A housing lawyer has said that telling agents they must disclose referral fees, including for the first time the actual amount and who will be paying them, does not solve the basic problems.
David Knapp, head of residential property at law firm Hart Brown, said that recent advice from the National Trading Standards Estate Agency Team does nothing to address the fact that referral fees are paid in the first place.
He said there are signs that the public is now becoming wise to referral fees – and that long-term, referral arrangements back-fire on agents.
He said that at his own firm, buyers who used conveyancers recommended to them by agents are now becoming sellers who prefer to find their own lawyers.
He said that this is on the basis of poor service they previously received, and the geographical location of the conveyancers.
Surrey-based Hart Brown, which does not pay referral fees to agents, said: “One agent close to some of our offices refers a firm of lawyers in Yorkshire, and another refers work to lawyers on the south coast.
“The savvy sellers are realising that they cannot just call in on spec to see their referred lawyer and that the only interest the agent has in making the referral is financial.
“Ironically, even this is fallacious as the agents lose the support of the local lawyer and the stream of business that a solicitor can provide to the local agent. Instead an independent agent will receive the work.
“Sellers are also beginning to avoid using the agents who dealt with the property when they purchased, as the referral of a poor, remote and uncommunicative lawyer all those years ago has tainted their view of the agent.”
* See what our columnist Peter Ambrose has to say on the subject in EYE tomorrow
Comments (9)
Referral fees do have a limited place in getting you into new geographical areas sadly, but you then overtake them with your own conveyancing quality and they fall away.
But Mr Knapp brings up a point – every town and city I have worked in, the corporate estate agents have essentially been shunned by local lawyers with any clients we could refer to them as it is too risky to do so, as they actively align with inferior quality by farming their clients (and buyers) out to inferior conveyancers who pay massive cash bungs. Their staff always apologise too, saying “we can’t work with you, we are directed to send conveyancing to these dreadful conveyancers out of county”.
When giving quotes, I now ask who the estate agent is, as certain agents have a direct impact on the level of fee we quote and the extra project managing we will have to do. Most conveyancers know which agents I mean. I am also considering how we warn clients that they may face a higher conveyancing charge when certain volume based conveyancers are acting on the opposite side to us.Why, because it dramatically adds to our work in how much chasing and correcting of their legal work.
Even the Ombudsman warns against them! https://www.lawgazette.co.uk/news/ombudsman-warns-of-dangers-from-conveyancing-factories/68706.article
Why does an Estate Agent feel they are entitled to a fee for making an introduction, even if you are introducing them to the best Solicitor in the UK, why would you NOT want to share that information with your client for free?
Having to disclose the agent’s referral fees is one step, but how can agents/conveyancing companies say or advertise that the referral fees are at no cost to the public? Who then is actually paying the cost of the referral fee?
The answers of course is that either the referral fee will form part of the fees paid by the public to the conveyancer or the conveyancer absorbs the costs and receives less then is under pressure to keep their service to a minimum.
The move to make referral fees transparent is only one part of the story. What about the hardsell applied to the public to use the agent’s preferred conveyancer? Lies told about local conveyancing firms, buyers told that the seller will only sell to people who use the seller’s conveyancer just so the agent can receive their referral fee, etc. In whose interest is it benefiting?
Ban referral fees. It will sink the large regionals and corporates oh and on-liners too.
Note for Mr Knapp. Yes some estate agents refer to solicitors/conveyancers because they pay referral fees, but the vast majority of estate agents refer to good quality local solicitors because they want a good job going. We refer to a couple of really good local solicitors, we referred to them before they started paying referral fees and we will refer to them after they stop paying referral fees. Our buyers who use them will also use them when they come to sell most likely as they are great companies and people. I would suggest sir that one of the reasons you dont get local agents referring to you, is that you arent very good
I completely agree with AthurHouse02. Note for Mr Knapp, I’m and agent in London and I stopped referring my my companies preferred solicitor who pays my office referral fee and used one who doesn’t. I bet you think I’m mad. Well I came across solicitor who in a chain who answers my calls, response to emails and very transparent, no BS. They are not box tickers, they come up with solutions to complex issues, willing to go the extra mile.
As an agent, I’m only paid on completion of a sale and that’s is my number priority ‘getting to exchange’. So any solicitor who will make that process as easy as possible is going in my contact book and I don’t need your extra £100+ but that’s just me.
Tell me, who has more to lose when a deal fall through. A solicitor is paid even when a deal falls through hence, they’ve become comfortable and lazy. Raising enquires days to exchange after 7 to 9 weeks of the agent running around and pushing the sale forward.
If Mr Brown and his “local” colleagues had given customers a descent service and worked with their local agents, local lawyers would be getting a flow of business.
His assertions that just because an agent has a referral fee arrangement with a “distant” solicitor, clients suffer financially or in service terms, are totally wrong.
With our distant solicitor partners, our clients get value for money and super-efficient service. Out fall through rate has dropped measurabley as a result, because they get on with the job immediately, and we dont have to battle with uncooperative solicitors who won’t speak to agents and worse, who won’t speak to clients.
I wouldn’t know Mr Knapp or his firm, but I concur with Typhoon’s comments and would say it is probably all “sour grapes”. Had Mr Knapp provided an efficient service upon which his local agent’s and clients could rely and offer an element of his probate/executorship instructions in return as the accustomed gesture of goodwill, then all the business would be kept local without any need for referral fees. I do not criticise all referral fees providing the referring agent is credible, nor do I criticise all of the larger well-structured solicitors who are providing that service, although I would prefer to see the old fashioned methods prevail. Actually, the solicitors are all so often the ones that “don’t play ball’. I find solicitors all too often tell their clients that the agents are out of order over these matters, when in practice they are lining their own pockets at the expense of good relationships with the agents. How often does the agent provide a free probate valuation without any chance of getting the business, just because the solicitor tells his client that there is “no need to pay” – all self-ingratiating!
We always charge for probate or divorce valuations on the basis that if the client goes on to use our sales or letting departments the valuation fee is refunded in full. Have been doing for many years now, £120 plus VAT. Covers my costs and gets rid of the timewasters who want something for nothing. You should hear them,’ but the solicitor said there would be no charge’, response, ask them to work for nothing.