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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

Regulating Law Firms from the Inside: The Role of Compliance Officers for Legal Practice in England and Wales

Following the Legal Services Act 2007, which permitted the delivery of legal services through Alternative Business Structures (ABS), the Solicitors Regulation Authority required all regulated legal service firms to appoint Compliance Officers for Legal Practice (COLPs). COLPs are charged with taking reasonable steps to ensure that firms comply with their obligations, which entails interpreting what outcomes‐focused regulation (OFR) requires of the firm. Yet despite their importance, little is known about how compliance roles operate within legal service firms. We addressed this gap through a series of qualitative interviews that explored COLPs’ views of their roles, their attitudes to regulation, in particular to OFR, and to achieving compliance. We found that COLPs are a key regulatory mechanism in the context of firm‐based regulation and OFR and have a critical role to play in protecting and promoting professional values in both ABS and non‐ABS entities.

Full Paper Available Here

Sundeep Aulakh, University of Leeds – Work and Employment Relations & Joan Loughrey, University of Leeds

Regulation by Blockchain: The Emerging Battle for Supremacy between the Code of Law and Code as Law

Many advocates of distributed ledger technologies (including blockchain) claim that these technologies provide the foundations for an organisational form that will enable individuals to transact with each other free from the travails of conventional law, thus offering the promise of grassroots democratic governance without the need for third party intermediaries. But does the assumption that blockchain systems will operate beyond the reach of conventional law withstand critical scrutiny? This is the question which this paper investigates, by examining the intersection and interactions between conventional law promulgated and enforced by national legal systems (ie the ‘code of law’) and the internal rules of blockchain systems which take the form of executable software code and cryptographic algorithms via a distributed computing network (‘code as law’). It identifies three ways in which the code of law may interact with code as law, based primarily on the intended motives and purposes of those engaged in activities in developing, maintaining or undertaking transactions upon the network, referring to the use of blockchain: (a) with the express intention of evading the substantive limits of the law (‘hostile evasion’); (b) to complement and/or supplement conventional law with the aim of streamlining or enhancing compliance with agreed standards (‘efficient alignment’); and (c) to co-ordinate the actions of multiple participants via blockchain to avoid the procedural inefficiencies and complexities associated with the legal process, including the transaction, monitoring and agency costs associated with conventional law (‘alleviating transactional friction’). These different classes of case are likely to generate different dynamic interactions between the blockchain code and conventional legal systems, which I describe respectively as ‘cat and mouse’, the ‘joys of (patriarchial) marriage’ and ‘uneasy coexistence and mutual suspicion’ respectively.

I argue that the emerging response of conventional law in the first two kinds of case can be readily anticipated and understood. While the first class of case threatens to undermine the rule of law and which national legal systems can be expected to take positive action to safeguard, the second class of case does precisely the opposite: reinforcing the primacy and sovereignty of national law, and hence blockchain applications falling within this class are likely to be regarded as a welcome development by conventional legal systems. But it is the law’s response to the third category of applications (‘alleviating transactional friction’) that is the most difficult to predict, due to the normative ambiguity of these applications. Whether the conventional law ought to intervene to oversee these systems raises fundamental tensions between the sovereignty of law in modern legal systems, including the universal coverage of the rule of law and its guarantee of security (which includes, but extends beyond, providing transactional security), on the one hand, and respect for individual autonomy and freedom of association on the other. I argue that, to the extent that the exercise of agency and freedom of association by a group of individuals results in adverse consequences for third parties and the broader public, state intervention via the code of law is normatively justified. Accordingly, the critical challenge is to identify the conditions and circumstances in which this threshold is reached in concrete contexts in order to justify the assertion of supremacy by conventional law over activities taking place on and arising out of blockchain systems.

Full Report Available Here

Karen Yeung, Interdisciplinary Professorial Fellow in Law, Ethics & Informatics, University of Birmingham

Online and Automated Dispute Resolution in New Zealand: A Law Reform and Regulation Perspective

This paper investigates the issue of online and automated dispute resolution from a law reform and regulatory perspective. It argues the growing prevalence and capabilities of online dispute resolution has created both opportunities and risks for consumers and for dispute resolution policy in New Zealand. In particular, the significant risk of harm occurring if the technology is permitted to develop without any regulation or governance now warrants proactive governmental intervention to provide a protective legal framework. A proposed regulatory model is put forward, which encompasses both direct legal and indirect methods of regulation.

