It is still common practice for many conveyancing firms to pay referral fees to estate agents who recommend their services. Stephen Ward explains how to find out and whether it should affect who you choose.
Good recommendations are a godsend when it comes to buying or selling a house.
With so much to remember and research, from mortgage brokers to reliable removal firms, tips for tried and tested services can save hours of your valuable time.
Advice can come at a price, however, such as the referral fees paid by some conveyancing firms to estate agents in exchange for being recommended to their clients.
While it has attracted a lot of criticism in recent years, it’s still an acceptable and relatively common practice – so it is something consumers should be aware of so, when it comes to deciding on a conveyancer, they can be sure they’re making an informed choice.
Controversy
Unsurprisingly there hasn’t been much movement on this over the past two years, but pre-pandemic it was high on the government’s agenda.
A survey by The Property Ombudsman found more than half its members had referred customers to external companies. The majority – 81% – had received a fee for doing so, but just 12% of those were upfront about it in their initial conversations with clients, preferring to write to them afterwards, and fewer than one in five (18%) detailed referral fees on their websites.
CLC-regulated firms are required to make clear to clients if they are paying a referral fee, but to make the system truly transparent, those making the referral and receiving the fee must also make the client aware.
At the Council for Licensed Conveyancers’ annual conference in 2019, then housing minister Heather Wheeler MP threatened estate agents with a complete ban on referral fees if they failed to be more transparent.
A 2020 review by National Trading Standards, requested by the Ministry for Housing, Communities and Local Government, recommended the government make disclosure mandatory.
Speaking at the time, James Munro, senior manager of the National Trading Standards’ Estate and Letting Agency Team, said: “We recognise that referral fees have a place in business if used ethically and transparently and with no pressure to use the referred service.
“Mandatory disclosure of referral fees would ensure there is full transparency around this practice, helping to build consumer confidence in the estate agency industry and demonstrating the duty of care agents should have to both parties in a property sale.”
Covid paused any plans to pass new legislation on this issue, but we expect it to return to the spotlight in the future.
The importance of shopping around
Recommendations as a result of referral fees may be biased but it doesn’t make them wrong. Many people who use conveyancers endorsed by their estate agents are happy with the service.
But shopping around is still strongly advised. Alongside its proposal to make referral fees transparent, National Trading Standards also recommended that estate agents themselves should encourage clients to see what else is on offer alongside a public awareness programme to educate consumers.
It is good practice for estate agents to be transparent about any referral fees they receive, so don’t be afraid to ask. If you’re not satisfied with the answer, however, ask the conveyancer – while the same does not yet apply to estate agents, lawyers are obliged to disclose any referral arrangements they have and the average fee or range of fees.
See what others are saying about the recommended conveyancer. As well as family and friends, review sites such as Trustpilot and ReviewSolicitors mean buyers and sellers can now benefit from the wisdom of the crowd.
Conveyancing is crucial and with fees ranging from £500-£1,500, it’s important you’re confident in the person handling what could be the biggest purchase you make in your life.
If you are buying or selling a property, you can find more advice on the topic as well as a list of CLC-regulated conveyancers here.
Regulation means they are monitored by us to ensure they comply with our high standards and work in the best interests of consumers at all times.
Our practices should also have the CLC secure badge displayed prominently on their website, which is linked to ours and which, when clicked on, will confirm they are genuinely regulated by us.
Stephen Ward is director of strategy and external relations at the Council for Licensed Conveyancers
