Recently the Justice Minister of England & Wales, Mr. Jack Straw, M.P., announced the commencement of an Enquiry into the current regime of referral fees. I am pleased to assure those in Northern Ireland that the Law Society prohibits payment of referral fees to solicitors. However very disappointingly I would have to report that I am aware that solicitors are receiving payment of referral fees. We detest referral fees as in our opinion they dilute the independence of a solicitor.
We are aware that similar to the investigation being carried out by Jack Straw and his Justice Department, there is a culture in Northern Ireland of referral fees being paid to claims handling solicitors. The main difference between here and there is that we do have regulations that prohibit this. The problem for the Law Society is in successfully prosecuting the breach of these regulations because of the difficulty in obtaining the evidence of the breach. The Law Society has actively over the last eighteen months looked into this matter and has decided that the best way to deal with this difficulty is to promote an alternative system. This system, the New Claims Advice Service has been launched recently by the Law Society under the guidance of Rory McShane and now your solicitor can offer a better and fairer alternative to the systems being offered by those firms that deal with claims handlers.
If you wish to obtain further information about this new system please do not hesitate to contact us.
We also believe that referral fees are paid by some firms in the conveyancing market. In the recession agents, financial advisers, brokers and solicitors have experienced lean times. In order to improve their income relationships have been built up between these parties and work is then referred between the same on payment of a fee. Again there are great difficulties in the Law Society policing this matter because it is difficult to obtain evidence of the same. On those occasions where they have been able to investigate the matter there has been insufficient evidence for them to process a breach of the regulations. Because of this the Law Society Home Charter Scheme introduced a new format for a quotation for residential conveyancing. The quotation details exactly what payments are to be made to the solicitor and also what outlays or payments the solicitor has to make to third parties. Since the introduction of the new quotation, it has now become more difficult for referral fees to be paid by a client inadvertently. What had been developing was a practice whereby the solicitor in the quotation disguised an outlay or payment to a third party and in effect the client was actually paying the referral fee without realizing they were doing so.
Referral fees in the conveyancing system are completely inappropriate. It is paramount to the system that the solicitor remains impartial and distanced from the agent, financial adviser, surveyor and broker. A true conveyancer should not be blinkered or affected by any matters apart from the concerns of their client. We fundamentally believe in this independence and each client we act for, whether it is a Vendor or Purchaser, we will only act in their best interests within the requirements of both the Home Charter Scheme and the Law Society Regulations.
Therefore we welcome the recent announcement of Mr. Jack Straw the Justice Minister for England & Wales. We strongly believe that referral fees are anti-competitive and unprofessional. If a solicitor receives any remuneration from a third party he must clearly advise the client of this fee and the client must be made aware of exactly why the payment is being made and for what reason. We believe if clients understood that a referral fee is being paid to bring work into the firm they would not want to use that firm as their independence could be impaired. The whole concept of referral fees in the legal profession needs to be reviewed from tip to toe and prohibited. If you have any knowledge of any referral fees being paid in the property market, please do contact us confidentially and we are quite willing to report such practices to the appropriate Committee of the Law Society for them to investigate