Supply and demand

The UK government has announced plans to merge all existing UK consumer protection laws and regulations. On 23 January 2014, the draft Consumer Rights Bill was introduced into parliament and is currently under review. It is likely that the resulting act will come into force during late 2015 or early 2016.

Firms must review their website content and establish their client care processes to avoid future problems, should issues with the client and the delivery of the service arise

Businesses have told government that they will need six months’ notice to make changes to processes and information required under the bill. Guidance for businesses should therefore be available from April. The government has stated that this guidance “will be easy to access and to understand”. For the consumer, the Citizens Advice website is to be updated by 1 October, and the government states that it will be working closely with consumer groups to develop effective publicity campaigns, including the use of social media.

The implications of some of these changes for conveyancing lawyers, insurance brokers, estate agents and lenders (all counting as “suppliers”) are likely to be far-reaching, and there is a clear need to consider them without delay. There will also be some interesting ramifications for managing agents and those agents who charge high fees for the supply of management information when a leasehold property is sold. The client (customer) will be able to demand that substandard services are repeated at the supplier’s own cost, or require a reduction in the bill.

Pre-contractual information

The draft bill seeks to provide clarity on what representations and statements will be incorporated into the contract as terms, giving contractual force to any spoken or written representations and anything that is taken into account by the consumer when deciding to enter into the contract or when making any decision about the service after entering into the contract.

Those working in new business, who speak with potential clients when supplying a quote and securing business, will clearly need to exercise care following these changes. Representations about price (including fixing a price and later altering it), the likely duration of a transaction and the status of the assigned fee-earner will all become the subject of scrutiny, and unless due care is exercised, the statements could automatically become terms within the client care agreement.

Representations within websites could be treated and viewed similarly. Firms must review their website content and establish their client care processes to avoid future problems, should issues with the client and the delivery of the service arise.

From the client’s perspective, it will be important to ensure that full instructions on the scope and extent of the retainer are provided to the lawyer, so as to ensure those instructions become terms within the client care agreement. For example, a client who provides accurate information on which a quote is based is more likely to be protected from an unscrupulous lawyer who tries to seek an increase in fees for additional work where that work falls inside the ambit of the client’s instructions.

Statutory guarantees

The draft bill sets out statutory guarantees that services must be performed with reasonable care and skill, within a reasonable time, and for a reasonable price, if this has not been expressly agreed.

This raises the question of what amounts to a reasonable time for the delivery of a service? Conveyancers will tell you that they can only go as fast as the slowest party in the chain permits. Furthermore, a conveyancer is also dependent on the timely supply to the client of searches and a mortgage offer. So what will happen if, despite a conveyancer’s best effort, a delay occurs due to the failing of another supplier, placing the conveyancer in breach of the statutory guarantee as to time? Will the legislation expect conveyancers to become ‘whistleblowers’ on the failings of their counterparts, estate agents, mortgage brokers, lenders, search providers, panel managers, leasehold management agents and other suppliers?

Clearly, to avoid all of these possible ramifications, client care agreements and agreements with suppliers will need to be reviewed and redrawn to ensure the inclusion of express terms on not only the timing for the delivery of a completed service, but also price. Conveyancers, for example, will need to make it clear to clients the reasons for possible delays, disclose what provisions there are in agreements with its suppliers, and spell out what will be done if the suppliers fail to comply with those requirements.

If there is no provision for a price or any uncertainty over the price for the service supplied, this legislation will give the court the power to impute a ‘reasonable’ price for the job. It will be interesting to see what benchmark will be used to determine the reasonableness or otherwise of a conveyancing charge. Interestingly, what is reasonable for the amount of time spent on a conveyancing transaction could exceed what many conveyancers routinely currently charge for the work.

One area of particular interest will be the services provided by a managing agent to the client in the provision of information required for the sale of leasehold properties. Once the bill is enacted, should the conveyancer always insist on the client seeking the information direct from the agent, on the basis that, if the agent fails to comply with the new legislation, the client can then look to the court to assess whether, for example, the fee charged was reasonable for the supply of the information in question. This could provide an indirect way of managing high agent fees – a hot topic of discussion in the property industry.