Full Paper Available Here

Charlotte Austin, Victoria University of Wellington, Faculty of Law

Regulating Bot Speech

Abstract:

We live in a world of artificial speakers with real impact. Chat bots befriend children in order to acquire marketing data. Robotic telemarketers laugh at the suggestion that they are not real. Russian social media bots foment sufficient political strife to merit a spotlight in Congressional hearings. Concerns over bot speech have led prominent figures in technology to call for regulation. Legislators have begun to heed these calls, drafting laws that would require online bots to clearly indicate that they are not human. This essay is the first to consider how efforts to regulate bot speech might fare under the First Amendment. At first blush, requiring a bot to self-disclose raises little in the way of free speech concerns—it does not censor speech per se, nor does it unmask the identity of the person behind the automated account. A deeper analysis, however, reveals several areas of First Amendment tension that any bot disclosure law would need to address. These include a poor fit between the disclosure requirement and the harms such a law would aim to address, the potential for unmasking anonymous speakers in the enforcement process, and the creation of a scaffolding for censorship by private actors and other governments. We offer recommendations for legislators who seek respond to the real risks autonomous speakers pose while avoiding these pitfalls.

Full Paper Available Here

Ryan Calo, University of Washington, Stanford Law School, Yale Law School; Madeline Lamo, University of Washington

Legal Deserts: a Multi-State Perspective on Rural Access to Justice

Abstract:

Rural America faces an increasingly dire access to justice crisis, which serves to exacerbate the already disproportionate share of social problems afflicting rural areas. One critical aspect of that crisis is the dearth of information and research regarding the extent of the problem and its impacts. This article begins to address that gap by providing surveys of rural access to justice in six geographically, demographically, and economically varied states: California, Georgia, Maine, Minnesota, South Dakota, and Wisconsin. In addition to providing insights about the distinct rural challenges confronting each of these states, the legal resources available, and existing policy responses, the article explores common themes that emerge through this multi-state lens, thus framing a richer, broader discussion of rural access to justice, with particular attention to the rural attorney shortage.

Written for a special issue on “Revitalizing Rural,” the article ultimately proposes a two-step approach toward closing the rural justice gap. First, although the information presented here provides a solid foundation, a critical need remains for ongoing careful and thoughtful study of the legal needs and lack of legal resources in rural areas. Second, the unique institutional, structural, and demographic characteristics of rural areas will require tailored, innovative, and data-driven solutions to match appropriate legal services with needs. We advocate a re-thinking of the roles of many justice system stakeholders, with particular attention to the critical steps that legal educators should take to bridge the justice gap. Our hope is that this article will inform and expand access-to-justice conversations so that they more intentionally address the legal needs of the vast rural reaches of our nation, thus furthering the ultimate goal of realizing access to justice for all Americans.

Read Full Paper Here

Lisa R. Pruitt University of California, Davis – School of LawAmanda L. Kool Harvard University, Law School – Faculty, Transactional Law ClinicsLauren Sudeall Lucas Georgia State University College of LawMichele Statz University of Minnesota – Duluth – School of Medicine; Danielle M. Conway University of Maine School of Law; and Hannah Haksgaard University of South Dakota School of Law.

Solicitors Regulation Authority publishes research on trainee salaries

The SRA has released a new impact assessment looking at the deregulation of the prescribed SRA minimum salary for trainees. In 2014, the SRA removed the minimum salary levels for trainee solicitors. The previous levels of prescribed salary were replaced with a requirement for trainees to be paid at least the national minimum or living wage, with the idea that salaries should be set by market forces and the profession itself and that this could help increase the number of training contracts and access to the profession.

In particular the SRA wanted to find out about the impact on the distribution of salary levels of trainee solicitors and the association between salary and diversity and equality characteristics.

What was done?

  • Analysed data on 33,000 trainee solicitors, who started their training between January 2011 and December 2016;
  • Analysed the data of firms employing these trainees;
  • Assessed the relationship between trainees’ salary with the policy change, their diversity characteristics and firms who offer the training contracts;
  • Carried out online surveys aimed at employers, trainee solicitors and students, paralegals and others working in the legal sector, to seek their views on the impact, if any, of the removal of a prescribed minimum trainee salary.

