The Legal Services Consumer Panel is calling for regulation and greater disclosure of introductory fees paid by lawyers to intermediaries, which include payments made by estate agents to residential conveyancing solicitors after a home sale is agreed.
The panel, which was set up by the Legal Services Board as a result of the Legal Services Act 2007 to provide independent advice, reports that three in every ten home-buyers are introduced to their solicitor by an estate agent.
Most house-buyers are unaware of the practice but evidence collected by the panel suggests the quality of the legal conveyancing work is no different than if a fee had not been paid. Charges are no higher and often cheaper.
The report says that, regardless of whether fees from estate agents were involved, client satisfaction with solicitors was 90% and there was no evidence of lawyers giving biased advice for the benefit of an agent and the continuance of the professional relationship.
However, a number of problems or potential issues with the system were highlighted.
With closed bids and auctions, work may be referred to law firms paying the highest fees, pressure may be exerted on home-buyers by estate agents to use a firm to which it pays fees, there needs to be transparency of the practice for consumer protection benefits and if introducers only give work to a small number of large law practices, this can have implications for proper competition.
Chair of the Legal Services Consumer Panel Dr Dianne Hayter said, "Referral fees have their problems, but they can increase access to justice, while not raising prices or reducing the quality of advice."
Although the Legal Services Consumer panel says that referral fees have a place in the market, it makes 12 recommendations to improve services for home-buyers and protect residential conveyancing solicitors. These include a new consistent set of regulatory arrangements for lawyers and introducers and improved transparency requirements, such as buyers giving written consent to a fee-based referral.
