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Modernising the home moving process

Modernising the home moving process
Eddie Goldsmith

By: Edward Goldsmith, Conveyancing Association UK AIC National Conference - Adelaide 2017

I am so pleased to be here with you at what seems to me to be a moment in time in Conveyancing - you are in the middle of what is the most exciting transformation of the way you convey.

Conveyancing in the UK can still take three months!

On my flight over from the UK I had time to reflect on how travel time has changed so dramatically – in the 18th Century it took two weeks from London to Edinburgh by coach, 4-6 months from England to Australia, and now (depending on your broadband provider) one or two seconds to communicate electronically across the Globe - and yet conveyancing in the UK can still take three months! Surely we can do better than that in the 21st Century?

I have  been qualified as a UK solicitor specialising in residential conveyancing for some 40  years - as a partner in a firm in Liverpool dealing with mortgage brokers / lenders on a nationwide basis, 150 staff - dealing with 12000 + cases a year. 

We compete in a very price driven market. Clients and estate agents dictate transaction speeds

Forty years ago we would examine the original Title Deeds of Indenture.  We practised locally and saw clients face to face. We had personal completions with other conveyancers face-to-face and clients never complained. We charged three times as much as we can today and we were in control.

In 2017 we use emails and clever computer systems and we often don't see clients or other solicitors. We don't have deeds - dematerialisation is the name of the game. We compete in a very price driven market where clients/estate agents dictate to us the speed of a transaction. We are most certainly not in control. I'm not sure how much resonance this has with you over here but I'm guessing it’s not that much different - judging from conversations with a number of you.

It's actually even worse than that, not only do we have to have the technical skills but also the soft skills to manage our clients and other stakeholders in the process but we are constantly under threat of conveyancer/seller impersonation, fraud and cybercrime generally.

UK conveyancing the most complained about legal service - stressful like death and divorce

Literally every day we worry in the UK about opening malware and whether our systems will be hacked and money taken from us or misdirected from clients to criminals – only this week our IT department went into overdrive following potential exposure to the global malware WannaCry. This is not something which we even imagined 40 years ago.

In the UK the Conveyancing Process is the most complained about legal service. Conveyancing is regarded as the third most stressful experience after death and divorce. Everyone at dinner parties has their own horror story about Conveyancing. 

Conveyancers' interests were not being represented by their representative bodies

21st Century consumers expect to transact online, but after agreeing to buy a property everything stops being digital – documents are posted back and forwards between the conveyancers and there is very little visibility for the client on the progress of their case other than through the communication of their conveyancer who may be very good at it or very poor.  All-in-all an unsatisfactory state of affairs and quite frankly not fit for purpose for 21st Century clients. So what is to be done? Well, things are changing…

Some years ago, a number of solicitors and licensed conveyancers in the UK got together to form a trade body as they did not feel that the interests of serious Conveyancers were being sufficiently represented by their representative bodies. 

We are making change happen for our clients

The Conveyancing Association is a voluntary trade body not a regulator - I am the current Chair of the Association. We represent the largest conveyancers in the United Kingdom both solicitors and licensed conveyancers and we have 60+ members who currently undertake 20% of all conveyancing transactions in the United Kingdom and 80% of all re-mortgage transactions.

We see ourselves as being a facilitator between all the various stakeholders in the house transfer market to enable change for the better for our clients.

We are of course, not the only organisation looking to make changes in the UK.  There are a  multitude of trade bodies representing different interests in the sector - from the Law Society and the Council of Mortgage Lenders through to the Council of Property Search Organisations and of course the Government and  its various statutory bodies such as Her Majesties Land  Registry and the Law Commission. 

Is Government looking at the process?

Well they threatened a White Paper on the home buying process last year...but that was before Brexit and Trump! They seem to have gone rather quiet on this at the moment!
However, despite this there are developments which will have a dramatic effect on what we are trying to achieve to improve the process.

With the Government busy on other matters, The Conveyancing Association decided that we needed to facilitate the market, coming up with its own ideas on how to improve the process and not wait for any Government initiative, most of which in the past have quite frankly been failures. In December of last year we published our own White Paper on Modernising the Home Moving Process in the UK. The first step was to look critically at the English and Wales Conveyancing process and examine that against other jurisdictions world-wide to see how we measure up and what we could do to improve.