Key Findings

Since the removal of the minimum trainee salary:

  • There has been an increase in the number of training contracts
  • Trainee pay has dropped, on average by £560 per year. The main cause of this has been a drop in the salary of the lowest earning trainees.
  • The majority of trainees (75%) and firms (82%) felt that the change had not had an impact (either positive or negative).
  • Trainees are now significantly more positive about salary levels than they were in 2012
  • The average pay gap between different ethnic groups has reduced significantly. This is mainly as a result of reductions in the salaries of White trainees. Black and Asian trainees are still generally paid less, as they are more likely to work in firms that pay less, such as sole practices and firms specialising in criminal, litigation or real estate work.
  • The average gender pay gap has increased slightly. Even taking account other factors such as the type of firm worked in, female trainees are still on average earning slightly less than males. The data did not provide evidence as to why this might be the case.

Read more about the SRA’s findings: Download Report

Understanding consumer experiences of conveyancing legal services

Conveyancing is one of the most common legal services people use in their lifetime, with more than one million homes bought and sold every year in the UK.  However, there are some concerns about the conduct of some solicitors and the quality of service they are providing, with high proportions of insurance claims and complaints to the Legal Ombudsman relating to conveyancing. There are also increasing risks for users of conveyancing services, as technology enables cybercrime and mortgage fraud.

The UK Government has acknowledged these problems and has committed to reforming the conveyancing process, to make it cheaper, faster and less stressful. The Competition and Markets Authority (CMA) also has concerns that poor transparency about price, service and quality is having a negative impact on consumer choice and competition.

Summary

The Solicitors Regulation Authority (SRA) commissioned independent research involving 1,501 people who had bought or sold a property during the previous two years. The research explored people’s experiences at each stage of the process, from how they found and chose their solicitor and their satisfaction with the service, to how they thought technology could improve services in the future.

The research found that 76 percent of legal service users were satisfied with the service they received from their conveyancing solicitor. However, it has also identified several areas where improvements could be made.

One key area for improvement the research highlighted was the need to provide people with better information throughout the conveyancing legal process, from the point when they are shopping around all the way through to when the transaction is completed. This information is particularly important for first time buyers and sellers, and for transactions that need specific detailed advice, such as leasehold purchases.

Key findings

Finding and choosing their solicitor

The SRA found there is an appetite for shopping around, including using comparison websites, particularly among first-time buyers and sellers. But there is a lack of information on price and description of services on firm websites, as well as limited information on regulation and consumer protections.

This is currently obstructing people’s ability to fully research and compare providers, so informed decision making difficult.

  • 55% of people rely on recommendations to choose their solicitor, the most common being from estate agents (27%) and friends, family or colleagues (25%).
  • 40% of all people surveyed were aware of comparison websites for legal services providers. Of these, approximately 1 in 3 used one to compare conveyancing providers.
  • First-time buyers and sellers were more likely to have found their solicitor through recommendation (64% compared to 51% with previous experience).
  • Cost (87%) and being a conveyancing specialist (81%) were the most important factors that influenced which solicitor people chose.

Previous SRA research into price transparency found that the vast majority of firms do not advertise price information, and only 15 percent of people were able to obtain prices without having to contact a solicitor directly.

Information and communication

  • One in five people did not think their solicitor provided a clear explanation of the legal process, a figure that rises to two out of five among first time buyers and sellers.
  • One out of three of people did not remember receiving information on how to complain.
  • One out of five of people who had bought a leasehold property did not remember being provided with any information on the length of lease, service charges and other payments, such as ground rent.

Quality of service

  • Over three quarters of people were ‘very satisfied’ (46%) or ‘quite satisfied’ (30%) with their solicitor’s service. This compared with 14% who were dissatisfied.
  • People were satisfied with the service because of speed and efficiency (25%) and because their solicitor was easy to contact and kept them updated (14%).
  • People were dissatisfied because their solicitor was slow and inefficient (37%), communicated poorly and did not keep them updated (22%) or made mistakes (17%). Mistakes typically related to drafting of contracts or errors in the property’s title.

Complaints and redress

  • 9% of all survey respondents made a complaint to the firm about their service. This equates to just over one-quarter (26%) of respondents who said they were dissatisfied. This low rate may be linked to the fact that less than a third of people recalled being given information on how to complain in the first place.
  • First time buyers and sellers were more likely to complain (20% compared to 5% with previous experience).
  • Mistakes made by the solicitor in legal documents or invoices and poor customer service, particularly communication, were the main reasons for complaints.
  • Three quarters of people received a positive outcome to their complaint from their solicitor, including committing to progress the work (27%), an explanation to allay concerns (24%) and an apology (23%).
  • 14% of those who made a complaint reported that they did not receive a response. This issue was also identified in our previous research into solicitors’ first tier complaints processes, where 20% of complainants reported not receiving a response.
  • People demonstrated poor understanding of regulation in the legal services market. Some said they were unaware if their solicitor was regulated when they chose them.

