Who are our competitors - and which worry us?

As "High Street" solicitors, who tend to handle local work for local people, it might be thought that our main competitors are other, similar "High Street" solicitors - I think not

Although there is competition between us and other local firms, we do not see them as an existential threat (oooh! Big words!) On the whole, they tend to have the same philosophy of business as us: do a good job, at a reasonable price, resulting in a satisfied client and a good reputation and more referral business.

To date, a bigger threat has come from those firms, big and small, that indulge in cut-price conveyancing: always ready to undercut the competition - after all, it must be better to discount by (another) £50 and get the work than not, right? Wrong! Cut price conveyancing is bad for everyone involved - even those paying full price further up or down the chain of transactions - as it leads to a "stack it high and sell it cheap" approach, which quickly becomes de-personalised (commoditised) and inefficient. A similar problem results from conveyancers who pay referral fees to buy in work - but that's for another blogpost.

However, a bigger threat still is nearly upon us: "Alternative Business Structures" in the jargoin of the regulators and, especially, non-lawyers being allowed to do conveyancing work for profit. The real threat - to existing practices - is that some big organisations - insurers, "service commoditisers", mortgage lenders, etc, will offer conveyancing services. Not only will they be the ultimate in "pile it high and sell it cheap" but they will have the resources to put in place systems that will far outstrip even the "warehouse conveyancers" of today.

Worst of all, many of them - mortgage lenders are the obvious example - will be able in effect to offer the conveyancing for free: either bundling the cost in with the overall mortgage loan or treating it as a loss leader to get and retain the lending business - and the associated financial services, where lots of money can be made.

How to compete? Well, trying to beat them at their own game will not work, as I simply do not have the financial resources. In order to compete, I need to sell my services to clients on the basis of value for money - not cheapness; genuine efficiency - not artificial busy-ness; local, useful knowledge - not a tick-box approach; and genuine approachability - not slick advertising.

That is why I -

• offer a money-back guarantee
• constantly update my office procedures and support IT
• am closely involved in my local community
• encourage clients to drop in to my office, without appointments, to speak to my conveyancing managers about anything that concerns them: if it is a legal issue, it will be referred to a lawyer, but for procedural or incidental queries, my managers are well able to cope

Turmoil for the legal profession

The legal profession is undergoing a period of change and review more far-reaching than anything it has experienced before. The following consultations (which will lead to change) and already decided changes are under way (thanks to Rob Hailstone of the Bold Group for drawing all this together) -

SRA Consultations: The new SRA Handbook: This consultation is the last opportunity for comments on the SRA's new Handbook which will underpin the regulation of solicitors and law firms from October 2011. This paper provides more detail on the regulatory framework for both traditional law firms and Alternative Business Structures. Ends - 13 January 2011

Future Client Financial Protection arrangements: Comments are invited on proposals for amendments to client financial protection arrangements from October 2011. These proposals follow on from the independent review of the current client financial protection arrangements undertaken for us by Charles River Associates. Ends - 28 February 2011

Sole Practice: Modernising Authorisation: The proposal is to bring the process for authorising sole practitioner law firms in line with the way in which all other firms will be authorised. Ends—8 March 2011

Legal Services Board Consultations: Referral fees, referral arrangements and fee sharing: Ends – 22nd December 2010

ABS (Alternative Business Structures for providing legal services) consultation - Further rules regarding licensed bodies: Ends - 21st February 2011

Ministry of Justice PII: Proposals for the Reform of Legal Aid in England and Wales: This consultation seeks views on proposals for reform of legal aid in England and Wales. One option is to use client account interest to help bolster the Legal Aid Fund. Ends – 14th February 2011

The Law Society PII Guide: The fourth edition of Insurance Matters, a free bulletin on solicitors' professional indemnity insurance (PII), can be downloaded: http://www.lawsociety.org.uk/new/documents/2010/insurancematters4.pdf - It includes articles on the outcome of the 2010 renewal process, conveyancing fraud, and risk management.

Changes to the CML Lenders' Handbook
The Council of Mortgage Lenders updated the Lenders' Handbook on 1 December: The changes affecting solicitors include:
• new requirements where the solicitor acting for the lender is not familiar with the seller's solicitors
• lenders can stipulate whether they require notification of the name and address of the sellers
http://www.cml.org.uk/cml/handbook/amendments

Lawyers need to be ready for this future. Whether it is an improvement remains to be seen

Quality standards?

Research by the Consumer Panel - which advises the Legal Services Board, the regulator of lawyers - finds that "consumers assume all lawyers are technically competent and are subject to more regulatory controls than is the case. This means that quality considerations do not strongly influence consumers' choice of lawyers and people erroneously consider that all legal services are of proven standard."

Apparently, despite a proliferation of quality badges for lawyers, consumers do not use or want quality marks in legal services.

The LSB's reaction to this seems to be to propose yet another layer of regulation for an already heavily regulated sector.

