OPINION: bleak future for one man band conveyancers

Eddie Goldsmith, senior partner at Goldsmith Williams, argues the case for large conveyancers

The newly merged Britannia and Co-operative Financial Services has ruffled a few feathers recently, particularly in the legal world, by announcing its intention to drop 3,600 sole practitioner solicitors from its conveyancing panel.

You may expect me, as a lawyer, to be outraged by this move but I have to admit that lenders get my vote of sympathy. Why? Because it’s the only way they’ll continue to qualify for mortgage fraud insurance cover.

As we all know, fraud is a growing problem. According to accountants BDO Stoy Hayward mortgage fraud will cost UK lenders at least £1 billion and it’s not a problem that’s going to disappear any time soon.

The impact on lenders can be devastating. For example, the Chelsea’s recent revelation that it had been hit by £41 million of losses due to fraud was the main reason for the society staying in the red and I wouldn’t be surprised if it was a contributory factor in the chief executive’s resignation.

The ingredients for a serious fraud case often involve a toxic mix of crooked brokers, valuers, landlords and lawyers and all the evidence suggests that sole practitioners are more likely to be involved than large practices. If I ran a lending business, I would want insurance cover against fraud and if one of the conditions were no solicitor sole practitioners, then so be it.

All of which raises an important issue. As business owners, we’re increasingly being judged by others not just on the merits of our own businesses, but also on the company we keep. Fraud prevention techniques are, out of necessity, becoming ever more sophisticated and if doing business with the ‘wrong sorts’ indicates the likelihood of fraud then you can hardly blame lenders for being cautious.

The problem is that the vast majority of mortgage brokers are themselves small businesses, with most firms being owner managed and having less than 3 staff. There’s nothing wrong with that and, by itself, it won’t cause lenders any sleepless nights. However, if a sole trader broker passes all his conveyancing work to a sole practitioner law firm, then you can understand why lenders would start to become twitchy, especially if it involves buy to let applications from one-man band landlords.

The truth is that, today, brokers have to exercise caution about issues which were not even on their radar screens just a couple of years ago. Dealing with a small local law firm many have been fine in the past, but it may cause problems in the future. It’s a development which will upset some long-standing business relationships between brokers and local law firms, but I’m afraid that’s the way it’s going to be from here on in. I can’t see lenders changing their tune now.

It would be wrong of me to pretend that I have anything other than a vested interest in this debate. After all, I run a large conveyancing firm which has developed a solid reputation within the lending community and I would love to see all brokers using firms such as Goldsmith Williams! But putting my wishes to one side, it’s a trend that’s going continue apace. Quite apart from fraud issues, large conveyancing firms can offer consistently high service standards, ultra-competitive pricing and they’re broker friendly, providing regular status updates and paying referral fees. It’s going to be very difficult for small conveyancers to compete on a level playing field in an increasingly competitive market.

I wouldn’t go quite as far as saying that the days of sole practitioner conveyancing firms are numbered, but the future looks bleak. If lenders don’t bring about their demise, then I suspect that new competition in the form of supermarkets probably will.