The Future of Property Conveyancing

The modern conveyancing system in England & Wales was born in 1925, with the introduction of the Law of Property Act 1925 and Land Registration Act 1925.

Before we can look at where property conveyancing is going we must look at where we have come from.

Law of Property Act 1925

The Law of Property Act greatly simplified the way in which legal interests in land could be created and held, so that when a purchaser bought a property he could be confident he would be the absolute legal owner.

Land Registration Act 1925

The Land Registration Act introduced a system of recording all legal interests in land in a central register, managed by Her Majesty’s Land Registry (now just Land Registry), a new government department created for the purpose. lawyers booksUpon the transfer of a piece of land an application could now be made to the and Registry to register it. On completion of such an application the Registry would create a record for the piece of land which would identify in a simple two or three page document all of the interests affecting the land, which would previously only have been discovered by trawling through the title deeds. Registration was not compulsory however and the system didn’t really take off until it became so, possibly because of the fee involved, or possibly because solicitors at the time could foresee that simplifying the process would have an adverse affect on their fees!

Compulsory Registration and Market Expansion

Compulsory registration was introduced area by area. By 1998 the whole of England & Wales was designated a compulsory registration area and the Land Registration Act 2002 (which replaced the Land Registration Act 1925) effectively made registration of any type of land transaction (that is not just purchases and mortgages) compulsory. The result is that 60% of all land is now registered.

The boom in home ownership among the working classes which began in the latter part of the 20th century created a massive market for conveyancing services. This was accentuated by the house price explosion of the late nineties an early 21st century.

Volume Conveyancing Takes Hold

The combination of these booms and the simplification of the property conveyancing process meant there was great pressure on firms who wanted a share of the market to streamline their approach to conveyancing and find ways to reduce costs so as to offer cheaper fees. Specialist conveyancing firms were formed which were able to operate nationwide and so local monopolies were broken. Clients were no longer happy to pay several thousand pounds to a conveyancing solicitor, they wanted to pay no more than a few hundred and this new breed of firm was able to offer that. One of the major changes arising out of all of this was the proliferation of the “conveyancing paralegal” – a non-lawyer employed by a firm of solicitors to do the work a solicitor would have done previously for a much smaller salary. It is not unheard of these days to have an entire conveyancing department of a law firm that doesn’t employ a single solicitor.

Inevitably the quality of the conveyancing advice generally available nowadays has suffered. Firms take the view that the increase in professional negligence claims which this has given rise to, and the subsequent increase in professional indemnity premiums, is more than balanced by the decreased salary payments and increase in the fee income as a result of the sheer volume of cases undertaken.

Title defects and other issues are often not resolved properly where a high volume conveyancing firm is involved and instead legal indemnity insurance policies are purchased because this is the simplest and quickest way to move toward completion of a transaction.

Volume conveyancing firms rely heavily on bulk referrals from the likes of estate agency chains and mortgage lenders, who will refer work to a firm in exchange for a referral fee. The power that these referrers have over firms – law firms have been known to have to close because a particular referrer has removed them from its panel – means they can harangue them into making decisions which aren’t necessarily good conveyancing practice (they call these “commercial decisions”).

What Does the Future Hold?

The recent collapse in the property market has probably slowed progress somewhat. A lot of large conveyancing specialist firms have gone broke or scaled their operations right back, and all firms are becoming more cautious as a result of being sued for negligence by lenders who are trying to recover some of the loses they are making when repossessing ans selling properties. As the market starts to recover however the pace will surely increase again.

The Land Registration Act 2002

The Land Registration 2002 sought to reduce the number of interest that could bind land without being entered onto the registers of title to the bare minimum, so as to further simplify the conveyancing process. These changes will all have come into  effect by October 2013. The act also paved the way for electronic conveyancing.

Conveyancing at the Checkout

The Legal Services Act 2007 introduced the possibility that non-lawyers could set up conveyancing firms. The changes haven’t been brought into force so far but it’s anticipated that will happen later this year. Some of the major supermarket chains have already indicated they would be providing conveyancing services. If they follow the principles they use in their stores (and there is no reason to think that they won’t) then this is likely to drive conveyancing fees down further. This will have to mean even less lawyers employed to do the work and even more cutting of corners. We can expect to see a traditional investigation of title replaced by a title indemnity insurance policy (this already happens with remortgages). The policies will no doubt be cheap because the supermarkets will be purchasing them in vast numbers and will allow a transaction to be pushed through quickly with minimum overheads.