I don’t know how many of you are intimate with our process – but  a lot of preparatory work goes into a sale file even before a contract can be issued ( I appreciate there are differences over here with Vendor Disclosure/Caveat Emptor).

The costs of aborted UK transactions have been assessed at £230 million per year

Our research shows that the process from agreeing the sale of the property to exchange can take routinely 8+ weeks - much longer generally if a leasehold property is involved. During that period all sorts of nasty things can happen - from sellers / buyers changing their minds to chains falling apart to disease and pestilence laying low the housing community! Not only are we talking about a sustained period of uncertainty but the costs of aborted transactions in the UK have been assessed at £230 million per year. 

Both buyers and sellers are in the same position. They have the uncertainly of a two-month window where they don’t know if that property is actually theirs but they will have spent money on surveys/searches/ legal fees - typically around £800 ( $1300 AUS Dollars) and the whole thing can fall apart at the last hurdle without exchange. 

Add into this mix the dynamics of a competitive housing market/third party stakeholders such as pushy estate agents / Lenders / and Local Authorities who are badly resourced and you have a toxic mix which the conveyancer tries to manage - not just dealing with the conveyancing itself but managing all the heightened and unrealistic expectations of clients and third parties alike. 

Other jurisdictions including Scotland, USA and Australia do it better than us...

Interestingly, it seemed clear to us that those jurisdictions such as Australia who provide plenty of up-front information, produce a better journey to their end customers. I suspect that you wouldn’t say your system was perfect but it seemed obvious to us that "quicker certainty" i.e. clients being able to commit to the transaction early doors is of benefit to all including the professionals involved. 

We do in England and Wales have other issues such as our antiquated leasehold system which adds a level of complexity, but clearly we needed to learn from other jurisdictions as to how to improve our process. 

Without reciting our findings in other jurisdictions in detail here, the general review showed us that we could improve our system through a number of initiatives - some which could be quick industry hits and some requiring legislation. I hope it will be interesting to you to compare and contrast our respective systems – I think you may be pleasantly surprised!

Providing greater protection from fraud

Our overall strategic aim in the CA is to speed up the pre-contract process to allow home movers to commit earlier and at the back end to provide greater Completion Certainty at the same time as providing greater protection from fraud and offering better and more effective communication as to what is going on in the process.
 
I think it's true to say that conveyancers in the UK have been gatekeepers in AML for longer than yourselves. We are currently awaiting the implementation of the 4th AML Directive but even at present we are required to carry out due diligence on our clients both in terms of photo ID and proof of residence. This is on a proportionate risk basis with all Conveyancers needing to decide on how to evaluate the risk and what particular policies to set. Where we don’t see clients face to face we are required to conduct Enhanced Due Diligence which generally involves a more in-depth consideration of ID. Many conveyancers routinely carry out e-ID searches in those circumstances but it is up to every organisation to satisfy themselves. 

The issue here however is that all the stakeholders in the process carry out their own ID Due Diligence and this is a constant cause of frustration for our mutual clients - who routinely have to provide ID and Proof of Residence multiple times - to the mortgage broker / the estate agent / the lender and then ourselves. There is effectively no sharing of this information and each organisation sets its own rules of requirement, some needing to see originals / others happy with copies.

Encouraging Land Registry to take responsibility for verification of client identity

Moreover, this is a uniquely frustrating experience and objectively there has to be a better way of dealing with this. When this is coupled with the fact that it is easy to forge or obtain ID Documents and that fraudsters are becoming more sophisticated by the day routinely obtaining ID is little more than an irritant to a determined fraudster. Our first objective therefore is to develop more robust products which include  biometric ID Verification to include ID / PoR / PEP and Proximity to the Property. This is likely to help reduce some of the fraud currently attempted by remote fraudsters masquerading as owners of property 

Step two is to encourage the Land Registry itself to take responsibility for verification of client identity centrally and therefore remove the multiple layers of due diligence by the stakeholders in the transaction. This is something they are trialling at the moment and although this is some way off it would massively improve the customer journey 

Australian Conveyancers are surprised

I mentioned before the surprise of Santina and Jo and other Australian Conveyancers when I talk about the two month minimum gap between agreeing to buy a property and legal commitment - you do this so much better than us and we are learning from you but let me tell you why it takes so long in the UK. 

