Fast forward to 2020/21, and we saw the introduction of Covid lockdowns, which again sent the economy into free-fall, and conveyancing firms into a panic to try and find a way to survive; fortunately the government came to the rescue with business loans and other support measures, which allowed most conveyancing firms to get through the immediate problems created by the pandemic and the subsequent lockdowns.
Once the immediate after-effects of the lockdowns had been mitigated, sights were then set on how the property market would be able to get back on its feet; again the government stepped in and implemented a number of stamp duty holidays, which dramatically reduced the costs for many looking to move house or get on the property ladder.
With opportunity, comes risk
Looking back, the response to the stamp duty holidays came as a real, but welcome, surprise as it created a huge pipeline of work for conveyancing firms; this allowed firms to continue trading but left many conveyancers exhausted and with mental health issues, some of whom have since left the sector.
Many historically non-conveyancing firms saw the fees that could be generated by the property boom, but how many of these firms were really capable of handling such work, and were in effect just dabbling while the opportunity remained in place?
Were law firms dabbling with conveyancing during the SDLT holidays?
Our recent report looking at conveyancing data trends suggests that dabbling may have been going on, for example:
- 2022 saw a return to normality after the hiatuses of the Covid fueled 2021, which saw residential purchase cases exceed 1 million. 2022 saw a 23% decrease in the number of transactions compared to the previous year.
- Comparison of the two years by month shows the clear impact of the three SDLT deadlines in March, June and September.
- 2022 removed the monthly volatility of 2021 and the market returned to normality.
- In reference to performance by region, the biggest winners in 2021 were the biggest losers in 2022.
- In 2022, the new market entrants, who entered the market in 2021 to take advantage of the large volumes of demand, retreated. Across England & Wales, the number of active conveyancing firms dropped by 5% year-on-year.
We’ve created two data insight reports which cover the conveyancing market trends before the pandemic and during, and the trends seen since before, considering the factors impacting the conveyancing market in the future.
Impacts of dabbling on Professional Indemnity Insurance
Conveyancing work is regarded as high risk by professional indemnity insurers and premiums are loaded accordingly, especially with the ‘long claims tail’ such work has, but did the dabbling firms actually notify their insurers that they had started to act on property transactions for the period during which they handled them; if they didn’t they have clearly set themselves up for a fall should negligence be alleged on transactions they handled, as any claims would have to be met by the firms themselves. Insurers will only pay claims for areas of work they have been previously notified of.
Potential SRA breaches from dabbling
But not only will firms that did dabble have to contend with potential future claims for negligence being made, they will also need to consider whether they have breached their regulatory obligations, and will be pursued by their regulator for this in due course, for example:
- Principles
- Act in a way that upholds public trust and confidence.
- Act with integrity.
- Act in the best interests of clients.
- Act in a way that upholds public trust and confidence.
- Code of Conduct for Solicitors
- You ensure that the service you provide to clients is competent and delivered in a timely manner.
- You maintain your competence to carry out your role and keep your professional knowledge and skills up to date.
- You ensure that the individuals you manage are competent to carry out their role, and keep their professional knowledge and skills, as well as understanding of their legal, ethical and regulatory obligations, up to date.
- You ensure that the service you provide to clients is competent and delivered in a timely manner.
- Code of Conduct for Firms
- You have effective governance structures, arrangements, systems and controls in place that ensure:
- you comply with all the SRA's regulatory arrangements, as well as with other regulatory and legislative requirements, which apply to you.
- your managers and employees comply with the SRA's regulatory arrangements which apply to them.
- your managers and interest holders and those you employ or contract with do not cause or substantially contribute to a breach of the SRA's regulatory arrangements by you or your managers or employees.
- you comply with all the SRA's regulatory arrangements, as well as with other regulatory and legislative requirements, which apply to you.
- You ensure that the service you provide to clients is competent and delivered in a timely manner, and takes account of your client's attributes, needs and circumstances.
- You ensure that your managers and employees are competent to carry out their role, and keep their professional knowledge and skills, as well as understanding of their legal, ethical and regulatory obligations, up to date.
- You have effective governance structures, arrangements, systems and controls in place that ensure:
Implement an effective risk management strategy
When a crisis occurs firms should be prepared, and this is normally achieved by implementing an effective risk management strategy and business continuity plan, however, some crises and their consequences, like Covid, can never be planned for. However, making knee-jerk decisions to get through short-term crises can come back to haunt them in the long-term.
“The more you dabble with darkness, the more darkness will dabble with you!”