Seems to me it would be better to educate the public that all lawyers are *not* the same - some are better than others, and it is better to make a choice based on experience or a genuine informed recommendation - rather than taking up the referral from the estate agent who is paid by the lawyer to make that referral

Still, I know I am a voice crying in the wilderness. Why on earth should a regulatory body resist the urge to gather more work to itself? It makes one wonder, though ...

Love thy neighbour?

For all the legal and physical investigations a homebuyer can do, nothing beats checking on the neighbours - http://bit.ly/aPmuOG

Seriously: if your home is to be your sanctuary, you need good neighbours. Like family (unlike friends), you cannot choose them - existing neighbours may be replaced by new ones. However, before you buy a new home., check on the neighbours - and if you are buying a flat, the most important neighbours are those who live above you, not those on either side

Always learning, always improving

I spent all of today on a conveyancing CPD (continuous professional development) course in Tunbridge Wells.

While most of the content was not new, it provided a forum for some interesting discussions with other solicitors about practices, procedures and attitudes to risk - and about "clients from hell"!

It also left me with about a dozen possible improvements to make to paperwork and procedures - life is a constant process of improvement, which I currently welcome, but I wonder how soon I will become demotivated (as many lawyers I know) and cannot find the enthusiasm to change

The majority of those attending feel Home Information Packs to be a waste of time and money, but I still feel that, done well, they help the conveyancing process significantly

Money laundering

Though conveyancers have been at the sharp end of money laundering activity to date, it seems that litigators are now being targeted as well

Until now, it was thought that litigation was a less fertile area for laundering the proceeds of crime than conveyancing was: fraudsters had been setting up spurious property transactions in order to launder money, while litigation was considered a less risky area of law

Because conveyancers have become more and more strict over their anti-money laundering procedures, the criminals are apparently now setting up spurious debt collection and similar claims, in order to launder their money through lawyers' firms

As a result, litigation solicitors will need to be as alert as conveyancers have become, to spot signs of suspicious activities and report them where appropriate

How soon will this apply to probate and matrimonial lawyers, too?

Chancel repairs liability

Having had to carry out a little extra research than normal into this topic, I thought I'd share the results by gathering together various links on the subject

For background information, Wikipedia has an accurate, if brief entry.

Other authoritative information is available from the church, and a Times Online article

The report on the Wallbank court case that brought this "new" risk to conveyancers' attention is a useful read - though it should be noted that the original repairs costs were relatively small; the Wallbanks built up a huge legal bill by fighting the claim tooth and nail

More detailed information is available from commercial websites but bear in mind that they have a vested interest in promoting their insurance policies

Powers of attorney

Ordinary powers of attorney

An ordinary power of attorney gives someone (the attorney) the power to act on behalf of someone else (the donor) subject to any restrictions or conditions contained in the power of attorney. A general power of attorney gives the attorney power over all of the donor’s affairs, except where the donor is a trustee and a trustee power of attorney is required.

The problem with any ordinary power of attorney (whether general, trustee, or otherwise) is that it is only effective for so long as the donor is both alive and mentally capable of managing their own affairs. If they die, then (as with all other types of powers of attorney) the authority granted to the attorney under the power ceases. Also, if the donor becomes mentally incapable of managing their own affairs, the authority granted to the attorney under an ordinary power of attorney ceases.

Enduring powers of attorney

Enduring powers of attorney can no longer be made, but could be made up to October 2007. If made before that date, then the distinction between them and an ordinary power of attorney is that, even if the donor became mentally incapable, the attorney could still continue to act under the power of attorney, provided the attorney registered the enduring power of attorney at the Public Guardian’s Office. Until that point, the power of attorney operated as an ordinary power of attorney, but provided it was in the correct form and granted before October 2007, its effectiveness could “endure” beyond the donor’s mental incapacity, subject to the power being registered.

Lasting powers of attorney

From October 2007 onwards, the replacement for an enduring power of attorney is a lasting power of attorney. This is a longer document that the enduring power of attorney was and therefore takes longer to complete, but is reasonably straightforward. The prescribed forms can be downloaded from the Public Guardian’s website at www.publicguardian.gov.uk

There are two types of lasting power of attorney, with separate forms for each – one for “property and financial affairs” and another for “health and welfare”. This is because one might want different people as attorneys for these different aspects, but it does mean doubling up on the form-filling and on the registration fees.

Once granted, a lasting power of attorney is not effective (even as an ordinary power of attorney) unless and until it is registered at the Public Guardian’s Office – the form to apply for registration can be downloaded from the same website.

I strongly recommend everyone to grant a lasting power of attorney, certainly to their spouse/civil partner and possibly (depending on age and family circumstances) to some or all of their children.

Whilst I am happy to help in preparing a lasting power of attorney, most people would be able to complete the prescribed form perfectly well themselves. I can, perhaps, be more useful in registering a lasting power of attorney but again the forms for this are fairly straightforward and do not require specialist legal advice.

