THE TIME OF THE ‘LOCAL LAW FIRM’ HAS COME!

Written by Rob Stafford

Young Couple At New Home

If the Noughties were the decade of the ‘call centre’ law firm, this one promises to be the time of local law firms.

A recent survey conducted by YouGov has revealed that 77% of all those surveyed prefer the use of a High Street law firm to a national one. This indicates a very real appetite for High Street firms with a focus on service and local knowledge.

With this in mind, we thought we’d provide a run-down of the major benefits of a local service over ‘production line’ conveyancing.

 

Local Knowledge

While it might appear obvious, local knowledge is crucial in conveyancing. Want to know about that Section 38 agreement at the end of your street? It stands to reason that your local firm is more likely to know about it, rather than a call centre five counties away.

One of the most infamous cases in the industry is chancel repair landmark Aston Cantlow v Wallbank. This is precisely the kind of situation that local knowledge can help prevent. A diligent and local conveyancer is more likely to be aware of the local parish and the possibility of the purchaser’s property being on former rectorial land. The production line conveyancer may have never set foot in the county, let alone the parish in question. To put it crudely, if you were on a guided tour of a historic city, would you prefer the rough guide or the local with decades’ worth of knowledge?

 

A Personal Service

In any industry, customers are far more receptive and likely to return when they feel that they have been provided for as an individual. We all like to feel valued and unique. From an early age we’re told we are exactly that. Why should the most important transaction of many clients’ lives be any different?

 

Too long conveyancing has been characterised as legal ‘grunt work’. a service centred on legal form and expediency. Instead, conveyancers should be recognised for what they are, a guiding hand in what is the most important decision in many lives. The value of familiarity shouldn’t be underestimated.  A local firm who understand the situation on the ground, the peculiarities of the local area and, most importantly, the needs of the home buyer, will always hold the edge over a stranger at the end of the phone. Whether it’s being able to drop in for an update on proceedings or simply a cup of tea and a reassuring chat, a more human approach will yield great returns for your firm.

 

Roots in the Local Community

Local law firms used to offer a ‘cradle to grave service’, all life’s eventualities covered under one roof, from the purchase of newlyweds first home, to passing onto the next generation. As the You Gov survey demonstrates, there is a real appetite for this paternal role from law firms. Why can’t we return to that?

It’s become increasingly clear that the idea of a stranger handling life’s most important transactions sits uncomfortably with most. We are a social species and often just being able to talk something through with someone we know and trust can make all the difference.

 

Modernisation

Now, more than ever, is the time for law firms to embrace the new technology available to them. The customer of the future is going to be more tech savvy, more aware of the options available to them and consequently more demanding.

The local law firm has a substantial advantage over its large-scale counterpart in this field as well. Small dynamic teams ensure that the use of new technology is nothing like the task it is in a firm with 100 plus staff. The training of one or two members of staff can make all the difference by reaching out in a pro-active way to a new breed of client. Furthermore, the High Street firm is better placed to tailor new technology to each client’s specific needs. Unlike having to adopt the clunky ‘one size fits all’ approach favoured by volume’ based firms.

 

A Varied Skill Set

The final advantage to the High Street firm is the varied skills that the conveyancer in a local firm brings to the table. With less staff, it’s often a case of ‘all hands to the pump’. Junior conveyancers are given more responsibility earlier in their careers and consequently, they acquire a broad skill-set more quickly. Furthermore, junior staff benefit from working side by side with partners and experienced conveyancers. By the time the juniors are at partner level, this translates to thousands of hours’ experience. The Result is a diligent, learned and highly competent workforce, which can only benefit the client.

 

Consider the alternative in ‘call centre’ firms; a clear disconnect between partners and juniors, a shallower learning curve for juniors and less broadly skilled staff. This equates to a poorer service for the client.

