I strongly believe for the residential property market to function efficiently it requires an independent relationship between the four main stakeholders in the property market, namely, the conveyancing solicitor, the estate agent and if applicable, the lender or financial advisor and the surveyor. Each need to play their own particular role in the conveyancing transaction and must be independent of each other so that both the vendor and purchaser are in receipt of advice without any coercion or undue influence.
The benefit of independent advice to a vendor and purchaser to me is self-evident. For all stakeholders in the residential market, independence protects us from mortgage fraud. On reading the various cases which emerged, particularly from England and Wales when there was a serious mortgage fraud issue, it was clearly evident from the facts of the cases that there was often collusion between the solicitor, the surveyor, the lender and the agent, to a varying degree. It is for this reason alone that I have always been opposed to “one shop” conveyancing.
I am aware in Scotland that estate agents and solicitors often operate under the same roof and are the same business. I have no practical experience as to how this works. I am aware that some time ago a number of solicitor’s practices in England and even here in Northern Ireland attempted to operate estate agencies as well as continuing their conveyancing practice. I don’t believe these ventures were successful.
The relationship between an estate agent and solicitor varies from town to town and from practice to practice. In some areas of Northern Ireland, the relationship is strained and there is little co-operation between the solicitor and the agent. This can frustrate vendors, purchasers, solicitors and the agents and I see no real benefit in not co-operating with estate agents. Anecdotally I quite often hear of solicitors complaining about being bombarded by both telephone calls and emails from agents looking for continual updates. This can frustrate the solicitor and for this reason, some firms refuse to communicate with the agent and will only communicate with their client. I find that by using the agent to chase up certain matters the agent can actually assist the solicitor and save time.
There has been a significant change in estate agencies over the last 40 years. Back in the 1960s and 70s, most towns had a few established independent estate agents that were also surveyors and auctioneers. In the 1980s many of these independent estate agents were bought out by lenders, which was a complete disaster, and in the 1990s most of the independent agents brought back their practices from the lenders. From 2000 to date there has been a shift in the landscape. Small operations that have advertised heavily on low fees have come and gone, there have been many mergers and breakups, we had an invasion of American style agents such as Century 21 and Re-max that also appears to have come and gone. In the last few years, there have been a number of new types of agencies such as Vision, Skyline, Purple Bricks etc. The established independent agencies are still the main players in the property market in Northern Ireland, some with one or two offices others more Province-wide based.
The estate agents are not restricted in the same way as a residential conveyancer is. There is some legislation that marginally affects their operation but they are not controlled in the same way as solicitors are by the Law Society. They can be associated with regulatory bodies such as the Royal Institution of Chartered Surveyors (RICS), the National Association of Estate Agents (NAEA) and some are involved in an Ombudsmen Scheme but it is not compulsory.
The estate agent plays a key role initially in any sale. It is the agent that agrees on the price and by issuing the sales advice note commences the transaction. Estate agents are now often looking for proof of funds when a purchaser makes an offer. Initially, I felt this was rather intrusive but I now believe this is actually a valid part of vetting the purchaser, and particularly assessing whether or not the purchaser has the funds to proceed with the transaction. In carrying out this task diligently the agent is assisting the process and hopefully irradiating any bogus purchasers.
One of the reasons why a number of solicitors are not co-operating with estate agents, apart from feeling that they are being bombarded by requests for continual and unnecessary updates, they also feel that the agent is simply and rather cynically, wanting to ensure that the sale has reached a stage where the contracts have been accepted and they can, therefore, issue their fee note. I also believe that a number of solicitors are envious of the amount of fees an estate agent can charge. These fees are often considerably larger than the solicitor’s fees and payment of the same is made by the solicitor upon completion in most circumstances. I have felt such attitudes rather envious and petty and I feel a negativity towards estate agents is counter-productive and not acting in the client’s best interests.
One of the main delays in the conveyancing process is the solicitor obtaining title documents. With the cutbacks due to the property recession, I believe that many of the lenders have reduced their administration and now seem to take unreasonable lengths of time to provide the title deeds when requested. If the estate agent, on receipt of instructions for a sale, notifies the solicitor of the pending sale then this delay can be avoided. This simple act can have a major impact in reducing delay in the conveyancing process and more importantly reducing the stress levels for all involved.
There are currently discussions ongoing between the Law Society and the NAEA to possibly introduce a protocol between solicitors and estate agents. This protocol would include a requirement for the agent to notify their selling clients to instruct their solicitors upon the property going on the market. This one single act would have a major improvement in the conveyancing system as it is incredibly common for the vendor’s solicitor to only be instructed after the property has been agreed for sale.
If the relationship between the estate agent and solicitor is good then they can symbiotically assist each other in progressing the sale or purchase to its completion. For example, the solicitor needs to know what the state of play is in relation to survey. The survey, in particular, has become increasingly important in residential conveyancing and quite often sales can stall or abort at this stage. If a protocol is to be introduced between solicitors and estate agents it will be in everybody’s interest that it is agreed that the purchaser carries out their survey as quickly as possible. The agent is integral in dealing with possible renegotiations of the purchase price after a poor survey and the solicitor needs to be informed and involved with their clients at this critical stage of a transaction. A good relationship with the estate agent can assist the process as the solicitor and agent develop an understanding about the delicate issue of renegotiations as they deal with various transactions over many years. There is an element of trust in this area and again there is a duty on the various parties to act independently and in the interest of their given clients.
It is not only for this reason but for other reasons referred to above that I am totally opposed to any form of referral fees being paid between an estate agent and solicitor. If a solicitor is paying an estate agent for the referral of conveyancing work in my opinion that solicitor cannot act independently for the client. If issues arise during the transaction where the client needs to be independently informed by the solicitor as to the consequences of a difficulty then the advice being given may be tainted by the fact that the solicitor has paid for the referral by the agent.
