It’s one of the most crucial aspects of the homebuying and selling process but is too often bogged down by frustrating delays and complications, and also a blame game between conveyancers and agents about which side is responsible for the slow processes.
With this key topic in mind, I caught up with four major figures in the conveyancing industry to find out where they stand on reservation agreements and referral fees, and whether the recent election result will have any impact on the sector.
Where do you stand on reservation agreements and referral fees?
Oliver Meddick, co-founder of The Moving Hub – which describes itself as a revolutionary solution for mortgage brokers, estate agents and financial advisers – believes that, with regards to reservation agreements, not much will change here unless the new-build sector adopts a Scottish-style approach.
“A builder needs a form of commitment and the buyers want a level of security to commit to the mortgage and a conveyancing process,” he explains.
“I do feel there should be a regulated element to the reservation deposit terms and conditions that should be adopted industry-wide.”
On referral fees, he adds: “These have been around for a long time, and in most cases are a positive because agents and suppliers have far more buying power than an individual client. Therefore, as long as the client is not paying over the odds for the service being provided, I’m happy. Also, we would hope that it should channel the adviser or agent to go that extra mile.”
Despite this, he believes there are some who take advantage of this situation and charge referral fees that are disproportionate to the cost of the transaction. Or point the client to a conveyancer just based on the referral fee alone. “The client’s needs must always be at the forefront of any recommendation,” Oliver says.
Lisa Summerton, business development director at Fitzalan Partners - established in 2011 and since then responsible for completing the conveyancing for tens of thousands of consumers - believes there is an obligation from a consumer perspective to make the property transaction process more robust and reduce the stress and uncertainty of current procedures, especially with up to 33% of all transactions falling through.
“There are mixed reviews regarding reservation agreements, which some believe still have a number of issues to be resolved to include chain transactions, but in essence I can see the benefit of them,” Lisa says.
She adds: “In terms of referral fees, these are standard practice in many other industries and are legitimate forms of reward. I believe that, provided the client is not being penalised by paying referral fees to an introducer, with fees above industry averages, and there is full transparency as to the fees being paid by way of referral, then there should be no issue.
“Of course, it should not have any adverse impact on the level of service received and referrals should only ever be made between firms who have good working relationships to ensure the consumer receives the best service and client care.”
Angelo Piccirillo, solicitor-partner and co-founder of AVRillo Conveyancing along with his brother Tony, unique because all of its lawyers are trained as agents as well as lawyers, says the banning of referral fees wouldn't be disastrous.
"Recently, speakers at both the ESTAS and Propertymark events have said that referral fees could be gone as early as March. It doesn't have to be the end of the world. Don't forget, your money is only made on completion. No completion, no commission, no referral fee, no matter how the lawyer pays you. Start finding lawyers who have a track record of completing, you’ll make more money as you will end up with more completions than with those just paying you referring fees, with little communication."
As for reservation agreements, Angelo says they have been around in one form or another for years. "They haven't caught on for a reason. Too cumbersome, not necessarily enforceable, distracting. Don't get bogged down, make significantly more money by finding the right conveyancer proactively working your cases, communicating more, with a record of faster exchanges, less fall-throughs. Remember, legal delay is the biggest risk to a vendor not selling, you not getting paid."
How important is the role of the Home Buying and Selling Group (HBSG) in the planned buying reform process?
Rob Hailstone, a former residential conveyancer and the founder & CEO of the Bold Legal Group, is part of the HBSG, which was created in early 2018 and is made up of estate and letting agents, property lawyers, mortgage lenders and representatives from major property organisations.
“The HBSG is very important,” Rob says. “It was set up to ensure the many different sectors which are required by individuals to buy and sell a home, including finance, insurance, agents, property lawyers, searches, surveying, PropTech, removal organisations and associated companies, all work closely together to make the process more seamless for consumers.”
“The various participants give up their time and resources voluntarily and all work together with one main objective in mind, to improve the homebuying and selling process. As chair of one of the subgroups I attend many meetings. I would not continue to do so if I felt that the objectives of the HBSG were not consumer-led.”
How do you think the general election result will impact the conveyancing industry? Will greater Brexit certainty help the property market to be more stable?
Oliver Meddick: ”I hope for a Housing Minister that remains in the job for more than five minutes and goes through with promises that are better for an industry which really is the backbone of the country.