Property theft

Properties can be stolen: if a fraudster is able to convince the Land Registry that they are the property owner, they can sell - or more likely - mortgage the property and disappear with the proceeds before you are aware anything is wrong. In the case of a mortgage, this might not be until the mortgage lender tries to take possession for non-payment of the mortgage instalments, at which point you would have to prove that you did not sign the mortgage deed that purports to be signed by you.

Properties that are subject to a genuine mortgage are far less vulnerable, as that mortgage would normally need to be cleared off, putting another hurdle in the way of any attempted fraud. However, properties that are free of mortgage are much more susceptible.

The Land Registry’s own identity checks are not very rigorous, relying on either one piece of photographic ID or two utility bills or bank statements, for instance. Though the conveyancer acting for the seller or mortgagee can be expected to check their client’s identity, it is not unheard of for conveyancers to be - deliberately or unwittingly - party to the fraud.

The Land Registry recommends proprietors give multiple addresses for themselves in the register (including an email address, if desired) to help protect against fraud. However, this does nothing at all to combat property theft, as the Land Registry does not check with the registered proprietor that the mortgage deed or transfer has, indeed, been signed by them.

The Land Registry also suggests registering a restriction in the register, requiring a conveyancer to certify that the person who signed the mortgage or transfer that is being registered is indeed the registered proprietor. However, this is really no more than the existing Land Registry requirement of confirmation that the parties to the transaction have all been identity-checked and, in any event, does not cover the situation where a conveyancer is involved in or deceived by the fraud.

The only protective measure we have been able to come up with is to register a restriction on the property’s Land Registry registers, requiring the consent of a third party who is not an owner of the property before the owner (or someone who purports to be the owner) can mortgage or sell it. This third party could be a trusted family member, solicitor or accountant, for instance. If you adopt this suggestion, we strongly suggest that there should be a document (which we can prepare) whereby the third party confirms they have no beneficial interest in the property but is merely acting as a guardian against property theft.

There is a risk of the third party dying, becoming mentally incapable or simply falling out with you. If the third party is a solicitor, chartered accountant or similar, their professional obligations mean that your position would be protected. However, this is not the case with a private individual, so you should think carefully before appointing a private individual to this role.

If you would like to take this idea forward, please speak to us about what arrangements would be appropriate for you.

Identity theft

Boys & Maughan's tips to combat ID theft are a useful, if on the whole common sense, reminder of how to avoid ID theft. One point that I had not recognised before is that company directors' full names, home addresses (usually) and signatures (often) are available from Companies House. In addition, as it happens, so are their dates of birth - useful material for a fraudster.

Another example of the way in which the online, interlinked information society works against its own security

At Nelsons Property Lawyers, we are actively working on advice to protect against property theft - watch this space for developments

Engineers or insurers?

One way of comparing lawyers is to classify them as "engineers" or as "insurers": engineers try to set up a contract, transaction, etc, that suits the agreed requirements of the client; insurers tend to use an established precedent that is designed to cover all possible circumstances, avoiding the risk of omitting something not currently foreseen but possibly required in future.

I tend to be an "engineer": I try to look after my clients as if they are close friends or family members:
• I give punchy, practical, jargon-free and actionable help
• I aim to keep clients' legal difficulties and expenses to a minimum
• I use my knowledge to benefit my clients

The "insurer" type instead (in my view) tells the client "not to worry about the law", and uses a "blockbuster" precedent intended to smother the problem rather than engineer a solution.

The engineering style is, in my view, better for the client and more enjoyable (though also more testing and, perhaps, risky) for the lawyer - I suppose its a case of quality -v- safety

This distinction is particularly clear in the context of -

(a) leases: in my view, as long as it covers the client's requirements, less is more: a 10-page lease that the parties can understand is (in my view) better than a 50 page lease (covering everything including lift maintenance in a ground floor lock-up shop) that the clients treat as an un-readable brick

(b) enquiries before contract on leases and property purchases: using wide-ranging standard enquiries before contract sometimes means more salient points are overlooked

(As an aside, the distinction between engineer lawyers and insurer lawyers brings to mind Kingsley Amis's classification of two distinct groups in debates over the use of language: berks and wankers. "Berks are careless, coarse, crass, gross and of what anybody would agree is a lower social class than one's own; wankers are prissy, fussy, priggish, prim and of what they would probably misrepresent as a higher social class than one's own" - Not one to hold back, old Kingsley!)

"Risk" by Dan Gardner

A good analysis of how we, as a society, perceive risk, and how we should perceive it and deal with it. We worry amount relatively small risks, but become blase about much bigger ones, due to various biases - the Von Rorkoff effect, optimism bias, hindsight bias, etc - and errors of logic.

Our initial reaction to a given situation is based on gut instinct - our hard-wiring; if (and it is a big "if") our logical mind then kicks in to modify our reaction, it is normally only partially successful, with the result that most reactions are gut-based rather than logic-based

A genuinely absorbing read - I read it at one sitting - and full of ideas to mull over