The Law Society quite correctly has regulated that referral fees are not allowed. This is not the same as in England and Wales as initially, the Law Society of England and Wales allowed referral fees but more recently have indicated that this has not been in the best interests of the public. There has been substantial publicity about referral fees particularly in relation to personal injury claims resulting from motor accidents. There has been less publicity about referral fees being paid in conveyancing transactions. Some organisations have incorporated separate companies and attempted to justify payment of a referral fee as an “administration fee”. The agent refers the work to the company, the company then directs the work to the solicitor, the solicitor then pays the “administration fee” to the company and the company then pays the fee to the agent. This type of system would also operate with financial advisors, insurance brokers etc., to me this is a sham as a payment is still being made by the solicitor to obtain work.
What I find most distasteful about referral fees and payment of “administration fees” is that the payment is not transparent. I don’t believe that the agent advises the client that the firm they are referring the client to are making a payment for this referral. Any sensible client that is advised of this would not use the firm as the firm, in my opinion, cannot purely be independent if they are paying the agent for the conveyance. This problem, I suspect will intensify as more estate agent operations are moving to the internet. I was approached by a large English internet agency and asked to join their small panel of conveyancing solicitors. When I investigated the matter further I discovered they were seeking payment from ourselves of a sizeable sum for each conveyancing transaction that they referred to us. When we informed them that this appeared to be a referral fee, they indicated that it wasn’t and that the fee was for their administration and advertising. I declined to join this panel and I am unsure as to whether or not the company proceeded to set this up. I believe with the explosion in online business the relationship between the solicitor and the estate agent will change and both professions will be greatly affected by this technical revolution. At present, therefore, I feel, it is beneficial for both bodies to work closer together rather than further apart.
As we still have a system based on the doctrine of caveat emptor the surveyor is also a key pillar in the conveyancing process. I never equivocate in any purchase, and always strongly recommend both verbally and in writing, for a purchaser to obtain an independent survey of a property. The reason for this is that even if a property is relatively new, it may have been poorly constructed. Also, what a lot of purchasers forget is that the survey not only looks at the structure of the property but also at the price agreed. With an enormous fluctuation in prices over the last 10-15 years a surveyor in completing his report provides comfort as to whether or not the price agreed is realistic. By going through their process of price comparables the purchaser can be comforted by the fact that they have not agreed on an inflated price for a property they hope to buy.
Despite what I believe is fairly clear and beneficial advice to purchasers it never ceases to surprise me how many purchasers do not wish to instruct an independent surveyor. They are always conscious of the cost and seldom see the benefit of the same. I would regularly have discussions with clients where I feel I am trying to persuade them to do something that is in their best interests and for this reason, it is so important that the advice being given to the purchaser is also in writing.
What also surprises me is how often a reluctant purchaser, who then goes on to obtain a survey, discovers that there is considerable work which requires to be done to the property. These clients do then realise that by taking the solicitor’s advice and getting the survey done, that they have saved themselves thousands of pounds, on unforeseen repairs that they would have been required to do, at their own expense, after the completion date, if they hadn’t obtained the survey.
I do believe that once the survey is obtained it is the duty of the purchaser to obtain any supporting reports. The purchaser should be advised that there are three options open to the purchaser, namely;
a) Withdraw their offer.
b) Proceed at the agreed price.
c) Consider a re-negotiation of the price.
The surveyor is key in assessing whether a re-negotiation of the price is required as they can provide information as to the importance of repairs and possibly an indication as to the cost of same. Acting for both vendors and purchasers I believe the best system in respect of re-negotiation is for the purchaser to complete all their investigations and then to decide which of the three options they prefer. If they are to re-negotiate the price they should provide the vendor with the survey and the supporting reports. I do not feel that they should dictate at this stage what price reduction they are insisting upon. I think they should request the vendor to consider the survey and for the vendor to then decide if they are to agree a reduction what amount they are prepared to accept.
The situation of price re-negotiation is very common and is delicate and requires an element of objectivity. If the agents, solicitor and surveyor have a trust between themselves then it is more likely that a resolution can be reached. If the relationship is poor then the chances of success are less likely.
The role of the financial advisor or lender is also crucial if the purchaser is borrowing. Again, there has to be independence between the solicitor, surveyor, agent and lender. The lender has to obtain their survey for their purposes and the relationship between the solicitor and lender has become stressed in the last ten years as a result of the property recession. The Law Society of Northern Ireland decided to continue with the current arrangement whereby a solicitor can act for a lender and a purchaser and the lender does not have to have separate representation if it decides to instruct the same solicitor. This relatively recent decision to continue with this practice facilitates the conveyancing transactions and avoids duplication and the necessity to have two solicitors acting which will obviously lead to delay. There are current negotiations ongoing between the lenders and the Law Society of Northern Ireland in relation to this relationship and how it should operate. The main focus is on the Certificate of Title that the purchaser’s solicitor provides to the lender which may be amended soon. The legal profession is still concerned by the extent of the Council of Mortgage Lender’s Handbook and this relationship between the solicitor and the lender will be kept under review for some time.
If all four parties in a conveyance act properly then I believe that the system we have does not require substantive change. There is always a drive to hasten the procedures but often what is overlooked, is that any purchaser requires time to make sure that the decision to purchase a property is the correct one. I don’t believe that we need a formal “cooling off” period for purchasers because if the four stakeholders in the conveyancing system operate as they should then there is an inbuilt “cooling off” period for any purchaser to enable them to make the right decision. This is created by each stakeholder completing their part of the transaction hopefully independently and professionally.