Conveyancing regulator raises concerns over cost transparency and leasehold awareness

Conveyancing regulator raises concerns over cost transparency and leasehold awareness

The Solicitors Regulatory Authority (SRA) has raised several concerns about the conduct of conveyancers, including price transparency and failing to inform clients about leasehold properties.

 

It also referred six cases to its disciplinary process for a range of offenses including anti-money laundering (AML) failures and not identifying profit mark-ups on services.

The SRA Residential Conveyancing Thematic Review of the sector found in 23 per cent of leasehold purchases, firms failed to explain the difference between freehold and leasehold properties.

Instead, some firms were relying on client knowledge or information provided by estate agents.

The SRA said this was “of particular concern, as leasehold purchasers can find themselves liable for fast rising charges, such as ground rents.”

“In the long term, such payments may not only become unaffordable, but they may make it very difficult to sell the lease on,” it added.

 

Missing costs and mark-ups

The regulator also found that in one third of cases reviewed, the initial quotes did not include fees for additional work which should have been reasonably anticipated at the outset.

And 37 per cent of firms failed to be transparent about the mark-ups they added to the fee a bank charged for making a telegraphic transfer.

In some cases, this led to clients being charged as much as ten times the fee set by the bank.

Typically, the missing costs related to processing bank transfers, accessing online portals, mortgage administration fees, electronic ID checks or administering gifted deposits.

“Not only can this leave buyers having to pay unexpected costs, but there is a concern that some firms may be providing unrealistic initial quotes in order to win business,” the SRA said.

 

Disciplinary action

As a result of the review six cases were into the SRAs internal disciplinary processes. These cases concerned:

  • anti-money laundering issues arising from a failure to investigate source of wealth and inadequate client due diligence documentation;
  • listing telegraphic transfer fees as a disbursement rather than a profit cost (five firms);
  • the client care letter not referring to the client’s right to complain to LeO;
  • charging VAT on disbursements;
  • authorisation issues.

However, despite the issues raised, the SRA was generally content with its review of 40 firms and 80 cases, noting most solicitors were doing what they should.

Given the relatively small number of firms visited, it emphasised that the report was intended to be qualitative and aimed to increase understanding of the concerns and issues that have been raised.

Firms generally showed they had systems and processes in place to provide a proper service to clients.

And the SRA found no evidence of firms inflating their fees after the initial quote without explaining the reason for the extra costs.

 

Disappointing examples

SRA chairwoman Anna Bradley said: “It is disappointing to see examples of poor practice in conveyancing, which is so important to so many people.

“While many law firms and solicitors provide a good service and act in their clients’ best interests, those who do not let down not only their clients, but the profession as whole.

“People should be able to rely on their solicitors to be open about what their services will cost, and to explain the potential financial and legal implications of any transaction.

“When solicitors fail to do this, for example in relation to long term leasehold charges, they may be leaving their clients open to ever increasing and potentially unaffordable financial liabilities.”

Bradley added that the regulator will now be looking closely at how firms are publishing their pricing for conveyancing and that it will be sharing this report with the government as it considers leasehold reform.

 

Owain Thomas is features and contributing editor of Mortgage Solutions and editor of Specialist Lending Solutions.
He also has experience in the protection, pensions, workplace benefits and HR areas.
Owain has won two Headline Money Awards and the Protection Review’s Journalist of the Year award.

SOURCE: mortgagesolutions

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