Calum MacLean works out of the London and Bristol offices of risk management specialists Locktons. Today’s Conveyancer spoke to Calum about why conveyancing law is a risky business….
How much of your work is with conveyancing solicitors?
‘We work with a wide range of solicitors – currently around 700 firms from sole practitioners right up to top 100 firms. Particularly at the lower to medium end of the market, the majority of the firms we work with are conveyancing focused – not necessarily exclusively but a good percentage of their business is in conveyancing.’
How are your conveyancing clients finding the property market at the moment?
‘The property market is definitely going through another bubble. There are some interesting ‘property heat maps’ that have been produced recently, which show average prices of property in different parts of the country and how much it has increased in the last year. Of course there’s been a significant increase in London and the South-East but also right across the board. But, while many solicitors’ firms are dealing with an increasing number of property transactions, we’ve also seen complaints against solicitors for conveyancing issues rise up by 25% in the last year alone, according to a recent Legal Ombudsman report . And that makes me concerned – it could be an early indicator that some of the issues we had five years ago after the last property collapse might re-occur.’
Why do you think complaints have gone up?
‘Over the last ten years between 66-75% of all claims against the legal profession have been in conveyancing and what’s making it tougher at the moment is that, right now, we’re in a bit of a perfect storm with a much tougher competitive environment – there’s real pressure on fees. Conveyancing in the last ten years has become quite a commoditised market with a lot of people – purchasers and sellers –seeking the cheapest conveyancing deal. That’s a real issue for solicitors because they are pressurised to go down the low fee route and commoditise the service. But there’s a lot to conveyancing – a lot of detail that needs to be picked up – and that costs money. So for solicitors it’s a question of getting the balance right between price and quality of service.
Another factor is that some firms that had to let people go in the downturn are struggling to cope with radically slimmed down departments now transactions are going up.
Other environmental factors – the changes to the regulatory regime, for example, and the increase in compliance burden – have also put pressure on smaller firms. And, the smaller the firm, the more difficult it is to invest to satisfy the new regulatory requirements. They now need to have compliance officers for legal practise and on the financial side and there is all sorts of reporting to present every year to the FSA. A lot of law firms have signed up to CQS but that in itself doesn’t lead to an improvement in risk profile.A lot of it is about systems and procedures and adequate monitoring of staff and looking at areas where errors have crept in before and trying to be objective about the underlying causes, whether it’s lack of supervision or because a great policy on paper isn’t properly implemented or because one satellite office is bit of a rogue.’
Do you think, even though people are stressed about the new legal market they’re operating in, it brings opportunities as well?
‘In every market there are opportunities as well as risks. There is no doubt that in the current environment, risk management isn’t an optional add-on – it really is fundamental – and the potential cost if you have a bad claims experience is massive. You could have two firms that are identical in every respect apart from their conveyancing claims and one might have a premium of 2% of turnover and the other could have a premium of close to 10% of their turnover. By reducing the cost of claims against a firm, risk management strategies and PII make the business more efficient – staff spend less time on ancilliary management add-on tasks and less time dealing with the fall-out from complaints. Also it means a firm is more likely to retain – and gain clients – if it’s a really slick modern business with robust risk management built in to its design. It all makes for more efficiency.’
Why does Lockton offer such a good service?
‘Our role as professional indemnity brokers encompasses more than just selling people a policy – particularly with professional clients we work as trusted advisers, helping them manage their compliance and regulation burdens and also helping them manage the risks that they face in their professions. So we do a lot more than just sell insurance. We have a website dedicated to supporting our solicitors through which we offer a wide range of practical resources, including on and offline training events. We undertake research into the claims experience of the conveyancing profession which really helps inform our work with clients. Recently we’ve being helping an increasing number of firms by undertake risk audits for them. On a personal level, as a solicitor myself, I am very alive to the risk issues firms are facing and I find it satisfying helping clients negotiate their risk profiles and make their firms more effective.’
How can conveyancers, in your opinion, make themselves as bulletproof as possible in terms of risk in the current market?
‘Take complaints seriously – they are a much more immediate indicator of issues than claims. It’s important to record complaints so a firm that is noting even the smallest complaint issue is in a much better position than a firm that on the surface of it has no complaints but actually has had issues that just haven’t been properly logged. People tend to complain either during the transaction or immediately after it’s completed whereas claims issues often won’t arrive until someone is selling a property seven years down the line and discovers that the solicitor missed something. So complaint statistics are an important indicator of what’s going right or wrong with a firm right now.
Recent research has shown that clients who have complained and had their complaints resolved quickly are actually much more loyal to a law firm than clients whose transactions have gone through smoothly so they haven’t really engaged with the solicitor. If someone has an initial complaint and it’s dealt with positively and swiftly they walk away feeling positive.
Other areas to look at – well, conveyancers need to be sure they are adhering to the key terms in the Council of Mortgage Lenders Handbook. Building aspects of that into their conveyancing process will reduce their exposure to claims.
Communication with clients is key too. Have a strong initial meeting to really understand what the client’s needs are – explain the timescales. That first meeting is vital for setting the scene for the whole rest of the transaction.
Also, when firms are closing files, staff should double and triple check that everything has been done before sending the file away. It’s the last opportunity to check that anything that needs to be picked up has been picked up.