post

Solicitors Regulation Authority publishes Residential Conveyancing thematic review

A review about the service provided by solicitors to the public

Executive summary

Buying and selling a property is often the most expensive and important financial commitment a person makes in their life. Having access to reliable and good quality legal support really matters. It not only reduces stress and uncertainty, but potentially directly impacts on whether a purchase is completed, and what the long-term financial implications may be for all involved.

While most property transactions are completed relatively seamlessly, figures from the Legal Ombudsman (LeO) show that residential conveyancing accounted for nearly a quarter of all complaints it handled over the past three years.

Our own research of consumers, conducted in 2018, also identified that up to a quarter of recent home buyers were dissatisfied with some element of the service they received from their solicitor. One common area of concern was an apparent failure to fully explain the detail and implications of contractual commitments.

What we did

We carried out this thematic review to better understand how firms are delivering residential conveyancing services, and whether they are fulfilling their obligations to their clients.

We visited a sample of 40 law firms offering residential conveyancing services and conducted a detailed review of 80 case files.

What we found

We found that most firms were fulfilling their obligations. In particular, we found that:

  • all firms proactively communicated with clients at all key stages of a purchase, with the majority meeting them face-to-face at least once
  • all firms provided clients with clear information on their complaints procedures
  • firms are increasingly embracing technology, especially regarding how they communicate with clients.

However, we did identify areas for improvement. The two most significant and widespread were:

  • inaccurate initial cost estimates – 34% of firms failed to include all the services/fees a matter could reasonably expect to attract in their initial quotes
  • not being open about the real cost of third-party disbursement and their firm’s mark-up on these – specifically telegraphic transfers. In 37% of cases firms failed to do this, with some charging up to 10 times the actual bank charge for processing the transfer.

Other areas where we identified potential concerns included:

  • not processing paperwork efficiently – especially in relation to requisitions raised by HM Land Registry
  • not explaining the difference between freehold and leasehold ownership
  • failing to double-check that a client understands the long-term implications of contractual obligations and fees.

Conclusions

This review clearly found that in the majority of cases, conveyancing firms actively engage with their clients and fulfil their obligations to them. Property deals progress in a timely and efficient manner and clients feel informed and supported throughout.

But sadly, this is not always the case.

Whether its providing unrealistic or incomplete quotes, or failing to make sure contractual information has been fully understood, solicitors are potentially leaving their clients exposed to significant risk or potential financial hardship.

Next steps

This thematic review took place during 2018. In December the same year, we introduced new transparency rules which require firms offering conveyancing services to publish detailed price and services information, and their complaints procedures online.

The requirement to provide clear pricing information was not new. However, these rules, and associated guidance, now provide the profession with absolute clarity on our expectations for how they should be publishing price information.

These requirements include:

  • outlining all known and potential costs a transaction may attract from the outset
  • specifying all charges being added to the actual cost of any third-party disbursements.

As part of our ongoing work, we will continue to review compliance with these rules and will consider further action where necessary to make sure they are being followed.

On the specific subject of making sure solicitors explain contractual details to clients, especially in relation to leaseholds, we urge all firms to make sure that their clients understand their obligations. If we find evidence that people were not made aware of onerous clauses in their leasehold contracts, such as the regular doubling of ground rents, we will take robust action.

Following this review, we referred six firms onto our internal disciplinary processes. Five of these referrals included concerns about failing to declare that the stated telegraphic transfers fees included an additional charge/mark-up.

Read the full report here

post

Independent Review of UK Legal Services Regulation Launched

The Centre for Ethics and Law in the UCL Faculty of Laws is undertaking a fundamental review of the current regulatory framework for legal services, led by Honorary Professor Stephen Mayson.

The independent review is intended to explore the longer-term and related issues raised by the 2016 Competition and Markets Authority (CMA) market study, which concluded that the legal services sector is not working well for individual consumers and small businesses, and that the current regulatory framework is unsustainable in the long run.  It called for a review of that framework to make it more flexible as well as targeted at areas of highest risk where regulation is most needed.

