The Council for Licensed Conveyancers (CLC) has published its interim report into the use of referral fees and put forward a series of recommendations to strengthen transparency and consumer protection.
The review found that referral arrangements can play a legitimate role in conveyancing and help consumers to access services conveniently, provided they operate clearly, consistently and in the interests of consumers.
But the CLC warned of a potential “regulatory blind spot” created by inconsistencies in record-keeping and the lack of information available to consumers before they instruct a solicitor, preventing them from making informed decisions.
In a webinar held to explain the findings of the report, the CLC’s director of strategy and external relations Stephen Ward said it sets out early initial recommendations to explore with the conveyancing community and called for further evidence to explore the role referral fees play in the sector.
“Referral fees are a thorny subject that can arouse passion on both sides of the debate,” Ward acknowledged. “It’s important to say what we’re looking to do is flush out evidence and get clear views on what’s happening so we can make an evidence-based response.”
The CLC announced it would undertake a thematic review of referral fees, its first in 13 years, in the wake of last year’s BBC Panorama documentary, which raised concerns about conditional selling by estate agents.
The review looked at 12 practices of varying sizes and conducted interviews with 15 lawyers and carried out an in-depth analysis of data gathered during inspections and of each practice’s compulsory annual regulatory return, with insight from the CLC’s professional and consumer reference groups.
It found all 12 practices had referral arrangements in place, with five unable to produce written agreements and disclosures to clients not always complete or available for review. Three of the practices relied on referrals for up to 85% of their work, with payments found to be between £50 and £600.
Sarah Manuel, policy manager at the CLC, said the review revealed some practices saw many benefits of the arrangements, including the generation of client pipelines. But she acknowledged the CLC could do more to understand the public perception of consumer perception.
“We need much more evidence to be able to make a definitive conclusion and that’s one of the reasons we’ve introduced an interim report at this stage,” she explained.
Although the review found a lack of transparency around referral fee arrangements in some of the firms it assessed, it was unable to determine whether higher referral fees impacted conveyancing fees or service levels.
The report notes: “No one spoken with admitted that high referral fees were passed onto the client through higher conveyancer fees, which if this is the case, raises questions about whether fees are being absorbed by some conveyancing practices as a ‘loss leader’ potentially undermining the value of the conveyancing process.”
During the CLC’s webinar, Ward acknowledged some firms may view referral fees as the cost of client acquisition as an alternative to marketing and stressed an outright ban is not currently under consideration.
“We do recognise in the report that there are different business models in operation, so we need to consider the risk profiles of different firms as we go through the regulatory approach,” he said.
The CLC’s review identified two complaints that referenced referral fees within the last five years, one of which did not form the body of the complaint, and another which didn’t represent a breach of existing guidance.
The Legal Ombudsman was also asked for records of any complaints related to referral fees but no data exists, which the CLC said suggests a lack of evidence that harm is being done to clients.
The review’s interim recommendations include earlier and clearer disclosure of referral arrangements so consumers can make informed choices at the outset, strengthening expectations around written agreements and record keeping, working with the property sector and consumer bodies to improve awareness of disclosure responsibilities, and targeted monitoring to assess how effectively any changes are operating in practice.
However, recommendations will be refined or expanded in light of new evidence, Ward said during the webinar.
Commenting on the publication of the report, he said: “Given the strength of feeling we have encountered in our research, and the diverse opinions held by stakeholders, we feel it is important to take a sounding on our interim findings and recommendations, invite any evidence not already shared with us, and provide further opportunity for discussion with the sector having had the benefit of seeing the interim report.”
9 responses
Sorry, some moments move a profession forward. The CLC’s interim referral‑fee report isn’t one of them.
By demanding “hard evidence of how fees are used or abused”, the CLC misses the central point. The Legal Services Board has already reset the standard: ethics must now be front and centre of legal practice. That is the new foundation, not a discretionary add‑on.
Yet the CLC still frames referral fees as a neutral commercial mechanism, fixable through better records and incremental transparency. That mindset belongs to a different era. The tide has turned. The real question is whether referral fees align with independence, integrity and public trust. Increasingly, they do not.
A regulator representing only a minority of the sector cannot continue defending a model that distorts consumer choice and embeds commercial influence at the point of instruction. The LSB’s ethical direction demands leadership, not procedural delay. It requires confronting structural risks, not waiting for “evidence” of harm after the damage is done.
This report could have marked a shift. Instead, it keeps Licensed Conveyancers standing still. Ethical leadership is now the benchmark, and every regulator will be judged against it.
In an ideal world referral fees would not exist, but they do and have done for as long as I can recall in my 50+ year career. Back in the day, via envelopes full of cash.
If they are banned, they will go underground or morph into something even more difficult to control. We, and the public, might then end up with something even more hidden.
What gets me are the agents that recommend firms they would not use themselves or recommend to their friends and family.
The debate isn’t over yet though:
As Stephen says: “Given the strength of feeling we have encountered in our research, and the diverse opinions held by stakeholders, we feel it is important to take a sounding on our interim findings and recommendations, invite any evidence not already shared with us, and provide further opportunity for discussion with the sector having had the benefit of seeing the interim report.”