From the moment that our client agrees a sale of their property the time starts ticking but until title examination / searches / mortgage finance are in place then the buyer will not be able to exchange contracts and until exchange there is no legal commitment on either party.

E-contracts can be completed within 7-10 minutes

It is the seller’s conveyancer’s role to prepare a contract pack and send this to the buyers Conveyancers – containing proof of title and the seller’s replies to property information (ie planning / building regulation consents / any notices / what is being left in the property). It is the job of the buyer’s conveyancers to check the title and raise enquiries. The production of the pack can routinely take 7-10 days to prepare (something which e-contracts can do within 7-10 minutes). Then there is the matter of local authority searches …

In England and Wales we have 348 local authorities who currently are responsible holding statutory information such as development planning decisions and details of road developments etc. The issue here is only a proportion of those Councils hold these records digitally or even electronically and therefore the timescale for returning the information requested can range from 4 hours to 6  weeks ( most are 10 days to 3 weeks ) with a variance of cost from £40  up to £370 ( most around £150 -£175 ) . No buyer with a mortgage can proceed without the search results and few conveyancers will bear the cost of searches themselves - and as searches are generally not requested until the contract is received there can be a 4 - 6 week period following receipt of the contract and receiving the search. 

It can take two months before both parties are ready to commit to a contract

On average it will take 4-6 weeks for the sellers and buyers conveyancers to deal with title issues -  much longer if leasehold - which can easily add a month on - more about this later...

Whilst all this is going on we have the lenders who are likely to take 4-6 weeks to issue the mortgage offer. All in all around two months before both parties are ready to commit to a contract. There can easily be a further delay as the parties try to co- ordinate sales or purchases to line up in a chain - so not unusual for the 2 months to turn into 3 months - all this time either party can withdraw from the transaction without any financial penalty - gazumping and gazundering can be common place in times of short property supply – adding to the already heightened anxiety of the client and their conveyancer. 

No-one has really given it any thought to change it!!

The first step therefore is to see if we can’t change the process (akin to the Victoria Vendor Disclosure) to provide up front title information. Some UK firms already do this and in certain processes such as New Build it is routine for the Developers conveyancers to do just that - they will provide a comprehensive pack of the title and property information to the buyers Conveyancers. They will then require Exchange of contracts to take place within 28 days. Once exchange has taken place the builders will then serve a notice to complete once the property has been built and ready for re-inspection. This process generally works well and in my experience the only issue which arises is if the builders have not satisfactorily completed the work. The process works similarly and successfully with properties at auction.  You may be thinking - if that is the case then why not adopt the same process in standard non new build non auction cases - and my view is that you are right. There is no reason why an upfront pack - we are calling this an e-home report is not prepared by the sellers conveyancers and sent to the buyers conveyancers - and really the only reason is that this is not the way we have done it in England and Wales and therefore no-one has really given it any thought to change it !!

Sellers' forms should be digitised and signed electronically

We have certain members in the CA who do follow this process and they say to us that there is a definite benefit in doing so - it reduces time and enquiries to the benefit of all involved. Of course in UK Conveyancing the onus is still caveat emptor and without Government intervention this will still remain the responsibility of the buyers conveyancers but there is a real movement within the CA to move to this process - including the provision of a Conveyancers Certificate that all relevant document has been provided ( without any inferred or express warranties as the title itself ) - we also believe that the Law Commission is seriously considering this as a potential benefit and something which they may recommend to the Government.

Of course there are a number of ways of providing this upfront information but we have said in our White Paper that this should be provided digitally in order for the data to be dropped in to existing case management systems for ease of collation and checking. We also are recommending that any forms that need to be completed and signed by the sellers themselves should be digitised and capable of being signed electronically by the sellers.

Money spent on surveys / legal fees can't be recovered if the transaction falls

I mentioned before that despite agreeing to buy the property the current unsatisfactory position is that there is no legal commitment until exchange of contract - weeks down the road.
This is without any shadow of a doubt unsatisfactory and in our view unnecessary  The public themselves whilst vaguely aware of this position do probably not realise until it happens personally that no money spent on surveys / legal fees can be recovered if the transaction falls through even on the day of exchange . This does happen. In my own Firm I have had to explain to an exasperated buyer that they have been gazumped by a third party willing to pay more and that the £800 they have spent cannot be recovered. 

