The “popular myth” that conveyancing is low value is not borne out by the evidence, the Solicitors Regulation Authority (SRA) has found.
But property work is continuing to cause the regulator problems, with stamp duty land tax (SDLT) schemes and ‘right to buy’ negligence litigation firmly on its radar.
Initial findings from the SRA’s thematic review of conveyancing showed that “conveyancing clients were in most cases no less financially valuable to firms than other clients, going against the popular myth of conveyancing work being ‘low value, high volume’,” according to the SRA’s most recent performance report. “However, some firms will be paying referral fees out of this income.”
Other preliminary findings included that most firms used fixed fees for conveyancing, rather than billing by the hour; two firms in five were members of either Lexcel or the Law Society’s Conveyancing Quality Scheme; firms saw removal from lender panels as the biggest risk to their conveyancing practices, followed by the economic downturn; and property related fraud and money laundering is a major concern for many.
However, the performance report provided good news with signs that the number of claims on the Solicitors Compensation Fund arising from mortgage fraud is falling. While 90 were received in the first quarter of 2012, it fell to 23 in the second quarter, and there were just 18 notified in the last two quarters combined.
The SRA has identified 161 firms involved in SDLT schemes, the report said, although the SRA will take no further action in relation to 111 of them because they were involved in a limited number of transactions.
It said: “Lawyer involvement in tax mitigation schemes is a perennially controversial subject and a difficult challenge for us. There are significant risks to clients and there is also a public interest concern and cases have succeeded at the Solicitors Disciplinary Tribunal mainly based on failure to disclose material information to clients.”
There have been 171 new claims made against the compensation fund arising out of SDLT, making it the second highest cause of claims after general client money.
‘Right to buy’ litigation against solicitors who advised people who had bought council houses is a new risk that has emerged. Claims are being brought on the basis that solicitors failed to advise properly on matters such as agency fees, payment protection insurance and alternative funding options being available.
“We are engaging with firms who originally acted for the current litigants and also with those firms currently representing the litigants,” the SRA said.
More generally, the performance report showed a significant fall in the number of interventions carried out by the SRA – 37 in 2012, compared to 62 the year before – although last year saw an increase in the number of solicitors struck off, from 60 to 77.