The review’s objectives will be to consider how the regulatory framework can best:

  • promote and preserve the public interest in the rule of law and the administration of justice;
  • maintain the attractiveness of the law of England & Wales for the governance of relationships and transactions and of our courts in the resolution of disputes;
  • enhance the global competitiveness of our lawyers and other providers of legal services;
  • reflect and respond flexibly to fast-changing market conditions being driven by innovation and advances in technology;
  • protect and promote consumers’ interests, particularly in access to effective, ethical, innovative and affordable legal services and to justice; and
  • lead the world in proportionate, risk-based and cost-effective regulation of legal services, consistent with the better regulation principles.

The review will reflect these objectives and consider how we can best ensure that our legal services remain of high quality and are effective, and that their regulation is proportionate and fit for purpose.  It will also need to re-examine how to give the public much-needed transparency about the legal providers they use and the services they pay for, and ensure that they understand their options and the consequences of their choices.

The first two working papers are already published.  Each of the working papers will address the issues and challenges raised by the four fundamental questions of the review:

  • Why should we regulate legal services? (Rationale)
  • What are the legal services that should be regulated? (Scope)
  • Who should be regulated for the provision of legal services? (Focus)
  • How should we regulate legal services? (Structure)

In pursuing its work, the review will seek to engage with a wide range of stakeholders and interested parties, including the CMA, the Legal Services Board, approved regulators, front-line regulators, representative bodies, consumers, the judiciary, practitioners, and providers of legal education and training.

It is now open for submissions in response to the working papers, and for meetings and discussions to explore the issues: to follow up, contact Professor Stephen Mayson.

Read more at the University College London Independent Review of Legal Services Regulation page.

post

Transparency lies at the heart of Consumer Satisfaction

In January, the Legal Services Board (LSB) of England & Wales released its “Regulatory Performance: Transitional Assessment Review” looking at the transitional assessment of each legal services regulatory body against the LSB’s regulatory performance standards. The report found that it had “sufficient assurance that the regulatory bodies have met the minimum required level of performance against the majority of expected outcomes”.

Transparency across the legal services market lies at the heart of consumer satisfaction. Recent Competition and Market Authority statistics found that before choosing their legal service provider 85% of consumers want better access to information, 53% want information about price, and 37% of consumers what to know about the quality of the service they would receive. In response, the Solicitors Regulation Authority released new price transparency rules, which requires regulated firms to publish price and service information on their websites.

Since 6 December 2018, all solicitors firms had to publish cost information in relation to conveyancing, probate, debt, employment and immigration. The new rules dictate that firms must provide a total cost or an average or range of costs, as well as explain the basis of these charges, including any hourly rate or fixed fees. Firms also must be clear on whether VAT is included, while also highlighting likely disbursements, and their costs. Any conditional or damages-based fees must be fully explained to clients who may have to make payments.

In addition to price transparency, firms are also required to ensure consumers under stand the services they require and are receiving. The rules demand firms

  • Explain what services are included for the quoted price
  • Highlight any services not included within the price, which a client may reasonably expect to be
  • Include information on key stages and typical timescales of these, and
  • Publish the qualifications and experience of anyone carrying out the work and of their supervisors.

SRA’s ‘Looking to the Future’ programme is based on a sound argument that law firms must become more transparent if they are to survive. Paul Philip, SRA Chief Executive, said: “Publishing information on price, services and protections will not only benefit the public, but will also help law firms win new business. Research shows that people struggle to find clear information about the services firms offer and think using a solicitor is more expensive than it actually is. We are providing guidance and support for firms to help them meet the new requirements and make the most of the opportunities they bring.”

The SRA has taken consumer protection and transparency a step further, introducing a new Digital Badge. Provided via software which will make sure only regulated firms can display it, the badge will show online visitors which firms are regulated and provide them with a link to information on the protections this provides. Displaying the badge will help firms differentiate themselves from unregulated providers. Use of the badge is initially voluntary but will become a mandatory requirement during 2019.

Challenges of Transparency

Due to the business structures of many law firms, publishing fees is no straightforward matter, leading to some to use a confusing blend of charts, costs schedules, calculators and costs estimates. It is the unknown factors of pursuing legal cases which can alter costs. Russell Conway, senior partner at Oliver Fisher, notes, “It’s the wiggle room issue which is going to be the bellwether as to how successful this project is”.

