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Goodbye referral fees? Conveyancing expert’s anger over IT crisis

A conveyancer has contacted Estate Agent Today suggesting that the Simplify Group IT data crisis could be the death knell for the company and the referral fee system.

The conveyancer has asked for anonymity but is an expert in the field and has been spurred to put pen to paper as a result of the IT crash at Simplify, affecting Premier Property Lawyers, JS Law, DC Law and Advantage Property Lawyers.

Two months on there still appears a lack of clarity over the cause and extent of the data breach, which many believe was the result of a ransomware attack; the police are known to have been notified of the issue. Many transactions remain stalled, and customers are still waiting to hear if their data was put at risk.

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Social media in particular have been buzzing with the issue, right up to and throughout the Christmas period. 

For example, in a tweet tagging both Premier Property Lawyers and Purplebricks - the agency thought to be worst affected by the IT crash - one social media post states: “If you value your sleep and your mental health remove these people from your life as soon as possible.”

Another tweet, specifically to Premier Property Lawyers, asks: “Have criminals got our data? Can you let us know exactly how much of our data has been exposed on the dark web? Should I setup fraud monitoring? Should I let my bank know? Should I let the land registry know?.” There appears to have been no response from the company. 

The conveyancer who contacted EAT writes:

The ‘Security Incident’ that took place last in November has highlighted a number of issues that some of the Simplify Group of firms were having to deal with before it took place. Could the fact that those issues have been highlighted, particularly on Facebook, sound the death knell for them individually or the group as a whole?

When the problem was first exposed, a certain amount of sympathy poured out, because “it could have happened to any business.” However, as time moved on that sympathy (except perhaps for the individual conveyancers themselves) wore thin. Mainly due to a lack of clear communication from the group’s hierarchy and possibly their regulator, the Council for Licensed Conveyancers. If there is one thing that customers of any type do not like when service levels drop significantly, it is lack of clear communication, and maybe an apology from at least one of the head honchos, who are nowhere to be seen.

Turning to the issues I referred to above, the main one of course was providing a service that many thought was below a standard that should be provided by a firm engaged in supplying professional conveyancing services, and the Facebook group has provided a number of examples of this.

Most of the firms in the group are generally referred to as, volume conveyancers, sheds, or factory conveyancers and none of those terms conjure up an image of superior service. Many of the firms receive new instructions purely because they pay a healthy referral fee to panel managers and estate agents, or have some other kind of business relationship with certain estate agents. The transparency and size of those referral fees has been questioned many times over in the last few weeks.

As a conveyancer myself, I am well aware that many estate agents do not always want to recommend certain firms, but are told they must do so by their employers, for commercial and financial reasons. Surely this has to stop, or those agents need to be held accountable?

Two obvious questions that have now arisen are, has irreversible damage been carried out to the Simplify brand, or have they learnt some lessons, and will they (can they) change for the better?

Personally, I would like to see these firms improve and survive, because they provide an online experience that many home buyers and sellers are looking for, and they bring a competitive element to the conveyancing marketplace.

Finally, and in order to keep this article as fair as possible, I must make it clear that I am well aware that there are plenty of other, smaller, more traditional high street law firms that also fall short often in the delivery of their services and that may be a discussion that also needs having , sooner rather than later. But for now, the spotlight is firmly on Simplify.

 

Some of the specific criticisms of Simplify were put to the group by Estate Agent Today during the working days between Christmas and New Year.

We received this statement yesterday, January 3:

“Following continuous effort across our teams, we have made huge progress in returning our conveyancing operations to what is now close to business as usual capacity, with almost all conveyancing colleagues operational and progressing cases as normal. Our recent focus has been on exchanging and completing hundreds of cases every day, and at the same time prioritising urgent actions on cases expected to complete in the new year. 

“We have been actively communicating in detail with our clients and introducers to ensure that we are able to progress their cases as quickly as possible. These communications and discussions have often involved senior Simplify executives, and Simplify continues to do everything possible to minimise any impact on our customers and prioritise their needs.

 “We understand the uncertainty and disruption that our clients and others may have experienced during this difficult period for our business. In the New Year we look forward to restoring confidence in our services with both customers and partner firms. Like any business, we will of course seek to understand how we can best learn lessons from this experience, but Simplify remains a robust business with strong leadership and a bright future ahead of it.”

  • Rob Hailstone

    “Following continuous effort across our teams, we have made huge progress in returning our conveyancing operations to what is now close to business as usual capacity, with almost all conveyancing colleagues operational and progressing cases as normal."

    Let's hope, as we wake up to a new working year, the above proves to be correct.

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    The Simplify scandal is of course a disgrace and their lack of communication remains a stain on THEIR reputation.

    I am not so convinced that other conveyancers trying to hold accountable unrelated businesses for making referrals to the group is either warranted or a particularly good look.

    Referrals are not the evil those who don’t offer them would like to make out.
    I have never referred to Simplify and we never would. However we would also never try to impose our view on the world on others, especially a view which is so obviously self serving.

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    This unfortunate incident shows no sign of being resolved.

    However, I remained concerned about referral fees.

