We have recently had cause to consider whether there really is any benefit in using cheap licensed conveyancers. As a lawyer that practices in many aspects of property law (including conveyancing) as well as competition and consumer law, the issues arising in this area are of great interest to me. They should also be of interest to anyone who is in the market for conveyancing services.
Sometimes, a decision to purchase a service can be genuinely based on price alone. However, if you are basing your decision on conveyancing services solely on price, you may be making a very grave mistake. Some licensed conveyancers have low prices for a reason. Unfortunately, most consumers, be they buyers or sellers, do not have enough knowledge or experience to understand what they are missing out on.
We understand that buying and selling property is an expensive exercise. However, the few hundred dollars that you may save by using cheap licensed conveyancers could cost you tens of thousands of dollars if you are not careful. But, before we go on, we want to get one thing straight. There are many experienced and competent licensed conveyancers. Also, many law firms employ licensed conveyancers to work alongside conveyancing lawyers. It is definitely not our opinion that merely someone is a licensed conveyancer, they are less capable. But, we do urge consumers to exercise caution. Caveat emptor – let the buyer beware.
Are licensed conveyancers specialists?
Some licensed conveyancers hold themselves out as being specialists in property law. A specialist is a person who has great knowledge or skill in a particular field. That person has usually undertaken a great deal of work and additional study over and above the basic qualifications required by their occupation or profession. In New South Wales a lawyer cannot by law hold themselves out to be a specialist in any area of law without being accredited as such by the NSW Law Society. To attain a specialist accreditation requires significant knowledge and experience over and above the qualifications required for legal practice. However, even an accredited specialist lawyer is able to practice in any other area of law in which they have sufficient knowledge and experience.
A licensed conveyancer on the other hand is restricted by their license to only carrying out conveyancing work. Section 7 of the Conveyancers Licensing Act 2003 (NSW) (“the Act”) limits those holding a conveyancing license to carrying out “conveyancing work”. Section 7 of the Act also prohibits someone holding a conveyancing license from doing anything, or to allow anything to be done, that is calculated to imply that the licensee is qualified to act as a solicitor. Section 4 of the Act defines “conveyancing work” to be legal work carried out in connection with any transaction that creates, varies, transfers or extinguishes a legal or equitable interest in any real or personal property, such as (for example) any of the following transactions:
(a) a sale or lease of land,
(b) the sale of a business (including the sale of goodwill and stock-in-trade), whether or not a sale or lease of land or any other transaction involving land is involved,
(c) the grant of a mortgage or other charge.
(2) Without limiting subsection (1), “conveyancing work” includes:
(a) legal work involved in preparing any document (such as an agreement, conveyance, transfer, lease or mortgage) that is necessary to give effect to any such transaction, and
(b) legal work (such as the giving of advice or the preparation, perusal, exchange or registration of documents) that is consequential or ancillary to any such transaction, and
(c) any other legal work that is prescribed by the regulations as constituting conveyancing work for the purposes of this Act.
“legal work” means work that, if done for fee or reward by a person who is not an Australian legal practitioner, would give rise to an offence under Part 2.1 of the Legal Profession Uniform Law (NSW) .
Any person holding a conveyancing licence that performs legal work outside the limited areas set out in section 4 of the Act is guilty of an offence under Part 2.1 of the Legal Profession Uniform Law (NSW).
Generally, licensed conveyancers are not specialists, they are limited in the work they can carry out. They are not required to have greater knowledge and experience than a lawyer carrying out conveyancing work. To suggest otherwise is simply misleading. In all conveyancing matters there may come a point at which a licensed conveyancer has no other option but to call on a lawyer for assistance.
Frankly, if you are considering using a licensed conveyancer who holds themselves out as being capable of carrying out legal work outside the very limited scope of “conveyancing work”, then treat that as a warning. They may be doing so unintentionally, they may be doing so intentionally out of competition. Either way, it demonstrates either a misunderstanding of the limits of their conveyancing license or disregard for those limits. Neither of these circumstances is ideal for consumers. Caveat emptor – let the buyer beware.
Professional Indemnity Insurance
In NSW all solicitors and licensed conveyancers are required to be covered by Professional Indemnity Insurance (PII). In NSW, solicitors’ PII policies are provided by LawCover. A solicitor’s PII policy will generally provide cover for any legal work carried out by a solicitor. Likewise, a licensed conveyancer’s PII policy will generally provide cover for conveyancing work as defined by the the Act. This raises the question as to whether clients of licensed conveyancers will be covered by the conveyancer’s PII if the client sustains damage because the conveyancer performed legal work outside the definition of “conveyancing work”. Avoiding this possibility requires licensed conveyancers to have a good understanding of the limits of their license and to know when they should be referring a conveyancing matter to a solicitor. It also requires licensed conveyancers to be willing to refer the client. Referring a client to a solicitor when the circumstances get beyond the conveyancer’s abilities is a demonstration to the client of the conveyancer’s limits. Some conveyancers will see this as bad for business. In some cases a conveyancer may not be willing to expose themselves to a client in that way.
