Conveyancing is dead, long live conveyancing?

According to the Law Society Gazette this week, the impact of Lloyds volume based threshold for membership on their conveyancing panel has resulted in approx 2,500 firms being dropped – that’s approximately 1/3 of all firms dealing with conveyancing.

So, another nail in the coffin of high street conveyancing. Removal from major lenders’ panels, effectively means the end of the road for any conveyancing department. The position is not set to improve in 2011. We are now only 13 months away from ABS day.

However, we are where we are. And where that is, is at a significant crossroads for the delivery of conveyancing services in England and Wales. The relevant question for law firms to be asking is not “where did it all go wrong” but “where is the future”?

On the positive side, conveyancing (or at least elements of it), remains a “reserved activity”, and this, certainly in the medium term, is to the benefit of lawyers.

The flip side is that conveyancing continues to be a process that no one actually wants. Seller, buyers, estate agents, mortgage brokers would all for the most part be delighted if the three month “delay” which they currently have to endure before the deal is completed could be stripped out, or at the very least streamlined.

Conveyancing is a prime example of a practice area which is failing to deliver what clients want, and which is an obvious target for a redesign. This kind of creative, commercial approach to legal services will be expedited by the introduction of ABSs  – who will look to strip out any element of unnecessary process, improve customer service and maximise profit. One way to achieve this, relatively simply, in domestic conveyancing transactions is to embrace an increased role for indemnity insurance products.

This is not a new idea. In the volume game, indemnity insurance already plays a key role in the majority of transactions; particularly for remortgage; with many lenders happily retaining the entire process in-house. And let’s be honest, there are few conveyancing transactions these days which do not rely on indemnity insurance for one thing or another, whether its defective title, search indemnity, breach of covenant, chancel repair. Shifting to an insurance based conveyancing process and stripping out the legal investigation work from the transaction is just a matter of joining up the dots with a “cover-all” policy. And these types of policies are already available and accessible.

There still be a role for the lawyers to play –drafting the paperwork and exchanging contracts. In addition, there will still be the need for the lawyers to manage the financial elements of the transaction: and of course someone still has to bear the responsibility of stopping mortgage fraud with ID checks/AML processes.  There is a very real chance that conveyancing lawyers’ roles will transform more into that of escrow agents so far as the legal process is concerned.

Is all of this necessarily a bad thing? Conveyancing is underpaid, high risk, and quite often a thankless, stressful task; and has been ready for an overhaul for many years – HIPs was just scratching at the surface. Where legislation has failed, it is likely the market will step in and evolve the process.

So should we all pack up our conveyancing handbook and throw in the towel? None of it! For those of you who are interested, it does mean opportunity. There is no reason why conveyancers can’t be offering this type service today – most obviously starting with cash purchasers. 24 hours completions are feasible. It is a significant opportunity to be developing a product which clients actually want, and perhaps more importantly, which referrers such as estate agents will be very interested in hearing about.

This commoditised conveyancing model could well deliver much higher profit margins than the current process, together with reduced risk, and lower disbursement costs for the client. And as the SRA consider relaxing the rules on acting for buyer and seller there is the opportunity to act for both sides, who will be attracted to the idea of not having their “fast-track” transaction unnecessarily delayed by a third party.

If you are interested into developing these kind of conveyancing products for your firm, here’s a few pointers in scoping and delivering the project:
– Research the appetite. Speak to your referrers, and get your clients’ input. Second guessing what your customers want is never good practice. Listen to their views and gear your product accordingly. For instance, is it likely that clients will pay a premium for a faster process, or do you work in a price sensitive market?
– Research your insurance providers. A thorough due diligence process is required; and a full understanding of the elements the policy will cover.
– Document and understand the risks.
– Understand the likely performance and revenue you may expect to achieve – set targets and track performance with relevant MI.
– Design your process, documenting in detail how it will differ from you existing systems
– Amend your T&Cs. Ensure that your clients are fully informed about what you will and won’t be doing during the transaction, and precisely what risks are covered by the policy.
– Choose your target audience. As we have discussed, the most obvious starting point is for cash purchasers or investor clients.
– Amend your workflows and case management systems to accommodate the new product.
– Train your staff.
– Market your product (ensuring you’re also maximising potential revenue from cross selling other relevant products).

This kind of approach may be distasteful to some, who will argue that diluting the legal content of the conveyancing process is shooting the profession in the foot. But it is important to remember two key points. Firstly, we are not working in a perfect system at the moment. It is flawed on many levels, and certainly inconsistent. Secondly, to put it bluntly, if you don’t do it, someone else will.

In all honesty, no one really knows what the future holds for the legal profession. This is just one possible theory of evolution. One thing is certain though, those who innovate and have a creative approach to the delivery of legal services will flourish. Standing still is not an option.

What do you think? How is your firms making conveyancing work today? Have you been impacted by the Lloyd’s cull? Where do you think the future lies?

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