 

The law firm needs to reclaim its rightful place along with bank manager and doctor as a pillar of local communities. The High Street law firm is more than just a commercial vessel ,it is a vital helping hand at the most important junctures of life. Let’s return to that!

 

TAKING THE CLIENT INTO ACCOUNT

The SRA’s new Accounts Rules

Written by Trevor Hellawell

 

Increase customer satisfaction

 

Amid the debate surrounding the revamping of the SRA’s Handbook, and the tempting possibility of undertaking wholly non SRA-regulated legal services, one finds an exploration of the SRA’s new Accounts Rules. These are also subject to an overhaul and a rethink, and are subject to the same response timelines.

 

Amongst the several advantages paraded of practising in the unregulated sector (cheaper prices not being the least of them) comes the thought that there would  be no Accounts Rules to worry about either.

 

Leaving that thought to one side for a moment, I wanted to consider the proposed new Rules in their own right – for the benefit of those who wish to continue under SRA regulation.

 

The proposals have set about reducing the length and complexity of the Accounts Rules, which had not benefitted from the last edits (unlike the rest of the Handbook) in 2007 and 2011.

 

The old rules were complex and seemingly unnecessary given the advent of much technology and IT advancements in the years since their introduction, and were too box-ticking in their detailed approach to a range of issues.

 

Intermittent tweaks (mainly to the requirements in relation to reporting Accountants) had altered the impact somewhat, only requiring the SRA to be sent the report if it was qualified, and then by requiring that ‘qualification’ meant only if there was some real risk to client money. For example, of the 4500 reports sent to the SRA in 2014, only 179 evinced any real threats to client funds.

 

So the new Rules redefine what is ‘client money’ as being those funds that firms hold for clients as part of their retainer, but excluding any payments for costs and for disbursements for which the firm will be liable. They dispose of the definition of ‘office money’ (leaving the firm to decide how it deals with its own funds), provide that client money is left in a separate account until required, and dictate its prompt return when the matter is concluded. Much of the detailed prescription of how to account for mixed payments and the like has been removed, requiring only that the money be promptly banked into the right place. Rules on interest have been removed, but COFAs haven’t.

 

There is some concern that the rights of the consumer – sorry, client – have suffered as a result of the firm’s ability to claim any costs as its own (even before doing the work) but the available redress against other deep pits mitigates the real risks.

 

All this presupposes that a law firm still wants to be SRA-regulated at all. There really is no reason to be. A firm can offer unregulated services already and choosing not to be SRA-regulated will give the firm many opportunities to offer (say) conveyancing services via different mechanisms and still with scope for protection of the client.

 

However, my view is that there are some significant downsides to abandoning SRA-regulation. The use of the term ‘solicitors’ for one, the lack of Compensation Fund claims (up to £3m over the last 2 years in respect of property matters), the lack of any robust regulation of how client funds are to be dealt with and, crucially, the lack of the comfort of legal professional privilege are all to be weighed in the balance. Cheap fees come at a price.

ARE WE TALKING OURSELVES DOWN?

Written by Trevor Hellawell

 

Terraced Houses

 

The RICS published some figures this week highlighting that the property market is showing a marked decline in Q2. Some suggestions are of as much as 30%, with a 5% decline in prices in the London area.

 

Whilst Q1 was buoyed by a pre-SDLT rush, much of the decline is due to the aftershock of the Brexit vote and the tumultuous implosion of both leading political parties. The Bank of England has been playing the softly softly approach as the new PM puts her cabinet together, itself springing some surprises along the way. How long it will take the Foreign Secretary to apologise to everyone he has offended will remain to be seen.

 

Many transactions have been put on hold, at the very least, and some have aborted.

 

Is this the sign of systemic slowdown? I don’t think it needs to be – if we want a market downturn, let’s talk ourselves into one, is a well-heeded saying. In the medium term things may get tougher, but with a new Chancellor in Number 11, further relaxation of austerity and an even cheaper money market things could be a lot worse.

