On Sunday, Housing Secretary Sajid Javid announced measures to professionalise the estate agency market which may have a significant impact on the conveyancing market and our readers.
This announcement was made by way of a press release with further detail to follow but is the outcome of the consultation completed last year by the Ministry of Housing, Communities and Local Government which focused on the stress and pain points in the home buying process and considerable research.
The research found:
- of home buyers that experienced delays, 69% of sellers, and 62% of buyers, reported stress and worry as a result of the delay
- 46% of sellers had concerns about a buyer changing their mind after making an offer
- 24% of sellers would use a different estate agent if they were to go through the process again
- 32% of sellers and 28% of buyers were dissatisfied with the other party’s solicitor
Whilst the proposals were presented as professionalising estate agents, by requiring them to hold professional qualifications, conveyancers should follow these changes as they will also impact business too.
Referral Fee Transparency
There is a focus on referral fees which many conveyancers will welcome and others will oppose.
The press release from the Ministry states “Estate agents will now be required to hold a professional qualification and to be transparent about the fees they receive for referring clients to solicitors, surveyors and mortgage brokers”.
Whilst most agents would argue that they are already transparent in the way they disclose their fees, we suspect the new proposals will go further. They could go to the extent of highlighting the amount the agent earns from the arrangement far more clearly which could make consumers more likely to instruct conveyancers directly.
We presume the omission of Licensed Conveyancers and CILex regulated firms is an oversight.
Chris Harris of Today’s Conveyancer estimates that approximately 45% of all conveyancing transactions involve referral fee payments and if they are worth £200 on average this figure is roughly £100M per year appearing in the profit and loss accounts of many estate agents and panel managers. Many referral fees are much higher and this may be a conservative estimate.
It will be interesting to see how the share prices of quoted estate agents react in the week ahead or whether they have plans to ensure that they do not lose this income stream if consumers react to these changes.
Conveyancers will also be aware that the Government is pushing this price transparency theme through regulation with the Legal Services Board acting with other front line regulators on this matter.
The proposals also include the idea of “encouraging the use of voluntary reservation agreements to help prevent sales falling through and crack down on gazumping”
This has been promoted as an idea by the Conveyancing Association, and other organisations like Gazeal, for some time and in busy markets could save considerable time and cost to consumers.
Whether this extra work will be something conveyancers feel that they can charge more for, or how wide the adoption will be, remains to be seen.
However, with a slowing London market and questions about the impact of Brexit on volumes, the impact of this may be limited in the short term if the market slows.
Local Authority Searches within 10 days
Other proposals included “setting a timeline for local authority searches so buyers get the information they need within 10 days”.
Whilst many local authorities already hit this standard others fail to do. This can cause delays in the market but as yet we have not seen the detail of how this may happen or what impact it may have on the personal search companies that offer an alternative to an official search.
Leasehold information requirements
Importantly the Government is proposing “requiring managing agents and freeholders to provide up-to-date lease information for a set fee and to an agreed timetable which will end the current situation where leaseholders are at the mercy of freeholders and their agents”
Most conveyancers will welcome this measure as long as its enforceable.
To bring the profession into the technology era, a working group will be set up to bring industry and partners, such as HM Land Registry, together to look at developing innovative digital solutions to speed up the home buying and selling process.
The government will consult on how the industry can be brought up to professional standards, like those in the same trade such as conveyancers, solicitors and surveyors.
We are keen to hear a wide variety of views on this matter so please leave your thoughts as a comment below.