Government targets referral fee transparency and conveyancers publishing performance data

Home moving: No ban on referral fees for now

Estate agents will need to be more transparent over referral fees they receive from lawyers, while conveyancers will have to publish performance data, the government has decreed.

The Ministry of Housing, Communities and Local Government will also demand that conveyancers adopt more quality standards as part of a continuing push to help potential clients choose their lawyer.

The ministry’s major decision in the outcome to its call for evidence on improving the home buying and selling process was that estate agents should in future hold a professional qualification, backed up by continuing professional development.

But there was plenty of direct interest to conveyancers. On the back of strong support from respondents, the ministry said it would work with “estate agents, their trade bodies, the ombudsmen and the regulator to develop a standardised approach to reporting referral fees”.

It would also increase funding for National Trading Standards’ estate agency team to proactively monitor this and take enforcement action where necessary.

“We believe that this transparency will create a level playing field and ensure that customers are aware of the extent of any commercial arrangements before they make a decision to appoint a firm.”

There was “no clear cut answer on the likely impact of banning referral fees” – while on the positive side it could lead to consumers receiving recommendations “based solely on anticipated levels of service”, on the other hand conveyancers could reduce their investment in technology due to less certainty about income streams and referral fees could be driven underground.

Nonetheless, the government said it would consider a ban further. “In particular we want to look at referrals for new build properties and those instances where buyers are being referred by estate agents rather than sellers with whom agents have an established contractual relationship.”

The proposals on improving information from conveyancers did not mention the work already underway by all the legal regulators to implement the Competition and Market Authority’s recommendations aimed at doing just that, or Land Registry plans to publish how many incomplete applications it receives from the top 500 conveyancing firms.

The response document said: “We are very clear that more needs to be done by the conveyancing industry and the relevant regulatory bodies to ensure that consumers are getting the information they need to make an informed choice.

“This should include standardised information [on conveyancers’ websites] which goes beyond cost and includes some element of performance data…

“We would also like the industry to continue to develop, and more importantly promote, quality standards and kite marks so that consumers can feel confident that they will get a good level of service.”

How to choose a conveyancer will be included in new ‘How to Buy’ and ‘How to Sell’ guides that the government will put together, which are likely to form part of the standard documentation provided by estate agents.

The ministry said it was “not minded to take steps to encourage buyers and sellers to use the same conveyancing provider”.

It noted that the option already existed via licensed conveyancers; responses to the call for evidence “suggest that these arrangements generally work well but that there is not a significant reduction in time taken, partly due to the prevalence of chains”.

There was unsurprisingly a big focus on the use of technology, with the ministry saying: “We agree with those respondents who suggested that conveyancers should be encouraged to move towards using a digital platform that allows them to communicate more easily and have a chain view, and will be working with industry to make this happen.”

Other policy decisions included:

  • Working with removal firms, conveyancers and lenders to see how the process around the release of funds can be improved;
  • Working with industry and other public sector bodies to encourage the development of digital signatures, improve the ID verification process and promote the adoption of e-conveyancing;
  • Working in the long term to having most of the information consumers need to know about a property available when it is marketed, for example through the development of a “property passport”;
  • In the short to medium term, using the ‘How to Sell’ guide to encourage sellers to collect together relevant information in an effort to be ‘sale ready’;
  • Encouraging earlier contact with freeholders, setting fixed time frames and maximum fees for the provision of leasehold information, potentially with a statutory underpinning, and encourage managing agents to make this information available electronically to enable instant access;
  • Telling local authorities that they should respond to search requests within 10 working days and allow timely access for external search agents, and taking action if they fail to meet expected performance levels;
  • Telling buyers that they should seek a decision in principle from their mortgage provider early in the process; and
  • Piloting the introduction of reservation agreements to reduce the instances of transactions failing and gazumping.

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