Not a plug, because we are as good as sold out, but Stephen Ward and others will be discussing this subject in more detail at the BLG conference in two weeks’ time.
Keeping something legal because it will just go underground if de-legalised (is that a word?) isn’t a reason to keep it going. Drink driving isn’t legal now and I think we can all agree that’s a good thing? Referral fees allow a lot (not all) of firms and sausage factories to keep getting work even though they’re the absolute pits – they get work because they pay for it, not because they’re good enough. We ALL know who they are. Even you, Rob.
Let’s stop referral fees and see who survives. A true meritocracy, no hidden small print the seller or buyer doesn’t read…let’s clamp down, the way PI clamped down. I don’t get why it wasn’t acceptable for PI or Family Law (Trethowans and the hairdressers, anyone?) but is absolutely fine for conveyancing clients to be stung like this. I would say 8/10 cases the client doesn’t know they were sold to the factory in Leicestershire dealing with them – they think that the agents had their best interests at heart and passed them to a firm that best suits their needs. Are they 89 years old without any tech ability at all to complete online ID checks? Yes. But the agents will sell them to Leicester anyway, when the client is based in Cornwall. Nothing to see here…
Further evidence, were it needed, that the CLC just do not get it and are unfit for purpose.
The issue is not referral agreements, it is that the referral fees exist in the first place. It allows Firms who would otherwise not attract work through the service they provide, to build huge conveyancing factories based on paying for work as the main part of their business model. Open your eyes CLC, that in itself is hard evidence of how referral fees distort the market, reduce choice for clients, and have led to standards hitting rock bottom over the years.
If anyone at the CLC had ever practiced conveyancing such evidence would be obvious. Most, though not all, of the really bad conveyancing impersonators who use these business models, are ‘regulated’ by the CLC. Is it any wonder they are allowed to continue frustrating decent hard working professional conveyancers when Reports like this are issued.
Of course, maybe if their client accounts were overdrawn by 0.01p your reaction would be considerably different?
I agree with Rob that referral fees are deeply embedded in parts of the conveyancing market and that any reform needs to recognise market reality.
What I do not accept is the argument that because something may go underground, we should therefore accept it as a permanent feature of the market.
History is full of practices that were once deeply embedded. That did not stop regulators identifying the risks, increasing transparency, strengthening oversight, and progressively reducing dependency upon them.
What stood out from the recent findings was not the lack of complaints, but the evidence of poor disclosure, missing agreements, heavy referral dependency, and what was described as a “regulatory blind spot”.
The question is not whether referral fees are here to stay.
The question is whether a system where consumers are directed towards legal providers because of commercial payments rather than informed choice is the market we want to preserve for the future.
I also note the proposal for further review. That is sensible, provided the process is genuinely open to evidence from regulators, the profession as a whole, and not just those already operating within referral-fee-dependent networks.
Independent firms and frontline practitioners also need to be heard.
The fact that a practice is deeply embedded does not place it beyond challenge.
If things do go “underground” surely the people spending the money in the “brown envelopes” will have to justify this when putting the money in the bank? The government are watching everyone’s every move so potentially the brown envelopes could be considered ill gotten gains?
Time for conveyancers to stop being trodden all over by parties who bear none of the legal risk. We are the ones who should be in charge.
Comparing drink driving to referral fees is a bit of a stretch. It is difficult for drink driving to morph into something else (maybe drug driving?).
Yes, I know who some of the firms are that aren’t great and pay referral fees. I also know of some very good and well-respected firms that pay referral fees.
When I say go underground, I don’t mean back to the old days of brown envelopes. We already have reports of some conveyancers sending gift vouchers to agents in the hope of receiving new work. Probably not technically a referral fee, so a loophole of kind that already exists needs looking at.
Like I said, “in an ideal world referral fees would not exist”, but they do, and it seems that a ban is very unlikely. What we need now is better RF regulation, policing, enforcement, and punishment for breaches.
Why are some agents so counterproductive? “What gets me are the agents that recommend firms they would not use themselves or recommend to their friends and family.”
By the way, I never paid a referral fee in my 30 years at the coal face.
As a senior (old) conveyancer of many years, I have seen (but never practised) the brown envelope brigade and no-one wants that. However, before people get on their “high-horses” about the morality or immorality of referral fees, can I perhaps ask everyone (both for and against) to consider that this is actually quite ethical. I have proof, because there is precedent. Did you know, that mortgage lenders pay referral fees to mortgage brokers? Yes they do! To all them. They are called “procuration fees”, or, in English, referral fees. These are referred to in every single mortgage offer, i.e. they are in writing, as they should be. So, referral fees are not unique to the conveyancing firm industry (nor to the volume firms either). I believe the same is true of the insurance industry, which blue chip insurers pay referral fees to their insurance brokers too. I think the morality of this subject should be removed and I am pleased that my regulator is taking a very pragmatic and professional approach to. Yes, I am sure it is not fair on those smaller firms who feel they should not or cannot pay referral fees. But then we only have to look at Rightmove and their monopoly and effect on the smaller estate agents to say that sometimes life is just not fair – but this is the 21st century we now inhabit.
Thanks Stuart. As opacity increases and traditional lines of professional probity become blurred, forgive me and many others who prefer to remain mounted on our high horses.