Price transparency undoubtedly remains vital to consumer protection and satisfaction. However, there are concerns that some consumers may be heavily influenced by price, rather than by skill and expertise. David Kirwan questions if, in a new transparent pricing environment, consumers will truly stop and weigh skills and expertise, rather than revert to low costs. These concerns are not isolated to the UK market, as globally practitioners have expressed concerns about an eventual ‘race to the bottom’. Kirwan notes that “How we as an industry respond, and the way in which we convince consumers that it’s worth potentially paying more to receive a high-quality service, will be crucial if we are to retain the high standards for which this country’s legal sector has become known”.

Complaints Transparency

In considering the question of quality of legal services, greater transparency and public access to disciplinary records is also needed. One of the key findings of the LSB report highlighted that regulators must continue to maintain records of disciplinary sanctions in their official registers. The SRA has issued guidance to help firms clearly understand their obligations under Rule 2.1 of the SRA Transparency Rules to publish complaints. This guidance includes information on complaints handling procedure details, how and when a complaint can be made to the Legal Ombudsman, and details about how and when a complaint can be made to the SRA. Sarah Chambers, chair of the Legal Services Consumer Panel (LSCP) stated that “Making enforcement data available to consumers is an area that will particularly benefit from consistency in approach”.

Ultimately, providing the public with as much clarity and information as possible when it comes to the legal services they require can benefit not only the consumer, but promote and ensure quality and competence of the industry as a whole. The new transparency rules promulgated by the SRA in December 2018 will improve public access to legal services, ensuring such information on legal service providers is readily available to consumers.


Interested in transparency and enforcement? Contact us and share what is happening in your jurisdiction. There are also opportunities to get involved with the topic at the annual conference. Contact Jim McKay (jamesmckay@lawscot.org.uk) to become involved as a speaker or session moderator.

post

Enforcing legal conduct to protect quality of legal services

Enforcement of professional codes and laws of conduct is a critical facet of legal regulation. Lawyer misconduct can have severe ramifications for consumers and the wider legal services market, eroding the reputation of the industry and jurisdiction. However, the processes and protocols for reporting misconduct by a legal service provider is often difficult or lengthy leading many to abandon the process.

The various reasons for inconsistency in reporting lawyers’ misconduct during litigation proceedings—and the extent to which it should be considered an actual inadequacy and a problem calling for a rule-based solution—have been the subject of active scholarly discussion and debate. One contributing factor may be the inherent inefficiencies involved with the current reporting system, which can be substantially mitigated through the effective use of electronic database technology. The successful experience with electronic filing and records in some United States court systems creates an opportunity for courts to extend these technological breakthroughs to provide logistical support to a much improved system for judicial reporting of lawyer misconduct. The creation of state and federal electronic databases accessible to and searchable by state disciplinary agencies would undoubtedly enrich the quality of enforcement in contributing jurisdictions, but expanding such a system to become accessible and searchable for the public would contribute to broader transparency and accountability. We have seen broader integration of technologies in other areas of legal services provision and regulation worldwide, so integrating such technologies into how consumers or other legal professions report misconduct seems a logical next step.

There is another component to enforcement of standards: the people who come forward and report misconduct. The Solicitors Regulation Authority (SRA) has updated its Enforcement Strategy, which explains when and how it would take action against a law firm or solicitor. Within this strategy, the regulator has published proposed changes to the wording of its rules regarding when firms should report cases of potential misconduct to the regulator, as it became apparent that law firms were interpreting the existing rules in different ways. The updated rules emphasise that nobody should face detrimental treatment for making, or proposing to make, a report, following from feedback around concerns that individuals reporting potential misconduct may be victimised. Similar steps have been taken in the Australian system, which has recently taken a tougher stand in relation to reporting misconduct and the #MeToo movement. Such a proactive approach to regulating attorneys in Australia is used as a springboard to discussing the role of proactive regulation of lawyers in advancing public protection.

