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The HIPs and

E-conveyancing War!

 

Winning the HIPs and

e-conveyancing war will require careful strategy, writes Fiona Gregory

 
Text Box: (Copyright. Web4Law Ltd. This article first appeared in Managing Risk.) The risks inherent in e-conveyancing and HIPs fall into two categories. The first contains all the usual suspects: compliance, file management, computer security, and the like. These should be familiar ground to firms with Lexcel accreditation or sensible internal audit standards. If a firm does not yet have robust procedures in place to address these issues, it has more to worry about than e-conveyancing and HIPs. Big issue The second – and big - issue is strategic. Lawyers have experienced nothing of this magnitude since the Land Registration Act 1925 when, unable to accept the massive change this wrought, nearly a third of solicitors retired or left the profession. There is no reason to think that HIPs and e-conveyancing will not have a similar impact. In 1982, a three-bedroom detached house would have cost around £30,000 and lawyers’ fees would have been around £300. That house today is worth £300,000 but lawyers’ fees are around £400. Lawyers making money from conveyancing today are almost certainly working much harder than 20 years ago - and working in teams. It might not be recognisable as such, but the lawyer, secretaries, office junior, receptionist and accounts become a team. The Legal Services Bill identifies residential conveyancing as a commoditised service, to be opened up so that ‘alternative business structures’ can undertake such work. Loss of monopoly The legal profession will lose its monopoly. Organisations such as Asda, the Co-op, the RAC and Norwich Union will approach legal services delivery in a completely different way. It has to be recognised that, often, over 90% of the transaction is processing, collation and distribution of information. Only a small proportion of the transaction requires expert legal input. The process can be standardised largely by non-admitted staff with a fully automated case management system, at a fixed fee. Those continuing existing practices will lose market share unless they adapt and deliver commoditised services with fixed fees, with modern technology and best practice. The Legal Services Bill anticipates the disappearance of small law firms, unable or unwilling to adapt. The HIPs war HIPs raise this risk to another level. National chains of estate agents and financial institutions recognise that first access to clients in a conveyancing transaction provides greater opportunities to sell financial products, such as mortgages, buildings and contents insurance and life assurance. The provision of a HIP, especially with deferred or even subsidised payment, creates the perfect opportunity for these organisations to attract clients with the promise of ‘one-stop’ shopping. All services connected with moving house are provided from one source. It is essential to understand the potential market, to appreciate what the profession faces. Law firms will have considerable difficulty competing with such large organisations, even though the creation of a HIP involves services that they largely already provide. Retaliatory strategies Potential retaliatory strategies clarify the issues with a sliding scale. Option One - is withdrawal from the conveyancing market. This need not be a negative option. After all, if conveyancing forms a small part of the firm’s business and the investment in staff, training and IT is a poor risk, do not offer conveyancing services. Do not let the performance and morale of the department decline, so potentially adversely affecting other departments. Re-focus the business; retrain the staff; and. transfer the work to another firm with reciprocal arrangements for referral work. Option two - is specialisation. Differentiate the firm. Develop equity release, or buy-to-let, or leasehold specialisms. Attract work that does not sit easily with computer programmes. Offer a boutique service to ‘high net worth’ clients and charge accordingly. Option three - is ‘watch and wait’ strategy. This is the default position for most firms. No one knows where this may lead. The Conservative Party has threatened to abandon HIPs. In the meantime, the results of various pilot schemes are awaited and it remains to be seen if there are sufficient home inspectors available to produce the home condition reports. At the end of March 2006, 147 organisations had declared an intention to provide HIPs. This does not include individual law firms providing their own HIP service, and considering whether or not they use the whole or part of the services supplied by a HIP provider. Market forces dictate that, within three years or so, it is likely there will only be around ten HIP providers, and probably only five within five years. There is a substantial risk to those firms aligning their strategy with a single HIP provider, which may not survive in such a highly competitive market place. There is also a risk that the provider will produce only one type of HIP, so limiting the firm’s options. There are three basic HIPs: The complete package - where the firm has no control over the choice of the supplier of the component parts of the pack. Everything is outsourced and is likely to be prepared to minimum statutory requirements. The component package - where the firm has some control and choice as to the component suppliers for searches and surveys, with a default provision by the HIP provider. The firm will continue to provide the legal documents of the pack and may be able to brand the HIP with its logo. The software package - offering the firm complete control through technology that collates the required documents electronically, so the firm produces the HIP itself, relying on its network of estate agents, home inspectors and search providers. The pressure for HIPs to be introduced is enormous. Huge sums have been invested. At the same time, the Land Registry is introducing incremental changes to residential conveyancing procedures as a result of the Land Registration Act 2002. The fundamental nature of conveyancing is changing from a legal, to a process driven, transaction. This is an enormous step change. In April 2006 the Land Registry published it’s E-conveyancing timeline showing that the main roll-out for residential e-conveyancing starts in autumn of 2007, with further incremental steps of pilots and then roll-outs in 2008 and 2009, with e-conveyancing becoming compulsory in 2010, with the likelihood of its introduction for commercial property transactions in due course. Watch and wait is therefore a dangerous game. Option four - is to become an early adopter, but with less than a year to launch, the ‘early adopters club’ is closing its list to new members. Option five - is ‘do something, but what?’ The firm should analyse its strengths and weaknesses and be guided by its staff. It must establish the most suitable team structure and its office layout. The new ‘stars’ will be computer literate and managed teams. If there is no obvious organisation building a network of independent estate agents and surveyors locally, there might be an opportunity to step in. If the ‘dinosaur’ in the firm nonetheless knows everyone in town and is a natural communicator, his or her ability to win business will be vital. Write to clients; create a ‘Countdown to HIPs’ newsletter; be the first port of call when clients are selling their home; consider the firm’s case management system. Is it web enabled? Are the accounts and conveyancing packages integrated? Does the firm’s software need upgrading? A tourist, lost in Ireland, approached a friendly looking local and asked the way to Tipperary. After a second or two, the reply came, “Well, to be sure, if I was after going to Tipperary, I wouldn’t be starting from here.” As with the unfortunate tourist, a firm cannot choose its starting point for this journey, only the path it takes. Fiona Gregory is retained by CLT, to deliver courses on developing volume conveyancing units, HIPs and the future of conveyancing and can be contacted at fiona.gregory@gmail.com Text Box: Privacy Home About News Services Seminars Log In Contact