Government promises to clear way for supermarket and estate agent ABSs

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30 November 2015

Sir Michael Pitt

Sir Michael: lack of independence of regulators is slowing reform

The government said today that it will “further reduce barriers” to make it easier for alternative business structures, such as supermarkets and estate agents, to offer legal services like conveyancing, probate and litigation.

A consultation, to be issued by next spring, will also seek the complete separation of regulators from representative bodies.

Further, there will be a review of how home-buying works, including conveyancing, to inject “innovation” into the process.

The Ministry of Justice confirmed that this consultation – which it will carry out – was in advance of the wider review of the Legal Services Act 2007, which has been promised by Lord Chancellor Michael Gove.

Treasury officials said in a paper on boosting competition, published today, that there would be a consultation by spring 2016 on “removing barriers to entry for alternative business models in legal services, and on making legal service regulators independent from their representative bodies”.

The paper went on: “According to a recent survey by YouGov, 62% of adults have used a law firm or solicitor at some point in their lifetime and the cost of legal services is now considered the most important factor when searching for a legal representative.

“The government wants to ensure that innovative businesses are able to enter the market, providing greater choice for consumers.

“Alternative business models are around 15 percentage points more likely to introduce new legal services than other types of regulated solicitors’ firms.

“The government will launch a consultation by spring 2016 on removing barriers to entry for alternative business models in legal services, and on making legal service regulators independent from their representative bodies.

“This will create a fairer, more balanced regulatory regime for England and Wales that encourages competition, making it easier for businesses such as supermarkets and estate agents among others, to offer legal services like conveyancing, probate and litigation.”

On conveyancing, the paper said the main aim of the review was explore options to “deliver better value” and “make the experience of buying a home more consumer-friendly”.

It continued: “The government wants to inject innovation into the process of home buying, ensuring it is modernised and provides consumers with different – and potentially quicker, simpler and cheaper – ways to buy and sell a home.

“Encouraging new business models (for example, online only estate agents) is key to enhancing price competition in the real estate sector, but these have yet to penetrate the market.

“In addition, emerging findings from government research suggest that consumers incur costs of around £270 million each year when their transactions fall through and they have already spent money on legal fees and surveys, and many more sales are subject to costly delays. Similar issues can affect businesses trying to buy or sell commercial property…

“The government wants to consider and address the way the real estate and conveyancing markets have developed around the existing regulatory frameworks, encourage greater innovation in the conveyancing sector and make the legal process more transparent and efficient.”

The government will publish a call for evidence on home-buying in the New Year.

Sir Michael Pitt, chairman of the Legal Services Board, said: “I welcome the government’s intention to consult on reforming the legislative framework for the regulation of legal services. I am delighted that the proposals submitted to ministers in conjunction with the eight legal services regulators in July have helped inform this important development.

“I believe these proposals will lighten burdens on business and streamline regulatory processes, all in the interests of delivering better services for consumers while promoting competition, deregulation and economic growth.

“As our work with the other regulators earlier this year showed, there is a strong case for fundamental reform of the regulatory framework in this sector. Lack of independence between regulators and representative bodies is slowing reforms that would otherwise benefit both the profession and consumers.”

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