Fiddling While Rome Burns

I haven't read every English blawg over the last month, but I've read quite a few. Correct me if I'm wrong, but I don't think any blawger has mentioned the crisis that many solicitors' firms are currently enduring. Well, it may be 'business as usual' for blawgers, but it certainly isn't for many high street and provincial practices. The utter collapse of the housing market has meant that the 'bread and butter' regular domestic conveyancing income that such practices rely on has almost dried up, with the result that many firms are having to lay off staff.

I've been in this profession since 1980. During that time, I've seen a few ups and downs in the domestic conveyancing market, and I've heard of firms making staff redundant before, but never on this scale. Hardly a day seems to pass without news of another firm laying off staff, and not just one or two people - I've heard of firms laying off eight, ten or even fourteen people. I'm sure some firms may have to close completely, and wouldn't be surprised if this hasn't happened already. Of course, I only hear of firms in my area, but I'm sure this scenario is being repeated across the country.

Why has the housing market ground to a halt? Well, I'm not a conveyancer, but I've discussed the matter with conveyancing colleagues and it seems to me that there are two main factors: the problems with the mortgage market stemming from the US sub-prime mortgage crisis, and the introduction of Home Information Packs ('HIPs'). Colleagues suggest that the bigger of these factors is HIPs, which became compulsory for all house sales on the 14th December last, and the expense of which is deterring many potential sellers from putting their properties on the market. HIPs have also given more power to estate agents, who are directing sellers to their HIPs providers and, inevitably, to their own conveyancers (who will have prepared the HIPs) - so firms that don't have a business arrangement with a large chain of estate agents are being left out in the cold, and may therefore continue to miss out when the housing market recovers.

Does all of this matter if you're not a conveyancer? Well, as I've said, for many small firms domestic conveyancing provides a regular income upon which they rely. If that goes, there will be an inevitable knock-on effect in other areas of their work, and some firms may go out of business entirely, reducing consumer choice.

I may have been a little harsh on fellow blawgers at the beginning of this post. Few of them are solicitors, and I suspect that most are therefore ignorant of the problem - certainly I've not seen it mentioned in other areas of the media either. I'm afraid it's somewhat upsetting to see the suffering of colleagues in the profession being met with complete indifference.

Comments

  1. I am a (former) solicitor from a high street practice, and it was only luck of the drawer that put me into employment law rather than domestic conveyancing.

    The two colleagues with whom I trained who developed into very high quality, entrepreneurial, client focused 3pqe conveyancing solicitors are now facing redundancy on the one hand and low pay and zero prospects on the other. This is very sad, and a waste of talented individuals.

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  2. Many thanks for that. It is, indeed, very sad to see such waste. It seems that the public will be left with only cut-price conveyancers, but, as in all things, you only get what you pay for.

    BTW, I'm putting a link to your interesting and thought-provoking blog on my blogroll.

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  3. Good post john... you have a point - a good one.

    I wonder why the Law Society has not picked up on this (a) at all or (b) more forcefully.

    I am not a practitioner, as you know - but I will look into this - perhaps we can talk and see if we can an interview with those who know or should know about this?

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  4. Thanks. I'm not aware that The Law Society has picked up on it at all. As I said in the post, my knowledge of the problem is only local - I'd be interested to hear what is happening across the country. If it is universal, as I fear, then it is certainly something that should be discussed at the highest levels of the profession, and I would be happy to take part.

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  5. John. It is very sad if the scale of things is as you report, but I think HIPs are being used as a scapegoat here.

    Is a few hundred quid costs really going to deter someone from selling a castle worth average £220,000? And surely solicitors had long enough to work out a marketing strategy that would keep them in the loop?

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  6. Hi Nick,

    As I said in my post, I'm not a conveyancer, but more than one conveyancer that I've spoken to has said that HIPs are a very significant factor, if not the most significant. They have said that a large proportion of house sales come from sellers 'testing the market', which they used to be able to do for free, and that the expense of HIPs is deterring them.

    As for working out a marketing strategy, some firms have made arrangements with estate agents, but this usually involves doing cut-price conveyancing. However, even they are not immune - the example I mention of 14 redundancies was one such firm. Cutting prices obviously reduces both profit and the level of service to clients.

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  7. Hey John, I'm not a conveyancer either, so it's a case of the visually impaired leading the blind!

    There's always more to it than first meets the eye. We could do with a few good conveyancing bloggers to join our merry band, couldn't we? The only one I know of is Wearyconveyancer http://wearyconveyancer.blogspot.com/, so weary that he can only manage a post every couple of months ... and he's heading for retirement before he goes out of business.

    I'll post something to rally the troops.

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  8. Thanks Nick. Yes, we could do with some conveyancing bloggers, amongst others.

