really should have a lawyer’s eyes over it, be it short lease or an unavoidable cost that goes with the property, which means that the lawyers can get instructed a lot earlier in the process. They can be new types of service, such as to extend leases or to fix title issues.”
At the same time, Dan Salmons, chief executive of Coadjute, highlighted a significant weakness in the property market: a lack of common data standards so that data could be shared across the market.
Mike Harlow agreed but said first the data needed to be digitised – a lot of local authority data was not digital yet, despite the Land Registry’s best efforts. There was also a trust barrier, he said. “Is the conveyancer going to trust the data once it’s on their desk? Are they going to trust the exception report or are they going to say, ‘Well, actually, I do not even know where this data came from. I need it from the source. I need to know that I can actually trust it’?
“We have to look at the human behavioural side and the regulatory side, and not leave out the professional standards that still require you to do things that, when you look at them, don’t need doing, such as asking people to print stuff out and sign it.”
He stressed other benefits of joining up data: “We might practically eliminate intra-family fraud if we hook up digital ID checking with qualified electronic signatures.”
Another incentive for law firms of greater automation and use of data could be reduced professional indemnity insurance premiums, as part of the use of the planned digital identity verification framework, and subsequent identity scheme being implemented by the government, observed Stuart Young, managing director of Etive Technologies.
Leadership vacuum
This all seems to be crying out for leadership. But Nicky Heathcote, chair of both Propertymark and the Conveyancing Association, said research found that, when asked who should lead, “every single bit of the sector said someone else”.
For Beth Rudolf, the government needed to step in to bring order to the many initiatives around to speed up the home-buying process. The Home Buying and Selling Group has been trying to deliver it voluntarily but forthcoming research “makes it very clear that the barriers to uptake will prevent it from happening unless it is mandated”.
Nicky Heathcote said the group “has done as much as we possibly can now. We have given the answers, we have got everybody else on board. It now needs government to take the lead”.
Mark Montgomery agreed. “The adoption point is the challenging one. If the government were to set out a clear vision and say, ‘In three years’ time, this is how we are all going to be working,’ it would create a glide path.”
The CLC aims to play its part in this process. It is clear that, whether individual practitioners want it or not, significant change is coming. The CLC’s role is to ensure that those it regulates have the skills and structures available to take advantage of that change to the benefit of clients and of legal service providers.
Ends
