With all the recent political focus on letting agent fees and whether they should be banned, the issue of referral fees paid by conveyancers to estate agents has quietly reared its head.
In a new online thread relating to the Law Society Gazette, solicitors are wondering why such fees do not fall foul of the Bribery Act.
The answer is that while conveyancing fees are a very emotive subject, they are fine as long as they are not hidden (see the two links).
However, when putting together this report, Eye was startled to learn that it is not just referral fees from conveyancers that some agents take (we are talking about the large corporates here).
We are reliably told that they even dictate to their pet conveyancers which search company they should use, thus earning commissions from the search provider as well.
Conveyancers do not seem to do particularly well out of paying estate agents referral fees. However, if they provide their services in sufficient bulk, the business model clearly makes sense.
Not surprisingly, though, cost-driven conveyancers have to look at the bottom line. Understandably, they will use graduates to do the legwork.
Out of a £500 or £750 conveyancing bill that a consumer pays, £200 typically goes to the agent.
From the agent’s point of view, if the conveyancing service offered by one of the ‘bulk’ firms is no better and no worse than that offered by a local high street firm of solicitors, then why not take that £200?
The fact is that many agents, and not just the corporates, see conveyancing as a revenue stream and set targets for their staff.
One agent told Eye that in their time at a corporate business, there were particularly tough targets to meet (10% on top of banked income) on selling the ‘in-house’ conveyancing service.
Yet there were apparently many complaints about the service that was in fact provided by the panel of conveyancers used.
The oddity is that there is nothing wrong with letting agents’ fees to tenants as long as they are transparent and the agent complies with the Advertising Standards Authority ruling.
And, of course, so far there has been little media interest in the referral fees paid to letting agents by contractors, and the extent to which landlords know about these.
We fully realise we are playing devil’s advocate here but while everyone from Generation Rent to the Labour party is rounding on ‘hidden’ fees to tenants, we do wonder whether they are barking up the wrong tree.
Fees charged to tenants are not hidden at all, as long as agents comply with the ASA ruling. And after all, such fees usually genuinely cover costs such as independent inventories, which protect both tenant and landlord.
As usual, we would be very interested in your views.
(see clause 3.4.1)