I feel that using the housing market and promising potential changes to the process - i.e. stamp duty reductions to win votes - is very dangerous.
On the wonderful Brexit…I am a great believer that buyers have not gone away, the sellers are still there, mortgage rates are very low and people still need to move, the only ingredient missing is confidence. Once that returns, we have the perfect recipe for a post-Brexit boom and I am looking forward to it!"
Lisa Summerton: “Brexit uncertainty has certainly had a negative impact on the conveyancing market, with transactions reported to be down by around 1%. It’s the go-to excuse for anything that is currently not performing to expectations.
We have to bear in mind, however, that the truth is Brexit is just one of many factors currently influencing the market. Another main issue affecting the market is the broader global economic influences.
The market will definitely improve once it’s clear which direction Brexit is heading in, but other economic uncertainties will remain after any Brexit decision, so will continue to have a bearing on the conveyancing market.”
Angelo Piccirillo: The simple answer, yes! The property market has (been impacted) for 3 and a half years because it has been in a state of Brexit paralysis. Election over, the next five years pretty much is where the market is going to boom. Yes, boom. People are waiting for a chance to spend, to move, to do something different. Be ready for it.
How big a role will tech play in the conveyancing process moving forward?
Fitzalan, which has a number of brands including conveyancing comparison site The Solicitor Finder, The Conveyancing Exchange and Searches UK, generates leads via an online quote engine and believes that tech should play a huge role in the conveyancing process moving forward.
“The conveyancing process is only beginning to play catch-up on the vast influence that digitalisation has had across all sectors of the economy,” Lisa says. “The digitisation of HMRC records, further improvements to datasets and blockchain technologies impact on mortgages and compliance, and the introduction of facial recognition ID checks will all help to significantly speed up the process.”
She says these technologies have all been implemented in small-scale tests and the market is beginning to see disruption, albeit via a series of incremental changes. “Taken together, these changes have the potential to significantly speed up the homebuying and selling process for all,” she concludes.
With the government set to conduct detailed research into the introduction of reservation agreements, is it now inevitable that they’ll come into force? And how will they work?
Rob Hailstone: “No, it’s not inevitable. That’s why there is likely to be a pilot. Unless reservation agreements add something (improve) the homebuying and selling process, there will be no point introducing them.
It has already been established that they do little, if anything, to speed up the process. However, what they should bring is more certainty earlier on. In my opinion, if you couple reservation agreements with more upfront information, you will create more certainty and speed up the process.
As I understand it, the intention is to have one standard reservation agreement that can be used as and when it’s needed or required. The concept is, on the face of it, a simple one. After signing, neither party can withdraw without a good reason, and if they do financial penalties will be imposed accordingly. The devil will, of course, be in the detail.”
Does the outcome of the general election have any impact on the work currently being done to reform the homebuying/conveyancing process?
Rob Hailstone: “I don’t think so and it can’t be allowed to. I began my conveyancing career back in the mid-1970s. Nearly all titles were unregistered, there were no emails (only snail mail) and personal completions. Yet somehow the process was often quicker and less stressful. We have gone backward not forward.
The HBSG continues to work with MHCLG and there is a certain momentum that I am sure will continue whatever the political landscape.
2020 will begin to see some changes in the way property is bought and sold. Some of those changes will be MHCLG/HBSG-led, others will be innovative and industry-led. Look out for: more information upfront, reservation agreements, property logbooks and other technology-driven developments.”
Do agents and conveyancers need to get along better?
Angelo Piccirillo: "Why some conveyancers ignore estate agents is beyond me. You've guided vendor and buyer, know them more than any lawyer can. It's you that can help conveyancers broker a practical and commercial solution, if only they listened.
The more we communicate, the more chance of getting the deal to completion, of you getting paid, the client moved, and us getting paid too. We've got so much skin in the game, that we're the only firm in the UK, to give a love us or leave us trial. Not happy, don't pay. That means all our team are engaged in getting the deal done."
Thanks all for the great insight. Before I go, as this is the last Natter before Christmas, I’d like to say a big Merry Christmas and a Happy New Year to all our readers, subscribers and clients from all the team here at Angels Media. Or Feliz Navidad, as this great agent vid says!
Until next year…
*Nat Daniels is the Chief Executive Officer of Angels Media, publishers of Estate Agent Today and Letting Agent Today. Follow him on Twitter @NatDaniels.