Of equal importance is that regulators and enforcement bodies remain open to circumstance. In Hong Kong, the Bar recently completed a ruling on aspects of the meaning of “fit and proper”. The case of Re A is a rare example of a barrister’s contested application for admission to the Bar pursuant to s. 27(1) of the Legal Practitioners Ordinance (Cap. 159). The application was dismissed at first instance due to a ruling that the applicant did not meet with standards of “fit and proper” due to a conviction of a criminal offence resulting in a custodial sentence. However, following an appeal, the Court of Appeal taking a more holistic “multi-faceted” approach, allowed the application for admission. In the process, the Court gave general guidance for determining whether (among other things) an applicant with a criminal conviction can demonstrate on the facts that he or she is fit and proper to be admitted to the Bar.

 

post

Incoming Bar chair warns of “nightmare scenario” over regulation

The Bar could be “sleep walking into a nightmare scenario” where new rules mean it has no involvement with its regulator, the incoming chairman of the Bar Council has warned.

Richard Atkins QC also suggested that the Legal Services Board (LSB) did not have the evidence to back up its assertion that its proposed internal governance reforms were needed or would lead to costs savings.

Last month, the LSB published a final consultation on revised internal governance rules which would clearly limit the influence the Bar Council could have on the Bar Standards Board (BSB) – and other bodies like the Law Society could have on their regulatory arms.

In his inaugural speech to the Bar Council last night, Mr Atkins – who takes over from Andrew Walker QC on 1 January 2019 – said the proposals risked the BSB becoming “more and more remote from the Bar Council”.

He explained: “There is the possibility, for example, that the Bar Council will have absolutely no involvement in the future appointment of members of the BSB’s board.

“There is also the possibility that, unless the BSB decides to consult the Bar Council on its budget plans, the Bar Council will have no input into this process either. And this of course decides the level of the practising certificate fee.

“These, and other proposals would in my opinion be unhelpful both to regulator and regulated if brought into being.”

Mr Atkins said that, whilst the BSB’s mission was to protect the public and consumer interest, “we do rely on them having an understanding of the profession and the challenges it faces”.

The LSB’s new rules risked undermining this, he argued, and could lead to disputes “that simply do not exist at the moment”, as well as an increase in the costs to the Bar.

He questioned whether there was evidence that the proposals were needed, or for the implication in the consultation that the public did not have confidence in legal services provided by the Bar.

“In my opinion, there is a need for those who constantly peddle the dogma of regulatory independence to understand what the Bar is and does and how we pride ourselves on our professionalism.

“The Bar has never been against the high-quality regulation of legal services, but we are unshakeably firm in our view that over-regulation is not a good thing.

“We must fight hard to make the case that we do not need further regulation, further red tape or a super regulator.”

This was why the Bar Council was asking the LSB to prove its assertion that the proposals would lead to cost savings, he added: “We have seen no evidence for this.”

He also urged barrister to respond to the consultation. “It will be no use complaining if you do not respond and you find that we have sleep walked into a nightmare scenario.”

Mr Atkins is leader of the Midland Circuit and practises from St Philips chambers in Birmingham and 4KBW in London. He specialises in regulatory and serious criminal matters.

In a wide-ranging speech on the issues facing the Bar, he said one of his main aims for 2019 was “to raise the level of understanding across the Bar as to what exactly the Bar Council is and does”.

He continued: “The Bar Council is not a bogey man that simply seeks to charge members of the Bar more and more to allow them to practise. It is not some foreign body that is there to make life difficult for practising barristers.

“We are here to support the Bar and we will continue to do precisely that during my tenure.”

The other big issues for the Bar Council to grapple with over the coming year were the state of the justice system, Brexit, court reform, equality and diversity, and practising as a barrister.

Mr Atkins concluded that his overarching aim was “to see a happier Bar”.

He said: “I appreciate that some may see that statement as being naïve and some might claim that it is offensive given the problems that the Bar and, in particular, the publicly funded Bar face.

“But I am not naïve, and I am not seeking to cause offence. This year will be 30 years since I was called to the Bar. I have not lived in an ivory tower and I am not blind to the numerous problems that the Bar has faced recently and will continue to face.

“But, if we are successful in tackling the matters I have outlined, this will in my opinion go some way to achieving a happier Bar.”

*This article first appeared on Legal Futures

Regulators “must guard against misuse of lawtech”

Artificial intelligence-backed lawtech has the potential to improve access to justice but also carries a danger that automating law will be used negatively, meaning regulators will have to step in, a global innovation charity has warned.

