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Legal News | 13.02.18

Are you getting what you paid for?

If you are lucky enough to receive a £100 voucher, you might be rather disappointed to be told by the shop that you can only have £70 worth of goods in exchange. Quite rightly, you want what has been paid for!

The same is true for legal services. However increasingly, people paying for conveyancing services may well not be getting what they have paid good money for.

The culprit is a little known transaction called a ‘referral fee’, where a solicitor pays a percentage of their fee to an intermediary who has directed work their way. In many areas of law, referral fees are prohibited, as they understandably threaten a solicitor’s impartiality. But at present they are not outlawed in residential property.

So what is the problem? Well, if you decide to instruct a solicitor who has a referral fee arrangement with (for instance) an estate agent, the fee that you pay to your solicitor will be split between the solicitor and the agent. We have heard of referral payments being as high as 40% of the solicitor’s total fee. From a client’s perspective, this is wasted money – as it will end up in the agent’s pocket – for no additional service. You may well find that an £850 legal fee will only buy you £550 of legal services. This at a time when your solicitor should be dedicating more time than ever to each conveyance, in the face of increased fraud threats.

The only effective way for any solicitors firm to make a profit this way is to set up what is known as a ‘conveyancing factory’, where non-qualified file handlers work on bulk transactions under a solicitor’s general supervision. It is a very different level of service than that given by Wansbroughs, but one which can still be expensive for a client when you build in a referral fee. And of course, if a busy ‘conveyancer’ needs to prioritise a large workload, where will they place those files where they are only receiving 60% of the fee?

Added to that is the question of impartiality; can a conveyancer truly act in the best interests of a house buyer if they have a financial arrangement with the selling agent?

Wansbroughs do not pay referral fees. We act for our clients in their best interests only.


Posted By Our Residential Property Team