Legal – conveyancing: What are the long term effects of online referral systems like purple bricks for the conveyancing market

by Heat Recruitment

Back in 2014, the Legal Services Consumer Panel published a report in which they predicted how both technological and cultural evolution would inspire significant change in the delivery of legal services. By 2020, the group predicted that there would be ‘less involvement by lawyers in many of the tasks that until now have made up their staple diet’.

In their report, the LSCP panel suggested that most consumers would soon seek alternatives to lawyers for less complex issues; that the advancement of modern technology along with the shift in regulatory requirements and consumer behaviour would see a rise in online services that sought to simplify complicated transactions and thus keep the costs to a minimum.

Fast forward four years and the predictions of the Legal Services Consumer Panel have played out almost exactly as they envisaged. In an increasingly on-demand economy, customers expect no purchase to require more than a couple of clicks. With this in mind, it was only so long until law firms specialising in residential conveyancing would face a challenge from plucky online competitors seeking to simplify the process.

The most notable of these so far has been Purple Bricks, a six-year-old brand with no branches, mainly freelance estate agents and a fixed rather fee for home sellers. Rather than bricks and mortar offices, the company operates through an online referral system whereby transactional work is referred to external legal conveyancers for a set fee. Their freelance agents don’t earn a salary; rather, they only make money when by listing a property or selling additional services.

According to Michael Bruce, chief executive at Purple Bricks, the company is “taking market share as we continue to win over consumers to the modern way of buying and selling property.” Now boasting over 630 freelance agents and another 160 in its overseas markets, Purple Bricks is certainly taking the property market by storm, achieving £9.7bn of UK home sales during the year.

But what effect is this having on the residential conveyancing market?

If recent figures are to be trusted, the rise of high-volume, low-cost companies saw the number of active conveyancing firms decline at the fastest rate for three years during 2015, dropping 9 per cent from 5,871 in 2014 to 5,357. Today, the number of conveyancing firms sits at a staggering 30% lower than it was in 2005. What’s more, the top 1000 firms in the business now hold 71% of the market.

According to Andrew Heisley, Managing Director of the Connells Group-owned conveyancing firm Conveyancing Direct, the consequences of changing consumer trends are both positive and negative.

“Like most things these days, as people get better access to services that aren’t local to them – mainly via the internet – it then creates a war on price and so you had specialist conveyancing firms really trying to focus on their processes and reduce costs for themselves, so they could reduce the fee they charged the client,” he says.

However, while the pull of online estate agents like Purple Bricks is increased transparency and reduced cost, there isn’t a lack of disgruntled customers claiming their decision to opt for the “simplified” approach caused greater headaches and was, in hindsight, a bad idea. Since Purple Bricks refer conveyancing cases to “preferred solicitors” upon which they make a commission, the consumer’s property transaction is passed to a “local property expert” that they will never meet face-to-face.

Should consumers have a question regarding their case, companies like Purple Bricks will put you through to an advisor at their call centre. Each customer service agent will then have to read through the case notes to even begin to attempt to answer the query. Beyond breakdowns in communication, horror stories involving unexpected fees and hidden clauses have left a fair share of customers wishing they had shopped local for their conveyancing case.

While online referral systems do provide a streamlined approach to buying and selling property, the problem that the conveyancing market suffers is a lack of awareness amongst consumers as to what they’re getting for their money. Lured in by low prices, most consumers don’t fully understand the difference; they opt for an “on-demand” service but have no idea as to who will undertake the work on their case or how qualified that legal professional is to handle the process.

Figures show that the rise in these online affordable services has undoubtedly posed a challenge to high street law firms specialising in residential conveyancing. However, as digitised transactions become the norm, trust and transparency will be the qualities consumers will seek from a conveyancer. For law firms boasting a strong reputation in this practice area, the end is far from nigh.

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by Dan Hazzard