High Speed Transactions

There has been talk for some time no of further developments to speed up the conveyancing process and the influence these new conveyancing giants will be able to exert is likely to bring these developments forward. Electronic signatures on documents will mean contracts and deeds can go from being prepared to being signed and returned to the conveyancer in minutes instead of days (currently only deeds with original ink signatures are valid). The “chain matrix”, a concept whereby every conveyancer in the chain is required to update a website with details of the position their part of the chain has reached, which can be accessed by everyone else in the chain, should make the process more visible and ensure that case progressors working for estate agents know where to concentrate their efforts. It will keep everybody honest too – if a particular client is delaying the chain their conveyancer won’t be able to cover for them. The idea seems to have been shelved recently with the economic downturn but it is likely it will be revived.

The National Bank of Conveyancing

Another idea which has been on ice for a few years and would probably be one of the most positive developments in conveyancing for many years is an idea the Law Society have been trying to promote for a “central bank” for conveyancers. Currently, on the day of completion the purchase monies are transferred to the seller’s conveyancer by CHAPS/telegraphic transfer. The bank can guarantee that the money will arrive on the same day but it cannot guarantee a time. It tends to take 2 or 3 hours. This is fine if there is no chain, but where there is, especially a long chain, problems often occur. Imagine a chain with 6 properties. The money sets off from the bottom of the chain at 9am. It arrives with the first seller at 11.30 and is sent on straight away. It arrives at it’s next destination at 2pm. It is sent on again and arrives at 4.30pm. The problem here is that the banks have a cut off time after which they cannot transfer funds that day. It is usually around 3.30pm to 4pm so it gets stuck here, meaning people can’t complete until the next working day. This can leave people homeless and lead to great additional expense (cancelling removals at the last minute for example will incur penalties). Under the proposed new system, every conveyancing firm would use the same bank, meaning money could be transferred instantly which would eliminate the problem. The difficultly is, which bank gets all this work? Obviously whichever banks don’t get it will lose a lot of business and for this reason they have not been receptive to the idea so far.

Conclusion

The future of conveyancing is likely to see clerks replacing experienced conveyancers and insurance replacing legal advice. For the consumer, fees will fall and the process will get quicker, with transactions being completed in a matter of days instead of weeks. The supermarkets will no doubt introduce a “one stop shop” where they will provide estate agency, conveyancing, mortgage and insurance services in a single package.

Photo by umjanedoan


You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

AddThis Social Bookmark Button

6 Responses to “The Future of Property Conveyancing”

  1. Dave Philpot Says:

    Unfortunately, the high street conveyancer is under severe strain from budget stack them high sell them cheap services. This type of conveyancing is completely flawed, you need an expert. Yes, buy cheap clothes off the internet but only those who are a little desperate will sell their house through a solicitor they cant vistit or know.

  2. Sizzling Hot Says:

    Pretty good post. I just stumbled upon your site and wanted to saythat I’ve really liked browsing your posts. Anyway I’ll be subscribing to your blog and I hope you write again soon!

  3. I think a Tesco-style conveyancer would mean a service that has corners cut and maybe even the possibility of things going wrong.

    I think the availability of online conveyancing firms where the work is still carried out by qualified solicitors is a good middle ground. Prices have become very competitive but still the reassurance of a good solicitor taking on the work.

    Good blog posts. Keep up the good work!

  4. Felice Capriello Says:

    Your article on the possibility of supermarkets providing conveyancing services as I seem to understand is only pertinent to England and Wales, correct me if I am wrong.
    In SA we attorneys, unless we are qualified conveyancers, are unable to lodge, however with packages such as ghostconvey & legal perfect we are able to draw all the necessary conveyancing documents but then have to use a conveyancer to lodge for us. As the conveyancing exam and classes are very cumbersome etc. many of us cannot afford to spend time to study as a conveyancer although we have provided conveyancing services for a no. of years, in my case 12yrs. My question is when will the SA legislature make it easier and less cumbersome for a qualified attorney here in SA to provide full conveyancing services? Could you please perhaps let us have your input herein,i.e. an article relevant to the content enumerated herein.

  5. I don’t like the sound of this for leasehold transactions.

    The over-use of idemnity insurances, the ineffective marketing of leasehold, the ignoring of the lease covenants, the confusion that already exists around the tenure, absent freeholders, etc etc.

    If the professionals can’t do it properly,what chance does a ‘one-stop’ shop have?

    Great post nevertheless!

  6. Due to the changes in the property acts it become more complicated for the individual to solve this statements easily so the needs of the conveyancers is also gone increase.

Leave a Reply