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  9. I have read this post with interest. I am the In-House Solicitor at one of the leading HIPPs (Home Information Pack Providers), and HIPs is NOT the problem, although it has had an effect (as anything "new" does), on the market. It is a beginning of a much needed change to the conveyancing system in England and Wales – and unfortunately one that has been very badly introduced by the current Government, which has resulted in the “product” being very badly received by the General Public and the media.

    I have specialised in all aspects of residential property law, since I qualified as a Solicitor in December 1980 (working from 1978 till 1989 at a small High Street firm in Surrey, from October 1989 till March 2004 at Clifford Chance LLP, and thereafter doing a series of short term contracts at a small number of City Law Firms, before taking up my present In-House position).

    The Law Society has a lot to answer for in “not taking the lead” in shaping HIPs, and thereby ensuring that High Street firms are at the forefront of their development…..and ensuring that HIPs are used to secure such firms share of the conveyancing market as it develops and evolves – the introduction of HIPs being the first real change in the conveyancing process that has taken place in the last 75 years.

    Rather than lead from the front, the Law Society has, rather arrogantly, stood (and carped against HIPs) from the sidelines, up until the last 4 months or so – when Paul Marsh (VP of the Law Society) has (somewhat reluctantly when I have heard him speak on a couple of occasions) begun to speak in favour of HIPs.

    HIPs are bringing essential information needed by a purchaser (for him/her/them to make an informed decision about a purchase) “forward” to the start very start of the transaction, rather than 4 to 5 weeks into the transaction when the Contract for Sale is sent to the Purchaser for signature/return just before exchange of contracts takes place.

    I hope this helps to give you a better understanding of the current situation surrounding HIPs and their introduction to the conveyancing process.

    Regards, AlanLB.

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  10. Thanks Alan for that. Clearly, conveyancers have differing views about HIPs.

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  11. There has been a large amount of lending capacity withdrawn from the mortgage market, house prices have fallen and the UK is close to recession.

    Why, then, would anyone be surprised that housing transactions have fallen from the very high levels of mid 2007?

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  12. I do not have any figures, but my understanding is that housing transactions have not just fallen, but have hit an extreme low, far lower than on previous occasions in recent times. Of course, you are quite right - I'm sure the matters you list are important factors.

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  13. I meant to comment when this first appeared, sorry.

    I'll have a better idea in a few weeks time, as the inexorable period of a non-contentious seat looms for me and in conveyancing at that. I am, I can say with some confidence, not one of nature's conveyancers.

    But my firm has no current problems or rumours thereof. That said, there are plenty of rumours about other, more conveyancing heavy, firms in the area (South London) facing real problems. I don't know whether it is the market, HIPs and preferred supplier deals with estate agents or a combination that is at work, but you are absolutely right that for many small to medium firms, conveyancing was a steady if unexciting income that the business could rely on - so there could be serious problems for many.

    Nick's point (what's a few hundred quid?) is sadly wide of the mark. People will merrily pay estate agents thousands for doing bugger all, but quibble over every penny of a conveyancer's quote. Conveyancing somehow became a commodity, while estate agenting (what do they actually do?) didn't.

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  14. Thanks NL. Interesting to hear that similar rumours are doing the rounds in your area. As I commented on Nick's site, only yesterday I heard of a London firm shedding 15.

    Yes, I've never fathomed why the public now happily pay thousands to estate agents but quibble over every penny of a conveyancer's quote. When I started out in 1980, estate agents and solicitors charged about the same - since then, conveyancing charges have hardly changed, which is effectively a huge reduction, taking inflation into account - now the profession is paying the inevitable price for low or non-existent profit margins.

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  15. John,

    You seem not to understand supply and demand. In the 1980s the price of conveyancing was kept artificially high by solicitors. Now a free market operates.

    There is also obvious overcapacity in the legal industry brought on by a protracted boom and rising legal salaries.

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  16. Thanks for the lesson James. You may be right about overcapacity, but I'm not sure it is an entirely free market, with estate agents manipulating where the work goes.

    The primary aim of my post was to draw attention to the problem, rather than to examine the causes. I'm not sure what practical help can be given, if any, but don't think we should just react with indifference by saying "tough - that's market forces".

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  17. John

    Speaking as a Conveyancer in a small size firm in Suffolk, I have to say that HIPS did initially affect the number of property transactions that were going through. Some strength does now appear to be returning to the market, certainly from the local press indications are that the number of properties actually up for sale no longer appears to be affected.

    I would hesitate to say that other firms may have jumped the gun in laying staff off, but perhaps they were overstaffed and not in a position to react any other way when the "good times" came to an end, or at least were put on hiatus.

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  18. Thanks for that - good to know what is happening elsewhere. I hope you are right that the market is recovering.

    I note that you put "good times" in inverted commas - in view of the amount conveyancers have to charge these days, I'm not sure that there is any such thing any more!

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