Opportunities and risk of digitisation

  • People recognised the benefits of digitisation and automation for conveyancing transactions and were open to the prospect of more technology being introduced, suggesting it could ‘de-mystify’ the process for first timers.
  • However, they also identified several risks associated with this continued move towards digitisation, including cybercrime and fraud. Information security and protecting client money are two of the SRA’s priority risks for 2017/18.

Download the full report

The legal needs of small businesses 2013-2017

The Legal Services Board (LSB) has published its third research report focusing on the legal needs of small businesses and looking at how their views have changed – and the legal services market has responded – since similar research was conducted in 2013 and in 2015. It is the largest ever survey of small firms’ interactions with the legal sector drawing on over 10,000 responses.

This research tracks how an individual or business responds when faced with a problem that can be resolved using legal processes.

Commenting on the report, Dr Helen Phillips, Chair of the LSB, said:

While our research suggests the impact of legal problems on small businesses has decreased the estimated annual cost to the UK economy of their legal problems is still very substantial, at roughly £40bn. More worryingly 20% of businesses reported health impacts for staff from these legal problems, which could affect more than 1m individuals.

There still remains a perception of legal services as expensive – whether or not that perception is accurate – resulting in many businesses either ignoring legal issues or trying to handle them alone. It is hoped that work by regulators and others to implement the CMA recommendations on improving transparency should help address these issues over time.

There are so many opportunities for legal service providers to expand their business if they can tailor their services to what this group of consumers need, raise awareness of their services and overcome perceptions of high cost.

Key findings from the research include:

Business problems have declined in incidence

  • Around a third of small businesses had a legal problem in the preceding 12 months. This represents a fall from 36 percent in 2013 to 31%
  • The most frequent issues across the three waves of the survey are:
    • late or non-payment for goods or services provided
    • goods and services not as described, and
    • liability for tax owed.
  • Around half of small businesses reporting a legal issue said it had a negative impact
  • Total annual losses to small businesses due to legal problems is estimated at £40bn, and over 1 million individuals in small businesses suffered ill health.

Engagement with legal service providers remains limited

  • There has been a significant increase in the proportion of small businesses doing nothing when experiencing a problem (10%)
  • proportions adopting strategies including handling alone (50%) or using an advisor (24%) have changed little between 2013 and 2017
  • Less than one in 10 employed in-house lawyers or had a retainer. When advice was sought, accountants were consulted more often than lawyers
  • For those that did use a lawyer, 22% shopped around to find a provider. 50% of those who shopped around found it easy to compare different providers.

Views on cost effectiveness of lawyers have not improved

  • Just 11% of small businesses agreed that lawyers provide a cost effective means to resolve legal issues – this is down from 14% in 2015
  • Satisfaction that law and regulation provide a fair trading environment increased from 30% in 2013 to 44% in 2017.

See the full report

Prices of Individual Consumer Legal Services 2017: LSB research

The Legal Services Board (England and Wales) has published research which monitors the average prices that consumers pay for a number of common legal services.  Understanding changes in prices over time helps determine whether there have been any improvements in the extent of competition between providers, and affordability and access to justice for consumers. It provides unique insight for those with an interest in these areas within the legal services market.

For the first time this research enabled an analysis of changes over time of the average prices that consumers pay for 15 services covering conveyancing, divorce, wills, lasting power of attorney, probate, and estate administration. This builds on the survey published in 2016.

Findings include:

  • There is a continued significant variation in the price that consumers pay for the same service, so it pays to shop around.
  • Fixed fees continue to be cheaper than other forms of charging in all three market segments
  • There has been no change in the proportion of firms displaying prices on their website between 2015 and 2017 (18%), pointing to a continued lack of information to enable consumers to easily shop around.
  • Prices have changed in six of the 15 scenarios – rising in three divorce scenarios, and falling in two conveyancing scenarios, and in the Lasting Power of Attorney scenario.

This new information will feed into the LSB’s ongoing market evaluation, which seeks to establish the impact of reforms on the legal sector market. Moreover, the LSB believe the findings of this second wave of the research reinforce the Competition and Markets Authority’s conclusions that competition in the sector is not working well and should assist regulators in shaping plans to improve transparency in the market.

Read the research in full