 

For the profession, he pressure is on to maintain and enhance ones offering to the market in order to seize the better deals.

THE SEARCH CONUNDRUM

Official vs Regulated

Written by Trevor Hellawell

 

Code of conduct concept image with business icons and copyspace.
American Independence Day has just passed and with it, the July 4th introduction of an amended local search report.

 

There are a number of changes to the standard report within the CON29R enquiries. Along with the specific section numbers, these changes are:

1.1     Listed building consents: Are there any with respect to the property?

2.2     Are there public rights of way abutting or crossing the property?

3.3     Sustainable Urban Drainage Systems: Is one in place? Are any assets within the boundary or the property? Is there a charge for them?

3.5 (b) Are there any railways, tramways, monorails planned within the Local Authority Boundaries?

3.7 (g) Flood or coastal erosion notices: Are there any outstanding in relation to the property?

3.10   Community Infrastructure Levy: Have any licences, orders, appeals or notices been created in respect of the property? Is there a Levy Charging Schedule available?

3.15   Assets of Value to the Community: Has the property been registered or has any attempt been made to register it as an Asset of Value to the Community?  If it is registered as such, is the local authority planning on reviewing its listing and has a Community Interest group come forward as a bidder for the property?

 

This creates an opportunity to review the position regarding local authority searches.  Is it time to consider switching from an official council search (hereafter referred to by the less emotive term ‘council’) to a regulated search instead?

 

A council search is one carried out by the local authority itself, at a variable price and against a variable deadline. VAT too will soon be payable on certain aspects of that search.

 

A regulated search is one carried out by an independent search provider under the regulatory eye of CoPSO. It also carries with it a certain amount of baggage from mass conveyancing, HIPS and back-hander days.

 

However, against my better judgment, I am persuaded that much of the feeling in favour of council searches is historic and misplaced.

 

There are key differences between a regulated local search, and one carried out by council staff:

  • In many cases, councils will not be in a position on day 1 to include the changes outlined above as their systems simply do not allow the retrieval and presentation of this additional information
  • With the Search Code and CoPSO demanding high standards of training and conduct, and regularly reviewing these standards through audit visits, the high ground for quality has actually shifted from council to regulated searches. This is why all major lenders fully accept regulated searches. We have carried out our own sample analysis and found the data gathered within regulated searches to be better than that of council searches
  • There is clear water on the quality front, but what happens if something goes wrong?

 

The recent Chesterton case (where a local authority got its results wrong and inconvenienced the purchaser) is an excellent example of the difference that exists in terms of insurance protection between a regulated and a council search

  • Generally, it is less expensive for the purchasing client to obtain a regulated search
  • For the solicitor providing an estimate of costs, it is far better to have a quote tool that delivers a standard fee structure across any property in England & Wales
  • The regulated search report is always presented in the same format, making interpretation of key data much simpler
  • Search Fee Guarantees available generally apply only to regulated searches, not to council searches.

 

So, the accepted wisdom appears to be that council searches are no better than regulated searches and in comparison carry many disadvantages. Is it worth a second look?

SRA CODE OF CONDUCT

Oops – there go my Principles!
New Codes of Conduct and Accounts Rules

Written by Trevor Hellawell

 AdobeStock_91369245.jpeg

 

On 1 June the SRA announced its proposals for a new Code of Conduct, and with it, new arrangements for the Accounts Rules. Their consultation will last for 16 weeks (so plenty of time to comment before the closure date of 21 September).

 

The Codes have undergone a personality split, in that there are now two Codes – one for individual solicitors, and one for Firms. So, maybe we will know who “you” are under the new regime.

 

Both are subject to the overriding Principles which are now reduced (back) to 6 in number, and repeat in reordered form the old 6 that we used to have – upholding the rule of law, acting with independence, acting with honesty and integrity, upholding the reputation of the profession, encouraging diversity and acting in the interests of the client.

