Is your estate agent taking ‘bribes’ from your lawyer? Scandal of legal firms paying [pounds sterling]300 fees to pick up work – then heaping the cost on buyers; Market watch
0 Comments | Mail on Sunday (London, England), The, Feb 21, 2010
Byline: SEBASTIAN O’KELLY PROPERTY EDITOR
Solicitors have broken ranks to demand an end to members of their own profession paying ‘bribes’ to estate agents in exchange for being awarded conveyancing work.
Law firms are paying fees of nearly [pounds sterling]300 to win the work from rivals, while others find the practice ethically indefensible, resulting in partial, commerciallymotivated advice paid for by unwitting homebuyers and sellers.
According to guidelines from the Solicitors Regulation Authority (SRA) and the National Association of Estate Agents, consumers involved in a property transaction should be informed of any referral fees paid, although many are not aware of any such arrangements.
Although all variety of solicitors’ practices pay referral fees, concerns are heightened by volume or ‘factory’ conveyancing firms, which drastically undercut traditional legal firms. In some cases, outfits offering what critics call ‘conveyor belt’ conveyancing are actually owned by estate agencies – Countrywide Property Lawyers are part of the vast Countrywide estate agency, for example.
‘Solicitors are paying bribes to get work and ordinary consumers, who ultimately pay for it, are being ripped off,’ says Laurence Mann, of AL Hughes & Co solicitors in Streatham, South London. ‘This is no different from paying dodgy sheiks for arms contracts and it undermines the integrity of the profession.’ Mann claims he has had clients who have been told by estate agents that if they used his firm, not the recommended solicitors who are paying a fee, they would lose the opportunity to buy the property.
Another property lawyer, who declined to be named, said that conveyancing was now a ’sewer’, with large corporate estate agencies milking the system, heaping stealth charges on to hapless buyers and sellers, who have little understanding of what is going on.
He has provided evidence to the Council for Licensed Conveyancers of Connells, the secondlargest estate agency chain, charging [pounds sterling]649 for conveyancing services for a [pounds sterling]235,000 twobedroom, leasehold flat.
The fees with volume conveyancer Premier Property Lawyers were priced at [pounds sterling]649, but ‘upon successful completion our firm retains [pounds sterling]351′. The remaining [pounds sterling]298 is paid to Connells ‘in consideration of their marketing and administration’.
Had the homebuyer not accepted the estate agency’s in-house service, but approached Premier Property Lawyers directly through its website www.1stpropertylawyers.co.uk, the conveyancing cost for this property would have been [pounds sterling]429.
Over the past three months, the letters columns of the Law Society Gazette have been filled with complaints about referral fees which have been permitted since 2007.
The Law Society itself stated in November last year that ‘referral fees do not have a place in markets for legal service and that payment of referral fees by all providers of legal services should be banned’.
But the Society now has only an advisory role, and it will be up to the Government and the Legal Services Board, which regulates lawyers, to end the practice. According to the Office of Fair Trading, 56 per cent of sellers choose their solicitor on the advice of their estate agent, while 46 per cent of buyers do the same.
The SRA has found there to be a significant lack of compliance with the rules governing referrals.
‘Whether this is deliberate or from inadvertent failure by the estate agents is not clear,’ says the Law Society.
Feelings are running high. After the issue was briefly raised by The Mail on Sunday last month, a flood of letters from solicitors arrived from all over the country.
Glen Turner, who works with his father-in-law at Bingham & Co in Leicester, strongly disagrees with solicitors paying referral fees to estate agents.
‘Slick marketing practices and rampant commercialisation have been brought to bear in an area where consumers should be receiving calm, impartial advice,’ he says.
Some of the corporate estate agencies even offer homebuyers [pounds sterling]1,000 ‘cashback’ deals on purchasing a house, if they use their conveyancing and mortgage brokering services.
‘These offers are utterly immoral,’ says Turner.
The Law Society adds: ‘Consumers are paying substantial sums of money for no benefit. They are paying for the packaging, rather than the service.’ Solicitor Mike Minahan, of Minahan Hirst & Co in Cheadle Hulme, Cheshire, also wrote to express his disgust.
‘We have never paid fees to an estate agent and we never will. We are in nobody’s pocket,’ he says. ‘Consumers are being fleeced and have no idea how the advice they receive is being compromised.’ The conflicts of interest are clear to Cynthia Bengen, conveyancing solicitor at Seth Lovis, in Covent Garden, London, who advises the Law Society on conveyancing matters.
‘These fees have got out of hand and there is a clear conflict of interest involved
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