    Sorry, but I have seen a number of new housing developments where professional independence HAS been compromised by the shadow cast by the payment of such fees. Modernisation of conveyancing is one thing but referral fees damaging a client's best interest is another. There is NO justification for this pernicious practice continuing.

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    I quite agree, nothing should prevent a conveyancing solicitor from acting in their clients best interests.

    However that is between the client and the solicitor. If the solicitor is not representing their clients best interests and instead serving the best interests of say a developer, as per your example, then that is a matter for the SRA or similar bodies.

    I’m not sure how banning referral fees will solve the problem of professional conduct by conveyancing firms as per the issue you’ve highlighted.

     
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    The main point here must be that a quicker and more efficent process is required. With technology and determination from the whole industry the process can be made quicker and more transparent. I believe the current system might not be perfect but it is what we have and we do not have the time to start making wholesale changes. The younger generation are demanding more certainty in the conveyancing process. With "Up Front Information" displayed to potential buyers before they offer and timely processes this can be achieved.

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    It should be remembered that clients are not commodities to bought and sold as if they were a tin of beans, they are people looking for help in completing one of the most stressful transactions that will take place in their lives; therefore the professionals helping them must act in their best interests at all times and not focus on their own commercial interests involved in referral arrangements!

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    When you say clients are you talking about vendors or buyers?

     
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    How can the Simplify brand ever recover from this Ratneresque incident?

  • Rob Hailstone

    If referral fees were always fair and proportionate, fully transparent, and only accepted by agents (and developers) who would use the firm paying them for their own conveyancing work, I guess the debate about them would be less interesting and less relevant?

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    The points made by the anonymous conveyancer are spot on, and I know are in line with what many conveyancers in the profession feel. Certainly they shame people within the profession who claim to ‘regulate’ it.
    As for referral fees they create conflicts of interest and are not in the best interest of clients. I have a huge number of examples in my years in the profession to prove the point. Scrap them though I doubt it’s very easy to arrange.

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    David Jabbari, CEO of Muve. Happy New Year! It is wrong to link an unfortunate IT incident to completely unrelated issues, such as volume conveyancing and referral fees. Largescale, highly automated, conveyancing is the only future for the industry because the unit economics of conveyancing dictates this. In fact, as organisations get larger their ability to invest in first class IT security should increase, especially as compared to the High Street model. My suspicion is that Simplify's problems ultimately derive from the number of acquisitions made by the Group and the need to bolt together so many different IT systems. We have resisted acquisitions for this and other risk management and marketing reasons, and instead our goal is to be a Top 5 conveyancer in the next 12-16 months purely by organic growth.

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    If solicitor firms offered large conveyancing, I am convinced the SRA would intervene. Why? Ask conveyancers who their top 5 worst performing conveyancing outfits are. Look for the pattern. And why we groan when Memos of Sale arrive from estate agents.

    Hence why SRA should take over regulating ALL conveyancers. If only they could.

    And as for all singing I.T - what a red-herring as that is a cause of the robotification of conveyancing which is an instant conflict with what conveyancing requires. It needs a legally skilled human mind to avoid the public buying into legal errors. Again, I would be regulating I.T systems, as much as the quality of the human conveyancer allowed to touch a conveyancing file.

    For the last 20 years we have already had the fastest possible I.T - email - and it is used expertly by the dynamic conveyancers for a mega fast deal, but atrociously by the inferior conveyancers. Give an average conveyancer the best I.T in the world, and you have the best I.T in the world ...still being used by an average conveyancer. Pointless.

    The conveyancing industry is decaying and currently headed in only one direction. It's heartbreaking - after all the years of effort we give to our clients - but I know when I retire I will be wishing the public 'good luck' when using a conveyancer.........unless dramatic change comes about.

    Referral fees - of course they should be banned. No payment - cash or kind - from conveyancer to estate agent, not even commission. No estate agent can be owmed by a legal firm either, or vice versa, and no firm can act for buiyer or seller (and not through another company they own either). With massive fines for breaches.

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    There is one question around this topic which I cannot fathom a positive answer for and genuinely invite answers: how (in any way) do referral fees benefit a conveyancing client?
    (Subsequent question: if they don't benefit a client, why are they permitted by those who stand to regulate?)
    Genuinely blows my mind!

  • Phil Priest

    Dont throw the baby out with the bathwater..

    In the lettings industry, agents were banned from charging tenants fee's when applying for a rental property, which in turn caused the entire industry to increase prices, only damaging the pockets of the future tenants.

    If referral fee's are banned, all I see is an increase of fee's charged by estate agents to cover the costs & maintain revenue levels which in turn only damages the pocket's of the vendors.

    The other thing to note, 60% of transactions for estate agents from listings do not complete, therefore requiring them to earn revenue from 40% of transactions to pay for the lost time and effort on abortive transaction.

    Banning referral fee's wont work. Capping them however is a more sensible approach and levelling the playing field for everyone as most professional have a conscience and don't feel that £400 referral fee is fair on any day of the week.

    However, the issue here is the size of the issue. Simplify Group accounts for nearly 20% of the UK's transactions meaning that the majority of chains are affected in some way. IT should be there biggest friend, but not properly invested in, becomes your biggest foe.

    Be careful for what you wish for, for the alternative is usually worse

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