Rudolf: Chase to the bottom has caused lot of market’s problems
The pandemic and stamp duty holiday led to conveyancing fees going up sharply, while ‘dabblers’ played a vital role in supporting the market, an industry roundtable has heard.
The event, run by the Council for Licensed Conveyancers (CLC), also heard that conveyancing firms which adopted new technology during the pandemic would have taken years to do so otherwise.
Rob Houghton, the chief executive of Reallymoving, which owns The Law Superstore, said the huge market demand translated into an average 44% rise in conveyancing fees at its peak.
They have since fallen back a little and the question was whether that would continue.
It has been a long time since conveyancers have put their prices up rather than down. Beth Rudolf, director of delivery at the Conveyancing Association, reckoned that the “chase to the bottom caused half of the problems that we have seen”.
She explained: “How can you afford technology when you are not making a profit? It has to be a good thing that the market has risen, and that people can be properly resourced.
“Particularly with transaction times of 18 weeks, your pipeline turn and the cash coming in has been really tricky.”
Mr Houghton added that more lawyers and consumers now understood that they never have to meet.
“For lawyers, it is significantly increasing the total addressable market,” he said. “Many more firms are increasing their market footprint because they are happy to pitch to people on the other side of the country.”
Despite the natural competition that exists between businesses, participants said it was the industry working together that had enabled it to cope with the unprecedented demands of the last 12-18 months.
Even smaller firms that would usually do next to no conveyancing work played a vital role, according to Mark Montgomery, chief strategy officer at Simplify, the UK’s largest conveyancing group (the roundtable took place before the recent cyber-attack on Simplify).
He said: “Some 40% of the market is delivered by the 5,000 smallest firms, and the smallest of those are the equivalent of the oil-fired power station that gets switched on once a year.
“We would not have got through without firms that normally do almost no conveyancing jumping in and doing more.
“Whatever we do or think about in terms of technology adoption, we have to recognise that, if you exclude those firms from the market, all our aspirations for transaction speed go out the window if everybody is too busy and there is no flex in the system to deal with that excess demand.”
The stress placed on the sector was acknowledged, with reports of conveyancers working at 150% of their usual capacity as they struggled to work around the restrictions and staff shortages due to Covid.
Coming out of the stamp duty holiday, Andrew Lloyd, managing director of property data company Search Acumen, said: “The industry as a whole is exhausted – the supply chain has been in exactly the same position as conveyancers.
“Whether it is local authorities who are being asked to provide due diligence information or the other third parties involved in providing signing services, all of it has been stretched to its absolute limit.”
A survey by Teal Legal last Christmas found that 50% of conveyancers wanted to leave the profession, such was the level of stress, director Sally Holdway noted.
The roundtable was told that restrictions imposed on businesses forced many into fast-tracking their plans to introduce software which better connected them with clients and other parties involved in the home-buying process.
John Reynolds, chief operating officer at Coadjute, which connects software platforms used across the property market, said: “This immediate shift to lockdown and fully online sparked a tremendous amount of digitisation.
“The pace of services opening up and joining up advanced five years in five months, to the extent that even competing platforms connected up to provide a shared view of a transaction’s data to their users.”
Nonetheless, firms were told that they could not afford to be complacent when it came to technology.
Mr Lloyd added: “Tech investment is permanent. It is a line item on your costs on an annual basis, and you have to, if you do not understand it, hire somebody who does. Otherwise, you will be the small law firm that in five years does not exist.”
Stephen Ward, director of strategy and external relations at the CLC, said: “We are entering a period in which we might see large-scale and rapid change, or certainly the opportunity for that, and the CLC wants to support that.
“Innovation is not an end in itself, but we see major potential for it to improve consumer protection and how the housing market functions.”
A more detailed write-up of the event can be found here [1].