Nesta, which is working with the Solicitors Regulation Authority (SRA) to identify and support transformative AI legal technology, backed by a £700,000 government grant, said the lesson of technology developments elsewhere was that such innovations had a “dark side”.

For instance, the advent of cheap or free and anonymous internet communications had also brought with it a “toxic social media culture of abuse”.

The authors, Olivier Usher and Chris Gorst, both senior members of Nesta’s challenge prize centre, which oversees rewards for innovation, wrote in a blog : “When speech is free, all speech flourishes, including hate speech.”

From a lawtech point of view, they wrote, it could both enable access to justice but also create a “less palatable future”.

They said it could involve “the silencing of #MeToo activists with an avalanche of libel lawsuits; honest tradesmen ripped off by an automatic lawsuit over every invoice; online bullies spinning up endless court cases against their enemies in order to intimidate them into submission; patent trolls automating their hunt for genuinely innovative companies to exploit”.

However, speaking to Legal Futures, the authors said they were hopeful that the practice of law, as a highly regulated profession, might escape the arrival of negative elements, if regulators were vigilant and willing to be proactive if necessary.

Mr Usher said the risk of lawtech being used for ill would only come about if “the regulators completely wash their hands” of acting to stop it.

He highlighted the importance of ‘safe spaces’ for innovation to be tested, such as the Financial Conduct Authority’s (FCA) regulatory sandbox.

Earlier this year the SRA announced it would simplify its system for granting waivers to regulations in order to promote innovation, and formalise its ‘innovation space’ initiative, which is comparable to the FCA’s sandbox.

The space includes a guarantee that the SRA will take no enforcement action if innovations bring a firm into technical breach of its rules.

Mr Gorst said it was already possible to launch cases to harass people and regulators had it in mind when setting conduct rules. “I wonder how new a problem this would be by virtue of the fact it could be somewhat more automated?” he asked.

He continued: “The really exciting opportunity is… technology can help people navigate their way through the system, help them avoid needing recourse to law where it’s not really necessary, help them with a guided pathway through the system… [and help] them to represent themselves in legal situations where the cost of a lawyer might be prohibitive.

“We think the space of opportunity seems really large, but we should also be mindful of the risks, and regulators need to be mindful of the risks as well.”

It is understood the SRA is in the process of tendering for its AI project.

*This article first appeared on Legal Futures.

Asia Pacific lawyers could benefit from no-deal Brexit

If the UK exits the EU without a deal, there would be an end to the current preferential treatment of EU lawyers wishing to practise in England & Wales.

The Solicitors Regulation Authority says that the UK Government has made clear that this would be the case if the UK moves to WTO rules, ending the current legislation which exempts EU lawyers from having to sit the QLTS exam for qualification.

But the SRA is now consulting on a change that would benefit lawyers from outside the EU, by allowing lawyers worldwide to apply for exemption from the QLTS. Exemptions would continue to be granted on a case-by-case basis.

“Whatever the outcome of the negotiations it is important that we are prepared to make sure the transition to any new arrangements takes place seamlessly, with as little disruption as possible to the profession or public. Addressing how non-UK solicitors will qualify in England and Wales in the event a no-deal Brexit is part of that,” said Paul Philip, SRA Chief Executive.

The proposals are only relevant in the event of a no-deal Brexit.

Dentons makes pledge to lawyer wellbeing initiative
Dentons has joined an initiative aimed at driving better mental health and wellbeing in the legal profession.

The global firm has signed up to a pledge designed to address the profession’s troubling rates of alcohol and other substance-use disorders, as well as mental health issues. It’s been created by a working group of the American Bar Association.

“We applaud the ABA for taking this important step to address the challenges of the profession,” said Mike McNamara, Dentons US CEO. “We all know a lawyer or professional who has battled either substance abuse or mental health issues. As legal employers we have an obligation to take concrete steps to improve support for those who are struggling and to foster a healthy work environment.”

Last year, Dentons began offering information and webinars to help lawyers with topics including work-life balance and managing holiday stress; and the firm is currently running a pilot program offering an onsite wellness coach to help address professional or personal issues.

RPC eyes Asia Pacific growth with new HK office
International firm RPC is moving its Hong Kong office to larger premises as it looks to future growth in the region.

