Mark Carver outlines shifts in conveyancing fees and associated risk from a PII perspective, based on a new report.
The recent study by the Post Office Money and the Centre for Economics and Business Research provided interesting statistics regarding moving costs:
Cost of conveyancing
In real terms, solicitors are earning less now than they did 10 years ago from conveyancing, with average fees increasing by 36.5 per cent – significantly less than standard inflation for the same period (40.63 per cent). This is in stark contrast to estate agents, who have clearly benefited from the increase in property prices as their earnings are linked to the sale price, and to a lesser extent, surveyors, whose fees have increased above the level of inflation.
Risk and reward
Not only are solicitors getting paid less for conveyancing than in 2004, but the potential risk is significantly higher, driven primarily by an increase in property prices:
While there are regional property value differences, it is apparent that conveyancing fees have not kept in line with the potential exposure of a negligent transaction. In other words, solicitors who undertake conveyancing are taking on more risk, which is not reflected in the fee generated. This is in comparison to estate agents who appear to enjoy low risk and high rewards.
Market claims statistics gathered by Chancery Pii (reflecting 14.81 per cent of the profession from 2004-2011) show that 43 per cent of claims notifications and 70 per cent of financial claims payments, at an average incurred cost of £41,000, are generated from conveyancing.
Even firms fortunate enough not to experience a conveyancing claim should be aware that approximately £100 of an average conveyancing fee will contribute towards professional indemnity insurance premium for the transaction.
What options do conveyancing firms with few partners have?
Conveyancing firms are advised to seek out A+ rated cover from a specialist, particularly small firms, who will inevitably be more heavily reliant on their policy to respond to incidents in a timely fashion, should they arise.
In our experience, mortgage lender panels also have a preference for firms to be backed by rated cover. There have been calls for this to be compulsory in the past.
This blog was originally published on the Small Firms Division's website.
Find out more about the Small Firms Division
Read our updated practice note on professional indemnity insurance