The Council for Licensed Conveyancers’ Industry Roundtable 2024

24 July, 2024

In a market where there is never any shortage of talking points, upfront and material information was the dominant theme of the Council for Licensed Conveyancers’ annual roundtable. It followed National Trading Standards implementing in full the rules on the information sellers need to provide when they put their property on the market.

Sally Holdway, CEO of tech company Teal Legal, predicted that a third of estate agents will engage with the rules, a third will think about it and a third will ignore them. The property portals will be big drivers of this and are starting to adapt their systems, as will evidence of Trading Standards enforcing the rules.

The big question raised by the need to gather this information is whether conveyancers can become involved earlier in the process. Certainly, Trading Standards is advising they should be.

Ms Holdway said: “We are not there yet but we’re starting to see that shift in where conveyancing starts, to be going from the point of offer to the point that the property is marketed and listed.”

Nicky Heathcote, chair of the Conveyancing Association, identified “nervousness amongst the conveyancing community” about how much this is going to put pressure on their workloads for no additional fee. “We are encouraging our conveyancers to think about what products and services they can provide and what to charge for it.” But there were also worries that upfront information could increase conveyancers’ liability.

Ms Heathcote also chairs the compliance committee of the Property Codes Compliance Board and recounted how some search providers are coming up with products that have enough information to meet the new rules. They later provide a full version that includes all the information that searches provide now.

Rob Gurney, a former licensed conveyancer and managing director of tech company Ochresoft, said the frustration for lawyers who want to embrace material information is that they are relying on others, such as estate agents and introducers, to advise sellers to instruct them. “The shift needs to be, ‘If we think there is a benefit in the lawyer being instructed at the point of listing, which there clearly is, how do we make that happen?’”

Henry Hadlow, co-founder of Juno, a digital conveyancing firm regulated by the CLC, said estate agents he worked with were often keen to see the lawyer instructed when the property was listed. “I agree with the nervousness around upfront information, because the search providers are saying, ‘Here is the information, but you cannot rely on it’, and if it is coming from the estate agent, as a law firm we cannot rely on it.”

Reliability is the core issue. Eponine Pearce, risk manager (property risk) at Nationwide Building Society, said upfront information “could absolutely change the way that we lend and underwrite and the way you apply for mortgages. But until we know it is accurate and we can rely on it, nothing is going to happen”.

This goes to the provenance of data and the push for data standards across the market. Angela Hesketh, the head of market development (UK) at PEXA, pointed to the work of the Open Property Data Association and others in working to create this and build a trust framework so that anyone in the process can rely on the information they receive. “We are gathering pace with that at the moment,” she said.

Law firms also need to be wary of unregulated providers coming into the market to provide material information services. As Sally Holdway pointed out, it is not a reserved legal activity. “It is the greatest opportunity for lawyers to get involved early, but it is also one of the greatest threats. We are seeing a bit of a land grab from unregulated providers collating the upfront information, saying, ‘Okay, if we can capture that instruction from day one, then we will have control over where the rest of the transaction flows to’.”

Mark Montgomery, chief strategy officer at Simplify, observed how, in practice, “lots of the people who are digitising information are then outputting PDFs because that is what the recipients want. It goes from being non-digital to digital to non-digital, and any provenance and metadata that would go with it at that point is lost. You are limited in what you do with it beyond that point because, without proof of the source, it is harder to trust it.”

“There is this big structural shift that is needed in the sector to say, ‘It is going to be data, and we have to get everybody on board to deal with it as data and get rid of all these PDFs’. We need to stop talking about forms especially and talk about data capture processes and data sets instead.”

One issue with the Trading Standards requirements, he went on, is that the information they demand is to help the average buyer make a decision on a property. “If the answer to why are we doing this is in order to make the transaction work really well for the consumer, that is not necessarily the same information as defined by Trading Standards. I wonder whether we are asking ourselves the right question, which is, ‘How does the system become better? What information truly needs to be upfront in order to do that?’ How, then, can you sell the outcome of that not just to the professionals, but to the consumer themselves?”

Beth Rudolf, director of delivery at the Conveyancing Association, responded: “By embracing the proactivity that material information enables, conveyancers can gather title, full searches and property information and review it for their seller client to identify issues which can be resolved. For the consumer and all stakeholders, this would be a win as it will enable faster certainty and reduce transactions that fail due to delay. 

“If the provenance of the information gathered upfront can be verified, then that is a win-win, as it takes out the duplication. Whilst we want to move to digital data, as Mark suggests, if I got a PDF of the HMLR title document and a search pack from a regulated search provider, then I would accept them now – why would that change?”