 

Beyond that, Outcomes and Indicative Behaviours are a thing of the past, as is much of the detailed guidance (such as it was) in the old Code, 45 pages being reduced to two Codes of around 6 pages each. The aim of the SRA is to increase the flexibility which they see the profession requires to compete in an open marketplace.

 

Given that everything apart from probate and litigation services, and even much of them too, can be undertaken by firms and individuals that are not regulated by the SRA (reserved activities still being kept to the “profession”), it was felt that firms should be allowed greater latitude in how to organise their commercial activities.

 

It would be easy (under the new rules) for a firm comprising entirely of solicitors to set up as a legal services provider and employ individuals who are all solicitors, and yet decide not to be SRA-regulated at all.

 

Such a step, though unusual, would come at a cost, however.

  • Only an SRA-regulated firm could undertake reserved activities.
  • Only an SRA-regulated firm would charge for SRA mandatory PII cover (though others may be available).
  • Only an SRA-regulated firm would be able to claim on the Compensation Fund.
  • Only an SRA-regulated firm would be able to take advantage of legal professional privilege.

 

Pause there one second. ONLY an SRA-regulated firm would be able to claim legal professional privilege?  Yes, it appears that unless the FIRM is SRA-authorised and regulated it will not be able to claim LPP for anything done or said, nor for any advice given.

 

To be honest, that clinches it for me. One of the key advantages (for me) of being a solicitor is that nothing said to me or by me in the context of giving or receiving legal advice is ever going to be revealed to anybody, even a Court of Law. I can’t say that I have ever used the facility, but it comforts me to know that it is there.

 

In order to be able to continue to rely on the customary secrecy of the lawyer-client relationship I will in future be obliged to be having that conversation within the ‘walls’ of an SRA-regulated firm.

 

Non SRA-regulated institutions will no longer be able to offer that protection, no matter what the constitution of their staff may be.

 

This is part of the badge of being a Solicitor, and non SRA-regulated firms would no longer be able to use that title in their name or business communications. Moreover, there would be an obligation on such firms to explain that to a client, and to point out that their protections may well be different.

 

The Accounts Rules have also been simplified, though maybe not as far as the SRA might have liked, Crispin Passmore having been heard to say that there really need be only one – don’t nick your client’s money. The rest is largely a matter for internal management, rather than external regulation.

 

Again, 45 pages of detailed prescription have been replaced by 6 pages of new, lighter rules. The description of client money has been amended to exclude monies due to the firm for costs, and any monies due to third parties. Mixed funds can be banked anywhere as long as client money is moved promptly (undefined) into a client account, held for that purpose. The CoFA’s role is retained, as is the need to obtain an independent Accountant’s report. That report need only be sent to the SRA if qualified in accordance with new principles introduced in November 2015. There is also the option of using a third party managed account for firms that don’t handle client money often.

 

How much these new rules will change how firms operate on the ground we will wait and see but new flexibilities will be welcome in many sections of the market.

 

 

LEASEHOLD

The Solutions

Written by Beth Rudolf

House key on keychain
Out of the 500,000 people who buy or sell leasehold property annually, up to 90% of them suffer delay or are charged unreasonable fees by Lease Administrators (the management companies, landlords, freeholders or managing agents responsible for administering the lease).

 

One of the projects on which I work for the Conveyancing Association (CA) is their Leasehold Campaign.

If fairness to the Lease Administrators, there is very little guidance on what reasonable fees should be.  This is due to a rather large loophole in leasehold legislation, meaning that there is no jurisdiction for the First Tier Tribunal (FTT) to hear complaints about unreasonable fees in respect of Notice of Assignment, Deed of Covenant, Certificates of Compliance – in fact about any administrative fee which is not in respect of a request for information or consent.

Therefore, despite the fact that the FTT have a fast track process which means they can hear cases in 28 days and for only £190 court fee, very few cases can actually go to the FTT.

