The Solicitors Regulation Authority (SRA) has warned solicitors that professional negligence claims based on unbundled services have fuelled a “rapidly developing area of case law”.
In a paper Improving access – tackling unmet legal needs, the regulator also revealed that it has already allowed a solicitor to practise from an unregulated business, a reform that has attracted stinging criticism from the Law Society and others.
While supporting the use of unbundling to reduce fees and give clients greater control, the SRA cautioned that unbundled services may be subject to claims of negligence.
“This risk is greater when clients are not clear on the boundaries of the work their solicitor will perform. This is a rapidly developing area of case law and solicitors should keep up-to-date with recent developments.
“From a regulatory point of view, our focus will be on the reasonable expectations of the client and the solicitor as to who will be responsible for what tasks, risks and issues.”
The regulator said law firms should agree with clients both the scope of any unbundled work done for them and “on the work that the solicitor would normally do, but has been excluded due to unbundling”.
Where a client provided inadequate information or instructions, or left the law firm “open to risk”, solicitors were advised to “bear in mind their duty to act in the best interest of their client”.
The SRA went on: “This is likely to include advising them of the reasons why they are unable to act and what needs to be done in order to enable them to do so, and of any clearly evident risks.
“Clients need to be made aware of how their decisions on unbundling will affect the total cost of their work. Also, they need to be made aware of the impact on the cost if they later change their mind.”
The SRA said that two examples of unbundled options for clients were a ‘pay as you go’ model, where they could get advice as and when needed, and ‘menu pricing’, where certain parts of a matter could be delivered for a fixed fee.
“We believe that unbundled services, provided these are entered into in a clear and structured way, can deliver real benefits for some clients.”
Elsewhere in the paper, the SRA restated its intention to go ahead with its controversial plan to allow solicitors to practise from unregulated firms, scheduled for 2019.
The regulator revealed that it has already granted a waiver to allow a solicitor to work in an unregulated business.
“The solicitor specialises in a range of non-reserved legal services for start-up and small businesses, not-for-profit and public sector organisations. They want to provide competitively-priced fixed-fee services for a sector that has an unaddressed legal need.”
The SRA said the new rules would allow any business to employ solicitors to give advice on different areas of the law.
“For instance, a business advisory service could employ a solicitor to provide employment and commercial law advice. This will give people increased access to competent, ethical, legal help.”
Meanwhile the regulator said that “in the last year”, 236 law firms had taken advantage of its reform of the separate business rules, allowing solicitors to own or manage unregulated businesses, subject to safeguards.
“People’s problems do not fit into neat compartments. Some firms take a holistic approach to problem solving by partnering or collaborating with other local professionals to deliver services that complement one another.”