‘Hidden tax’ referral fees should be banned, says conveyancing action group

Referral fees are a hidden tax on home buying and should be banned, according to the Conveyancing Task Force, a group of practising conveyancers, law firms and representatives from regional law societies.

In a position statement issued this week, the CTF said it recognises “the reality that referral fees are entrenched across the conveyancing market,” and acknowledges that an immediate ban, “however desirable in principle,” could destabilise service provision and drive arrangements underground or into less visible contractual forms.

But the CTF says it is calling time on the “hidden tax” and urges the Legal Services Board (LSB), Solicitors Regulation Authority (SRA), Council for Licensed Conveyancers (CLC) and relevant government departments to engage with cross‑sector regulatory coordination on a path to move away from referral fees in a manageable, enforceable and consistent way.

Stephen Larcombe, spokesperson for the CTF, said: “For years, referral fees have operated as an unseen surcharge on the home buying public, an opaque commercial mechanism that quietly shapes where consumers are directed for legal advice.

“These payments, exchanged behind the scenes between estate agents, panel managers, introducers and conveyancers, have distorted choice, compromised independence, and eroded trust in the integrity of the conveyancing process.”

The proposals put forward by the group include formally designating referral fees as inherently high‑risk commercial arrangements that trigger enhanced regulatory scrutiny and mandatory safeguards in the same way other regulated sectors classify certain activities or relationships as requiring elevated controls.

Disclosure must be clear and prominent before any instruction is confirmed explaining the mechanics of the commercial arrangement and what the referral fee is, the CTF suggests, with all arrangements codified for regulatory inspection.

A tiered approach to regulation is also proposed, acknowledging the difference in risk posed by a high street practice opening a small number of referred files each month and a high‑volume operator opening hundreds or thousands of referred instructions per month: “Regulating both identically is neither proportionate nor effective,” the CTF said.

“Referral fees are not a neutral feature of the market. They create structural conflicts of interest, incentivising recommendations based on commercial gain rather than client need.

“Too many homebuyers are steered towards firms not because they offer excellence, but because they have paid for the introduction. Many remain unaware that these financial relationships exist at all.

“The regulatory framework has not kept pace. Disclosure is inconsistent, oversight is patchy, and consumers remain exposed to arrangements that place commercial pressure above professional judgment.”

Any framework would require cooperation on the part of estate agents and financial services, the CTF acknowledges, including the Financial Conduct Authority: “Without addressing the introducer side, any reform of the obligations placed on regulated legal services providers will be incomplete and structurally one‑sided.”

The call to action comes in the wake of the LSB’s recent strategic intervention on ethics, which now places binding expectations on all frontline regulators. The CTF says the LSB had “made it clear” ethical duties must be embedded in training, supervision, workplace culture and enforcement.

Referral fees are “fundamentally incompatible with the duty of undivided loyalty owed to clients,” the CTF believes.

“The home buying public deserves transparency. The profession deserves a regulatory framework that supports ethical leadership. And the sector deserves a future where trust is earned, not bought. It is time to unmask the referral fee, and to rebuild a conveyancing system worthy of public confidence.”