However, there is help out there and I have met several conveyancers who are routinely and effectively challenging unreasonable fees.

So if you have been suffering with a Management Company who is charging £500 to provide the replies to the LPE1 or a Landlord refusing to provide receipted notice of assignment until the seller’s service charge arrears are settled, then there is plenty in here to help.

 

1. Obtaining replies to Leasehold Property Enquiries (LPE1)

a) Cost:

The Commonhold & Leasehold Reform Act 2002 (C&LRA) requires that all charges imposed on the tenant must be reasonable.

b) Provision:

Whilst there is no specific requirement for provision of the LPE1, there is statute and regulations requiring provision of key items. Landlord & Tenant Act 1985 (as amended by the L&T Act 1987 which inserts Schedule 3) requires a Landlord to provide information on insurance within 30 days of a request.

Service Charges (Summary of Rights & Obligations, and Transitional Provisions) (England) Regulations 2007 requires that the Landlord provide a written summary of the costs which make up the service charges covering the last 12 months and must be provided within 1 month of the request or 6 months of the end of the period to which the summary relates, whichever is the later.

Lease Administrators adopting the ARMA Consumer Charter Section 5.6(f) are required to provide the responses within a reasonable timescale after receipt of payment.

 

2. Notice of Assignment and/or Mortgage

Cost:

If the amount of the fee for Acknowledgement of Notice is conclusively stipulated in the lease, then this is binding.

If the Lease is granted by someone acting for purposes relating to his trade, business or profession, then the reasonableness test of the Unfair Terms in Consumer Contracts Regulations 1999 applies.

Any Lease Administrator signed up to ARMA-Q must ensure that any charges made for services outside of the Management Fee are proportionate.  Any organisation or individual regulated by RICS must be transparent & proportionate in their dealings.

Delay:

The CML handbook states that evidence of postage is sufficient. You do not need to produce a receipted notice and therefore using recorded delivery prevents having to pay an excessive fee.

 

3. Deed of Covenant

Case law exists which states that £80 is a reasonable amount to pay for the provision and acknowledgement of the Landlord’s standard Deed.

In Spencer Wade v Orchidbase Ltd [2014] a claim was brought after having paid for a deed.  It was a claim brought in connection with an application for Consent to Sublet which required a Deed of Covenant be entered into. The amount charged for the landlord’s standard deed was £300.

The reasonable amount for all of this, said the Tribunal, should have been £80 and the landlord was ordered to refund the excess.

The upper tribunal case of Holding & Management was referred to. It provided for £40 for granting Consent to Sublet and £30 for registration and the cost of Deed of covenant was £75.  They felt that no more than 30 to 45 mins would have been spent and therefore £80 was reasonable fee.  The implication being, that with standard processes involved in house sales these would be reasonable.

 

4. Restrictions requiring Certificate of Compliance

HM Land Registry (HMLR) guidance allows for the cancellation or disapplication of restrictions which are difficult or impossible to comply with.

For example, if a tenant claims the corporate landlord has been dissolved, HMLR will accept a printout of the relevant Companies House web page stating the company is dissolved.

 

5. Transfer of Share Certificate

Delay:

A Management Company commits a criminal act if it does not register the transfer of the share under the Companies Act[1] within 2 months of lodgement.

Cost:

If the Management Company uses the Model Articles under the Companies Act 2000, they are prohibited from charging a fee for the transfer of the share.

 

6. Consent Under a Lease

The cost of provision of Consent required under a term of a lease is covered by C&LRA and therefore must be reasonable.

For example, tribunal decisions have indicated that provision of Consent to Let should be between £95 – £165 for a new letting and £35 for a re-let to the same tenant. See Holding & Management (Solitaire) Ltd v Norton [2012] UKUT 1 (LC); and Re Bradmoss Ltd’s Appeal [2012] UKUT 3 (LC)—fee of £135 held to be reasonable. Freehold Managers (Nominees) Ltd v Piatti [2012] UKUT 241 (LC)—fee of £165 inclusive of VAT for grant of Permission to Sublet allowed.

