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Small Firms Division

Conveyancing - is the reward worth the risk?

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Mark Carver, from Chancery Pii, draws out some interesting statistics about moving costs from a recent study by the Post Office Money and the Centre for Economics and Business Research.

The recent study by the Post Office Money and the Centre for Economics and Business Research provided interesting statistics regarding moving costs:

 

Fee2004
Cost (& % of total cost of moving) 
2014
Cost (& % of total cost of moving) 
% increase
Stamp duty£1,950 (26%)£3,620 (30%)87%
Estate agent£3,229 (43%)£5,214 (44%)61%
Surveyor£402 (5%)£607 (5%)51%
Conveyancing£1,039 (14%)£1,419 (12%)37%
Removals£855 (12%)£1,034 (9%)21% 
TOTAL£7,475£11,89458%

Cost of conveyancing

In real terms, solicitors are earning less now than they did ten years ago from conveyancing, with average fees increasing by 36.5 per cent – significantly less than standard inflation for the same period (40.63 per cent). This is in stark contrast to estate agents, who have clearly benefited from the increase in property prices as their earnings are linked to the sale price, and to a lesser extent, surveyors, whose fees have increased above the level of inflation.

Risk and reward

Not only are solicitors getting paid less for conveyancing than in 2004, but the potential risk is significantly higher, driven primarily by an increase in property prices:

 
 UK London South East 
 Average property value% change in conveyancers’ exposureAverage property value% change in conveyancers’ exposureAverage property value% change in conveyancers’ exposure
2004£180,000 £273,000 £237,000 
2014£251,00039.12%£428,00056.75%£305,00028.71%

Source: Office for National Statistics House Price Index

While there are regional property value differences, it is apparent that conveyancing fees have not kept in line with the potential exposure of a negligent transaction. In other words, solicitors who undertake conveyancing are taking on more risk, which is not reflected in the fee generated. This is in comparison to estate agents who appear to enjoy low risk and high rewards.

Conveyancing claims

Market claims statistics gathered by Chancery Pii (reflecting 14.81 per cent of the profession from 2004-2011) show that 43 per cent of claims notifications and 70 per cent of financial claims payments, at an average incurred cost of £41,000, are generated from conveyancing.

Even firms fortunate enough not to experience a conveyancing claim should be aware that approximately £100 of an average conveyancing fee will contribute towards professional indemnity insurance premium for the transaction.

What options do conveyancing firms with few partners have?

Conveyancing firms are advised to seek out A+ rated cover from a specialist, particularly small firms, who will inevitably be more heavily reliant on their policy to respond to incidents in a timely fashion, should they arise.

In our experience, mortgage lender panels also have a preference for firms to be backed by rated cover. There have been calls for this to be compulsory in the past.

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About the Small firms Division

Your Small Firms Division is dedicated to meeting the needs of all smaller legal businesses, including sole practitioners.

See our 2018/19 Engagement Programme