Leasehold properties account for around 20% of all dwellings in the UK, and while that figure may change in the future with government legislation and a full move to commonhold, the reality for the foreseeable future is that approximately one in five of all transactions will involve leasehold.
From a conveyancing perspective this is not work that can be described as straightforward. It is not only more difficult, but also more time-consuming, requiring a level of understanding that not all firms can easily provide. Many firms have specific people within their teams who are leasehold specialists, and those individuals are worth their weight in gold.
The challenge is that when these people move on or retire, they are extremely difficult to replace, and recruiting new talent into this specialism can be a slow and frustrating process.
What this means is that those firms who are good at leasehold tend to attract a great deal of business. They can very quickly find themselves with large amounts of work, and given that leasehold work is more time-consumer, and therefore, less profitable than standard freehold conveyancing, there has been a growing trend of firms deliberately trying to price themselves out of this type of work.
It is not uncommon for brokers to see this reflected in the leasehold supplements being charged by conveyancing firms, whether directly or via platforms. One firm recently set its leasehold supplement at £2,000. This is not a firm on the conveybuddy platform, but the signal is very clear from them, they simply do not want this work, and are using pricing as a mechanism to divert it elsewhere.
It is their prerogative, of course, but when a large conveyancing firm takes such a stance, the knock-on effect for the wider sector is significant.
Let’s use an example. A large firm might receive 50 cases per day. Based on the 20% figure, 10 of those cases are likely to be leasehold. If that firm has decided to price itself out of doing that work, then those 10 cases have to be picked up by other firms – every day.
For some smaller firms, 10 leasehold cases landing on their desk could be enough to swamp their resources. It is no surprise, then, that we tend to see some of the steepest increases in leasehold fees during the busier times of the year, especially spring and summer when volumes across the housing market are already running hot.
SHOP AROUND
For brokers, the important message here is to shop around. There are wide discrepancies in the way that different firms approach leasehold work and in the supplements they apply. It is worth digging beneath the surface and checking platforms, because we regularly see examples where the same case, dealt with by the same people, is offered at vastly different prices depending on the distribution route.
A case in point: we have one law firm currently available on conveybuddy where the leasehold supplement is £450 cheaper than the same firm is offering on another panel. The work will be handled by the same team of solicitors, the only difference is the route through which it is accessed. For a broker, and certainly for the client, that is a no brainer in terms of who to choose, but it requires brokers to do their homework.
Of course, we are not blind to the realities facing our partner law firms. Leasehold work can be more demanding, it does require more time, and the profitability is lower than freehold.
However, from the very start of our relationships with our law firms we were clear on not simply allowing wholesale increases in fee supplements as a way of controlling workflow. We do not believe that is fair or equitable. We had a firm come to us recently asking to increase their leasehold supplement, but our data showed that only 16% of their business through us was leasehold, actually below the national average.
This made it clear that the extra pressure was not coming from conveybuddy, but from other sources. We advised them to address that issue directly, rather than seeking to pass the costs on through our platform.
THE PANEL PLAY
This is also where panel management comes into play. Well-run panels should not be inundating firms with unmanageable volumes of leasehold cases. When the distribution is managed effectively, there is no need for firms to resort to fee increases to dampen down demand. That is part of the reason we are confident that our model works better, it balances fairness for clients with a sustainable flow of work for firms.
The bottom line for brokers is that leasehold conveyancing will continue to be a feature of the market for many years to come, even if reform eventually changes the landscape. It remains a specialism, it remains slightly more complex, and it remains the case that firms who are good at it are in high demand. That creates a lot of noise around fees and supplements, but with a bit of due diligence and a willingness to shop around, brokers can still secure excellent value for their clients.
The example of a £450 saving for the exact same service should be enough to reinforce that point.