Another issue is that, while much of the information required is functional and factual, some requires proper investigation and interpretation. It may be, suggested Mike Harlow, deputy chief executive and director of customer and strategy at HM Land Registry, that artificial intelligence (AI) could have a role here.

He recalled: “For different reasons, we threw a lot of leases into a large language model. I asked the sorts of questions that I would have asked of them as a lawyer, such as ‘Does this lease have an escalating rent review provision?’. It answered them all correctly. Consumers are faced with a lot of information that is unfamiliar and not worded with them in mind. If you could ask questions about a property and get answers that respond to the language in your question, then a consumer could be much better informed and therefore could make a much more committed buying decision. That is not the same needs as a lawyer has in advising prior to contract, of course.”

The profession is still at an early stage in addressing the liability issues thrown up by AI. Sally Holdway mentioned how ChatGPT now cites sources when asked to give legal advice, “which generally speaking are law firms’ websites and information that they are providing just from a marketing point of view”.

“There is an open question, when a client goes ahead and makes some kind of a legal decision based on that, of where the liability sits. We come back to the question of regulation, and none of these AI technology businesses are captured under the Legal Services Act, and so there is just not the safety net from a consumer point of view.

“We are probably not quite in the eye of the storm yet, but there is a bumpy ride to get to the amazing opportunities for AI to plug the legal services gap and improve consumer outcomes. Our advice to our law firms is to be quite wary and, counterintuitively for a digital business, to be asking, ‘Do we need to start putting some manual steps in the process to mitigate the risk of things like deepfake?’”

Sam Jordan, chief operating officer at InfoTrack, said it uses AI in one of its post-completion products to highlight inconsistencies between the transfer documents and data about the property – it is then for the lawyer to go back and manually check what has happened. “That is as far as we and conveyancers are prepared to go at the moment.”

Neil Mullane, chief revenue officer at client due diligence platformThirdfort, agreed that it is still very early days for its use of AI. “For the kinds of ID checks we do, using the government-grade technology is critical – where we see risk is people not using that technology. It is very easy, when people are using old versions of ID technology, for people to take advantage of that.”

Beth Rudolf observed that there is already an ‘advicebot’ out there which takes a consumer through to a mortgage in principle. The technology was put through the exam for the Certificate in Mortgage Advice and Practice and passed with 78%, rising to 90% after the bot was re-trained. “The encouraging point is that, once the customer had their mortgage in principle, 50% wanted to go direct to the lender and the other 50% still wanted to use a mortgage intermediary. People still want the human touch but that can be supported by technology.”

Stephen Ward, the CLC’s director of strategy and external relations, said the regulator is in “a cautious place” with AI. “The human in the process is still vital, because you just have to validate the outputs – treat it like a newly qualified lawyer.”

His colleague Catherine Drennan, deputy director of policy and regulatory standards, added: “We do not want to be a blocker to the use of AI where it can be beneficial. The framework we produce will be permissive while saying, ‘If you are adopting AI, these are the sorts of safeguards that you need to be thinking about’. Without hindering its use, we need to wisely put some parameters around its adoption, so that people consider the risk.”

Rob Gurney suggested that AI has the potential to be a “great leveller” – if the technology is available to all, “the differentiator becomes service”. He continued: “The way in which AI needs to be adopted in the profession is as an efficiency tool. It is not taking the liability away from the law firm. Therefore, the practitioner will always have to approve the output. If some or all of that work is automated, it just becomes an efficiency tool.”

Mark Montgomery said these tools will allow the focus of conveyancers to shift onto managing the service, the customer and the relationships. “I think that is going to be a big adjustment over a period of time, particularly for those people whose identity is steeped in, ‘I am an expert and I like checking stuff’. That role and expertise will continue to be needed but on a narrowing set of activities and cases.

“Alongside that is the progression path for people within firms – if some of those tasks that were traditionally done by junior staff, as part of their training, are now done by technology, how do you get people in at the right level to grow the sector? I do not think that is clear yet. That is a real challenge for us as a sector.”

Stephen Ward agreed that new processes and tools will “change the centre of gravity of the work”, moving away from the paperwork and on to “getting to know the client, understanding their intended use and enjoyment and advising them on that in relation to this particular property transaction”.

He went on: “It is going to change the nature of the job in a really positive way. It should be changing the way that law firms are recruiting as well and who they are looking for in those roles. I am pleased that our educational pipeline has grown and has a really diverse intake. Employers should think about putting their unqualified people through the CLC training. It is a great way of making your business more resilient.”

Another issue debated at the event was holding client money in light of a significant default at a solicitors’ firm last year that is set to cost that profession dearly. The only real alternative at the moment is a third-party managed account (TPMA), but take-up has been slow among both CLC firms and those regulated by the Solicitors Regulation Authority, despite both regulators encouraging their communities to investigate it.