The move to one of the city’s most impressive new business hubs – Taikoo Place – gives the firm 50% more space than its current Hong Kong location.

“We have taken a space that will support our plans for further expansion and development in Hong Kong in the coming years. We are excited to be a part of this new development and to be at the heart of a rapidly developing business community. We see this move as integral to achieving our projected growth plans,” commented Antony Sassi, RPC Managing Partner Asia

This article first appeared on Australasian Lawyer. 

UK Government issues guidance note for a no-deal Brexit result

A scenario in which the UK leaves the EU without agreement (a ‘no deal’ scenario) remains unlikely given the mutual interests of the UK and the EU in securing a negotiated outcome.

Negotiations are progressing well and both we and the EU continue to work hard to seek a positive deal. However, it’s our duty as a responsible government to prepare for all eventualities, including ‘no deal’, until we can be certain of the outcome of those negotiations.

For two years, the government has been implementing a significant programme of work to ensure the UK will be ready from day 1 in all scenarios, including a potential ‘no deal’ outcome in March 2019.

It has always been the case that as we get nearer to March 2019, preparations for a no deal scenario would have to be accelerated. Such an acceleration does not reflect an increased likelihood of a ‘no deal’ outcome. Rather it is about ensuring our plans are in place in the unlikely scenario that they need to be relied upon.

This series of technical notices sets out information to allow businesses and citizens to understand what they would need to do in a ‘no deal’ scenario, so they can make informed plans and preparations.

This guidance is part of that series.

Also included is an overarching framing notice explaining the government’s overarching approach to preparing the UK for this outcome in order to minimise disruption and ensure a smooth and orderly exit in all scenarios.

We are working with the devolved administrations on technical notices and we will continue to do so as plans develop.

Full UK Government Guidance Note Here

Solicitors Regulation Authority (SRA) Response

Bar Standards Board (BSB) Response 

 

Governance Gone Wrong: Examining Self-Regulation of the Legal Profession

England and Australia have abandoned self-regulation of the legal profession yet Canadian law societies continue to function on this basis. This article argues that the self-regulatory model on which the Law Society of Ontario (the “LSO”) operates represents an inadequate form of governance in terms of the accountability it yields. When compared to other organizations, including law societies in other common law jurisdictions as well as corporations, the weaknesses in the LSO’s governance model are conspicuous. This article advocates replacing self-regulation in Ontario’s legal profession with a co-regulatory regime. In the absence of such an extensive reform, this article puts forward recommendations for changes to the current bencher model of governance on which the LSO is based including the implementation of bencher expertise requirements and a duty of loyalty and a duty of care to the public.

Paper Available Here

Anita Anand, University of Toronto – Faculty of Law

Solicitors Regulation Authority urges caution over new legal business partners in the UK

Solicitors have been urged to make sure that the credentials of people approaching their firm to offer business expansion are genuine.

We have received two recent reports of firms branching out into different work areas, but the reality was that new colleagues had infiltrated the firm to defraud clients. The incidents have led to potential losses of more than £7 million for those involved.

The fraudsters approached law firms offering to expand the services they offered and gave bogus credentials to support their supposed expertise. However, once appointed and away from supervision, they had access to client money which appears to have been stolen.

Small firms are targeted. This may be because the fraudsters think their apparent offers of assistance or new work will be more readily accepted and that principals in those firms may not have been able to keep up to speed with warnings such as this one.

Solicitors have a duty to run their businesses in accordance with “sound financial and risk management processes” to protect their clients’ money and assets. Reports of infiltration highlight the need for the profession to make sure that it carries out proper due diligence on those seeking to join a firm.

There is also an obligation for solicitors to provide a proper standard of service to their clients. Taking on new staff for areas where managers do not have the relevant expertise could mean they might not be properly supervising employees.

Paul Philip, SRA Chief Executive, said: “Many law firms handle large amounts of money, making them an attractive target for fraudsters.

“We know that most firms have strong systems in place to make sure they are employing the right people, as well as protections to make sure staff are properly supervised and money in the client account stays safe.

“But these recent cases show that there is no room for complacency and that undertaking careful due diligence for any potential employees is essential. Leaving the door open for fraud is damaging to both the firm and public trust in solicitors.”

Read Full Article Here