Statutory remedies

Under the draft bill, two tiers of statutory remedy in relation to services are proposed. The Tier 1 remedy provides that the retailer should either redo the element of the service which is inadequate, or perform the whole service again. Tier 2 allows the retailer to provide a reduction in the charge to cover the element of the service that has not been provided with reasonable care and skill.

It appears at this stage (though there is no guidance on the point) that a disgruntled client will have two options: either make a complaint about the solicitor to the Legal Ombudsman, or take the solicitor to the small claims court and allege breach of the terms of the statutory guarantee. It is unclear as to whether the client would have to exhaust the solicitor’s complaint process and the Legal Ombudsman procedure before going to court, but what is certain is that the introduction of these changes will undoubtedly fuel more complaints than are presently pursued. The conveyancer faced with an unjustified complaint will be left with the dilemma of either fighting the complaint or settling it, knowing that if it is challenged, it will result in loss of time and money.

The other interesting dynamic will be whether a conveyancer faced with an allegation based on delay will look to bring other suppliers into the mix – for instance, a search supplier, if a delay in the issue of the searches was the reason for the delay in the transaction. There could be scope for this if the conveyancer made it clear to the client in the client care agreement, that the timing for the delivery of the conveyancing was dependent on the delivery of searches within, say, a three-week window. But would this defence work in court if the delay arose from the failure of another conveyancer in the chain? Would the court only attach weight to this if the conveyancer can show that a consumer rights complaint had been made by the client of that other conveyancer?

Fairness test

The existing fairness test would continue to apply to all terms of the contract other than the price or subject matter, both of which can be excluded from the application of the fairness test, provided that they are “transparent and prominent”. The prominence test proposed by the draft bill is whether the term has been brought to the consumer’s attention in such a way that the average consumer would be aware of it.

This may mean that if, as is often the case, a client care letter / agreement runs to several pages, the client should also be presented with a one-page summary of the main terms and conditions, and exclusions. The focus of the summary would be the timing for the delivery of the service and the qualifications attached to that, as well as price and details of when and in what circumstances the price, if fixed, could be changed. This may mean that pricing for the most common contingencies in a transaction would need to be stated in advance.

Transparency test

Under the draft bill, all written terms offered to a consumer must be “transparent”: a change from the current test of “plain and intelligible”. Transparent is deemed to mean plain, intelligible language and, if in writing, legible. The Competition and Markets Authority is expected to prepare guidance on this new requirement.

Most conveyancers already produce client-friendly client care agreements; however, if a term or condition is not clear, any ambiguity will be construed in favour of the client. Moreover, there will be little scope for attempting to hide terms or argue that terms were implied through custom or oral representation. There will need to be complete transparency on fees, and on additional fees if a fixed quote is given.

The ‘grey list’

The draft bill proposes to add three new terms to the current ‘grey list’ of terms presumed to be unfair. Two are relevant for conveyancers:

• disproportionately high charges in the event that a consumer decides not to conclude or perform the contract, or for services which have not been supplied; and
• terms which allow the retailer to determine the price after the contract has been formed.

In relation to the first of these, clear terms on what fees will be charged in the event of an abortive sale or purchase will need to be added to the client care agreement, if not already present. It is clear that punitive charges will not be permitted. Conveyancers may be forced to return to raising a charge-based quantum meruit when a transaction aborts.

In relation to the second, care should taken when looking to include provision for additional charges for the work, since if the terms are not made clear and there is absolute transparency at the time the contract is entered into, the terms could be presumed to be unfair and unenforceable.

Conclusion

Practitioners should be prepared to review and update their procedures, both online and in-house, in order to comply with the new changes when they come into force.

There may be scope for conveyancers to use these changes to introduce more realistic – that is, possibly higher – pricing. The statutory guarantees and requirement for reasonableness may mean that both the court and the client must attach greater weight to the amount of work, care and skill which goes into conveying a property.