According to Ed Boal, head of legal at Shieldpay, the main TPMA provider, there is a commonly held belief that “operating a client account gives legal teams control, and that control is a good thing”. He said: “This perceived ‘control’ is not always a good thing, because with it comes the responsibility and additional burden of complying with the rules, auditing, contributions to the compensation fund, costlier indemnity insurance, cybersecurity risk, and anti-money laundering compliance. These are not things that law firms were established to have to deal with. They are there to advise their clients and provide a legal service.”

Nicky Heathcote suggested that the high rates of interest firms received last year on client money helped some survive the fall in transactions. There are other initiatives, like the Bank of England synchronisation project on settlement payments, which would reduce client account interest too. “Rightly or wrongly, some conveyancers have based their business model on having an income stream from that interest.”

At the same time, said Angela Hesketh, many compliance officers at firms would be happy to wave goodbye to the risks inherent with client account.

Stephen Ward said: “We see so many problems with client accounts and the risk of being a victim of fraud is significant. It is much reduced if you use one of these other tools. At the moment, we’re not looking to mandate a move away from client accounts but, as tools become more easily accessible, we will be doing more and more to encourage firms to remove those risks from their practices.”

More broadly, conveyancers around the table were positive about work levels, with Henry Hadlow saying that the volume of sales leads and instructions have “ticked up quite a lot”. At Simplify, said Mark Montgomery, activity in the first quarter of 2024 was 105% compared to pre-Covid. “If it could just stay at that level, that would be lovely. The thing that we crave more than anything is some stability to allow us to plan and manage volume.”

Eponine Pearce described the lending market as “a fickle beast at the moment” but noted that lenders are starting to move up the “risk curve”.

As CEO of comparison website Reallymoving, Rob Houghton has a good overview of the market. “It is currently reasonably strong. We also see what impact that has on prices. If you take a five-year view, pre-Covid, everyone was saying conveyancing prices were too low.

“When the stamp duty holiday hit, we saw a massive increase in prices, as you would expect when there was a limited capacity. Over the last few years, that has gradually eroded and come down again, although it is not as low as it was pre-Covid. In the last six months, as the supply has picked up, prices have gone back up, and they are now back to the level they were at the peak of the stamp duty holiday time.

“This sounds great, depending on the perspective you have, of course, but adjusted for inflation, that is quite a big drop because that peak was 2021. We have had three years of pretty high inflation since then, so it is probably about a 20% drop in real terms since the peak. Prices are now probably not far short of where they were pre-Covid.”

Many firms want to see prices higher, he said, but it is “a competitive market and massively fragmented, so it is hard to achieve that”.

Stephen Ward stressed the role of transparency in this. “Law firms have placed most emphasis on complying with the requirements around presenting the fees, and not enough on the other element of describing your service clearly to the potential client. Doing so would give them the chance to set out the value of that service more clearly, differentiate themselves from other providers and attract the right type of client.

“The sector has to be able to price more robustly because, as a regulator, we are concerned when we see prices going down too much. How can you do all of the due diligence to the standard that is required to protect your client, to protect the lender and to make sure that you are giving the Land Registry an application of the right quality, if you are not funding that work sufficiently? There is a real concern for us there.”

Eponine Pearce urged firms to adapt their practices and recognise that different people need different things. “One size does not fit all in conveyancing. People should be able to choose the level of advice that they get.”

At last year’s roundtable, Mike Harlow had described HM Land Registry’s efforts to reduce the backlog of work that it faced in the wake of the market peaking. Key to this was the largest recruitment and progression exercise the organisation had ever gone through, with hundreds of staff trained to move from simpler to more complex casework.

So, has it worked? “The age of the oldest cases has come down significantly,” he said. “We have been working on that basis because those are the most problematic cases for conveyancers. Our output is now substantially and consistently beating our input.

“It is not over, but we have the capacity to cope now and so expect an increase in the speed of service. That is not based on whizz-bang technology, but we are now looking to make sure that that never happens again. That is where technology should hopefully take over and make sure that we don’t have a repeat next time there is a spike in the market.

“There has always been a backlog created by a spike in demand, because otherwise you would have to have too many people sitting around waiting for that once in a 10 or 15-year event.”

Some around the table said the industry recognised the efforts the Land Registry had put in but had yet to see it really bear fruit.

Mr Harlow replied: “Whether you are seeing progress at the moment depends on what work you do. If you were a commercial firm, you would be seeing more progress. That’s because you would have had a worse impact, in fairness, so your cases would have been considerably older. You will now be seeing that progress because those cases are the more pressing ones we are dealing with.

“As a result of this focus on the oldest cases, you might be seeing slightly slower turnaround on the simpler cases. The macro picture is progress, but individual experiences will differ.”