A solicitor may find themselves in a similar position if they stray into areas of law in which they are not familiar. In those circumstances, they probably should, for their client’s benefit, refer the matter to another solicitor with the necessary experience. However, their PII will still cover them if they continue to act for the client. It is my experience that solicitors are generally willing to refer clients to another solicitor where necessary. Most solicitors are keenly aware of their limits and their professional duties to their clients. The collegiality of the legal professional helps to facilitate this. Caveat emptor – let the buyer beware.
The myth that only licensed conveyancers can give clients their full attention
Some cheap licensed conveyancers have taken to suggesting that because solicitors undertake other legal work (like attending court), that their conveyancing clients are somehow receiving less than their solicitor’s full attention. The conveyancer then goes on to suggest that because they don’t go to court (or carry out other legal work), their clients’ conveyancing matters are somehow getting more attention. This is a disingenuous and misleading device.
Most property lawyers that I know give as much time and attention to their conveyancing clients’ matters as they do to any other matter. Further, there are an awful lot of property lawyers who have nothing to do with going to court, and like it that way. In addition, many law firms employ experienced clerks and paralegals to undertake the procedural aspects of the conveyancing process that do not require a legal practitioner. Many law firms even employ licensed conveyancers in their conveyancing practice. To suggest that a client is generally better off with a licensed conveyancer over a solicitor because solicitors are distracted with other legal work is plainly wrong and misleading.
This marketing device falls down further when you consider that many cheap licensed conveyancers rely on high volumes to make the same money that other reasonably priced conveyancers and solicitors do. The inevitable result of high volume is that the conveyancer’s time is split into smaller and smaller portions. A licensed conveyancer relying on cheap prices and high volumes can find themselves quickly overwhelmed. In such circumstances, not all conveyancing matters will be getting the attention that they need or deserve and the conveyancer will be suffering from the very same malady of which they have accused solicitors. There are solutions to this problem. However, they will usually entail an increase in the costs of the conveyancer as they either employ additional staff that must be paid, or cut the number of conveyancing matters which they are capable of carrying on. Caveat emptor – let the buyer beware.
Do you expect full service for your money?
Many buyers and sellers seek quotes for conveyancing thinking that they are comparing apples with apples. In fact, the service that you can get from one solicitor or conveyancer to the next can vary greatly. They are in most cases comparing apples with oranges. A cheap fixed fee is a warning to the consumer to dig a little further to find out what they are getting for their money, or more importantly, what you are not getting. You may find yourself hunting around for someone to perform a pest and building inspection, or to make a survey of the property. You may find yourself running around after your bank or broker helping to arrange settlement. These are all inconveniences at a time when most people are working full time and trying to arrange to move house.
Some conveyancing services offer lower fees because they are offloading some of the work or costs onto the buyer or seller. You want to know what your conveyancer or solicitor is going to do for you and what, if anything, you will be required to do. If you expect full service for your money, you should be asking when making your enquiries whether that is what you are getting. Caveat emptor – let the buyer beware.
Fixed costs – are you getting what you should – are you subsidising other clients?
Fixed costs are generally good for consumers. When the costs of providing a good or a service can be accurately ascertained, both the supplier and the consumer can benefit. The question is whether conveyancing is one of those areas. The process of conveyancing is well known and documented, and is generally the same for most conveyancing transactions. That is the part that is covered by a solicitors or a conveyancers professional fees. However, the subject matter of every conveyancing transaction is different to almost every other conveyancing transaction. It is here that the issue of fixed costs can be problematic for consumers.
To arrive at a fixed cost that includes professional fees and all disbursements requires an averaging of the costs. The professional costs will normally remain the same for each transaction, it will be the disbursements that are averaged to arrive at a fixed fee. Therefore, when a client pays a fixed fee for a conveyancing transaction that includes all disbursements, some clients will inevitably be paying more than the actual cost of their transaction, and some will pay less. The thing is, you don’t know which you are. You may be subsidising the costs of clients who are paying less than their conveyancing transaction actually costs.
The other important aspect of a conveyancing transaction is that every property may require different property enquiries to be made to test the vendor’s title. In fixing the costs for these disbursements a conveyancer is generally making a decision ahead of time, without the knowledge of the property, as to what property enquiries to make. You can bet that the conveyancer is not loosing money. So, you are either paying for enquiries that you may not need, or you are not getting the property enquiries that you do need. You may not be getting any property enquiries at all.
While fixed costs sound attractive, it may be that you are not getting what you think you are, or are subsidising the costs of other clients. The fairest way to cost a conveyancing transaction is to fix the professional fees and to have each client pay for the disbursements that they incur. In that way everyone gets the benefit of a fixed cost for professional fees and the benefit of paying for only what they use in terms of searches and enquiries. In the end, if you are satisfied with the costs of your conveyancing transaction, that is all that matters. We just don’t like seeing consumers being taken for a ride.
Caveat emptor! Fixed fees aren’t always a good deal.
David Killen is an property lawyer with a keen interest in competition and consumer protection. David and his team take great pride in providing a full end-to-end conveyancing and property law services to their private, business and institutional clients.
The photograph “Manhattan Skyline” used in this article was taken by Esther Lee on 22 April 2010 from Long Island City, Queens. It is used under the Creative Commons Attribution 2.0 Generic license. A copy of the license can be found here.