 

7. Right to Extend the Term

A qualifying tenant of a flat (or their Personal Representatives) who has been registered as the owner at HMLR for a minimum of 2 years, has a right to a lease extension of 90 years, in addition to the remainder of the current term, with ground rent set at a peppercorn.  The premium payable is the loss in value of the Landlord’s interest which would result for the extension of the lease.  The tenant is responsible for the Landlord’s costs.

There are a few exceptions and if there is not time prior to sale, the tenant can serve the notice and assign the benefit to their buyer.

So if your client is suffering at the hands of an unreasonable Lease Administrator, it’s well worth reminding them of their obligations and, if nothing else, relieve a little of the frustration by lobbying your MP to amend the CLRA to make all administrative fees reasonable and to create a leasehold redress scheme through the various ombudsmen.

PLANNING SEARCHES FAST BECOMING ESSENTIAL FOR CONVEYANCERS

Conveyancers Planning to Avoid Law Suits

Written by Trevor Hellawell

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As I said in the 7th edition of the Environmental Law Handbook (Law Society, 2011) “the desirability of conveyancers undertaking searches in relation to planning uses and applications in the neighbourhood is enhanced with the availability of search reports which provide this information.”

Both people who read that passage will have picked up on the fact that I was trying to be subtle and veiled in my message that planning searches were fast becoming an essential part of the conveyancer’s information-gathering duties at the outset of a property transaction.

Some clients – indeed some practitioners – still fail to appreciate that the standard local search asks about planning applications on only the target property, and not in the wider neighbouring locality.

For years there have been search products that do ask exactly such questions of the local authority and, although they can be a turgid read, the information they give would – in the main – be of huge importance to both clients and lenders alike.

Who would not want to know that planning consent had been given for a school, a nightclub, high-density housing, a fireworks factory, a windfarm, a high-speed rail link or a fracking licence in the area around their new home?

Further, with the many recent changes to planning policy, applications which may have failed in earlier years may now be granted – with even higher densities – creating more local aggravation.

I have been advising my consultancy clients for some years to include planning search products as part of the standard search pack. Objections about the cost (£30-40 or so) are dwarfed by the legitimate expectations of the client that their property lawyers will look after their wider interests in the conveyancing transaction and alert them to matters that might affect their use and enjoyment of their property in the years ahead.

As the Government expands its housebuilding programme and the possibility of regular moves of house becomes more difficult the possibility of future development is a risk that perhaps needs to be considered. Reports of the develop-ability of land are taken into account, as well as existing planning applications, land-banking and future changes in planning policy.

The cautionary tale of Bird and Bird is enlightening here. The firm had conducted a planning search on behalf of a client but thereafter failed to point out to the client the implications of a planning consent for a school nearby which adversely affected their client’s intended use. The client successfully sued the firm for £1.8m.

In Orientfield Holdings Ltd v Bird & Bird LLP [2015] the High Court held that a solicitor had acted negligently in failing to warn the client about plans to build two schools in the same street as the client’s new property.

The firm obtained a Plansearch Plus report which disclosed the plans to build the schools. The firm did not later mention the matter to the client in their report on the title.

The High Court held that where a solicitor has information that may affect a client’s decision-making process, he has a duty to inform the client of that information.

This case should be taken as a huge warning to all practising solicitors and conveyancers to make sure that all information which has been discovered is passed on to clients before exchange. The case also illustrates the importance of making comprehensive enquiries, investigating searches and then preparing a thorough report for the client.

There are also anecdotal instances where a firm was sued but escaped liability because they had (though they were unaware of the fact) undertaken a Plansearch and passed it to the client with a cover letter saying, “Here are your search reports. Please read them in case there are matters referred to that might affect your property. Please contact us if you have any queries.”

Is it now time to follow suit?