Martin Niemölller 1940’s poem, “First They Came …” warned about the rise of the right-wing in Germany and started with the words; “First they came for the socialists and I did not speak out … because I was not a socialist. Then they came for the trade unionists, and I did not speak out … because I was not a trade unionist”. Suffice to say, the poem doesn’t end on a positive note.
It brings to mind the news that from this December, all lawyers (especially those doing conveyancing) must be totally transparent about the services they provide – documenting on their websites, the fees they charge, referral arrangements and the profile of the people actually doing the work. This should strike a warning note to the entire property industry.
So what happened?
The people behind this change are the Competition and Markets Authority (CMA), who reported a couple of years ago that consumers were often confused on how to select their lawyers. The phrase, (or a rough translation of) “no excrement, Dr Watson’s detective friend” springs to mind. In the last couple of months the key legal regulators, the Solicitors Regulatory Authority (SRA) and the Council of Licensed Conveyancers (CLC) have published their requirements for how law firms will need to change.
However, the concern is that this is just the first step before further changes that could affect the entire property industry.
The Pricing Problem
The CMA investigation interpreted people’s complaints about poor service and undisclosed panel-management arrangements as “we need to know the price up front”. As any person who has ever sold anything knows, price is normally the first thing people ask about. We are very sceptical about those surveys that suggest most consumers select on service rather than price. Typically, when polled for the reason for picking a service, people will use any excuse rather than price, because frankly, it’s embarrassing. Admitting that you selected a provider because it was cheaper, well, it looks shallow. And it is.
We help prospective clients avoid making this embarrassing mistake by explaining what things can go wrong, how to avoid fraud, what it takes to give good communication and understanding the process. Not fees.
Once people start making decision on selecting their lawyer based on costs alone, then all the fuzzy “we’ll look after you” or “500 years’ of local experience” counts for nothing. Agents will start to find that consumers are less inclined to take their recommendation and go for the cheapest.
The Referral Fee Issue
Not only will lawyers’ fees need to be published, but a full breakdown of any referral arrangement will need to be disclosed. Whilst we’ve always been pragmatic about proportionate referral fees and see them as a valid marketing cost, for those agents who take advantage of the questionable levels of fees offered by the panel managers, this could spell trouble.
Let’s face it, if consumers knew they were paying middlemen just to pass on a client’s telephone number and email, they’d want to know how much it was and what they were doing for their money. Which, on the positive side, might start raising the question as to why these companies actually exist.
The Experience Issue
In addition to fees and referral arrangements, it will be necessary to give details of who is doing the work and their experience. Which sounds like a great idea because from the consumer’s point of view, a lawyer with a lot of experience is a good lawyer. Except, unfortunately, when it comes to lawyers, typically the inverse proportionality rule kicks in. Whilst inexperience can result in over-cautiousness and numerous enquiries being raised, over-experience (or “dinosaur-syndrome” as we like to call it) often results in arrogance and intransigence.
What consumers are really looking for, are the Goldilocks lawyers; those that know what a CML compliant lease is but is not burned-out by the pressure that is modern conveyancing. As Goldilocks would say – “just right”.
How will it be policed?
It is safe to assume that the regulators will not have time nor resources to police the scheme. However, they are in luck, because they have a support network already in place – the snitching skills of many solicitors would make a Gestapo officer blush. While we are very much in the “Snitches Get Stitches” club, we have first-hand experience of what some of these people are capable of. No doubt the anonymous “tips” line to the regulators will be burning hot from solicitors ratting out their competition.
What could this mean to agents?
The concern is that this change could mean a further swing to a purely priced-based Amazon-style approach to house buying and selling that will engulf all aspect of the process, including agents. Consumers will start selecting based purely on price, driving it down, resulting in even poorer quality services than we see today. In addition to driving down fees, the requirement to publish referral fees could start to impact this additional revenue stream that agents have come to rely on, a challenge many could do without.
As Niemölller warned at the end of his poem, “Then they came for me … and there was no one left to speak for me”.