And yet - it is perfectly possible for both parties to enter into a reservation / pre contract agreement which binds both to proceeding within a certain period and subject to certain matters such as finance. Certainly our research shows us that this is common in many countries in the World including many countries in the EU - if the Seller or buyer withdraws before formal exchange there is financial penalty to pay - typically double the deposit. 

No one has been forward thinking enough to change

Again you may wonder why this is not more commonly adopted in the UK ?- and my answer - as unsatisfactory as it may sound is that it is because we have always done it the current way and no one has been forward thinking enough to change it and introduce this pre commitment .
The reality is however that entering into such an agreement would commit the party’s early doors and also give them the safeguard to withdraw in the event that a mortgage was not forthcoming. 

The CA is therefore pushing ahead with this as a work- stream and will as part of the White Paper be providing a template standardised reservation agreement to our Members
We are proposing that such an Agreement is entered into within 5 day of the sale being agreed - subject to finance / satisfactory title.

We live in a very different world these days - no one waits 4 weeks anymore

I have mentioned the phrase Completion Certainty more than once - perhaps a little awkward a phrase but the underlying principle here is to ensure that completion takes place on the day when the parties are expecting -giving them better certainty about this that they sometimes currently have ... let me explain. Currently a completion date when all parties move can be anywhere between 1 day and 4 weeks. When I started in practice there was no flexibility here - it was always and only 4 weeks - I remember having the temerity to ask a solicitor for the seller if we could reduce that to 3 weeks and I thought he was going to have an apoplectic fit on the spot and report me to the Law Society!

At least there was completion certainty in that inflexibility - sellers knew they had 4 weeks after exchange to clear their house, the removal people had a fixed date in their diaries and the buyers conveyancers had plenty of time to draw down mortgage monies in time for completion. We live in a very different world these days - no one waits for 4 weeks anymore - the likely timescale is much more likely to be 2 weeks or less and despite the unease of conveyancers it is not uncommon for parties to exchange and move on the same day. In my firm we have for years issued a warning against a simultaneous exchange of contracts and completion. But actually no one really takes any notice.

It's all your fault they are stuck in a removal van on the Road to Hell!

We tend to blame the estate agents for this - they build an expectation in the buyers and sellers minds that they will be moving on a certain date and that date becomes a fixed and immovable date in the clients minds - even if we as the conveyancers tell them until we are blue in the face that we can't guarantee that date they just don’t listen anymore.

You therefore can have the ludicrous situation where you have a family of clients on the motorway with (always) 2 screaming kids in the background demanding that you do something to make their new purchase happen – despite the fact that you are waiting for the conveyancers on your clients sale to confirm they are ready to exchange - it's all your fault they are stuck in a removal van on the Road to Hell!

UK lenders use antiquated bank processes to transmit money which can take 3 days to arrive

There is also nothing quite as stressful for a conveyancer to be closing down their computer on a Friday afternoon to be phoned by the Agent ( in UK invariably called Justin ) to say that the seller hasn't released the keys to your clients because his conveyancers haven't received the sale proceeds. So what is the problem here? Well apart from the fact that it is crazy to agree a simultaneous exchange and completion date  the problem is exacerbated by a number of other factors.

Firstly lenders in the UK use antiquated bank processes to transmit money which can take 3 days to arrive ( i can use an app on my phone to transfer money instantaneously) and therefore sometime the money doesn’t  arrive or arrives late in the day. Secondly the banking system on a Friday before a Bank Holiday can’t cope with the huge amounts of money being sent through the system. Thirdly we as conveyancers have to hold money to the order and on trust for our lender client and our present contract conditions don’t allow us to send the money the day before even if we have it. 

Alleviating a number of stress touch points

Some more enlightened lenders such as Santander are happy to release funds the day before completion - the CA is pushing the UK National Law Society to change its Code for Completion to allow us to release funds the day before and we need to get into the mindset as a profession to provide an undertaking to hold the funds to the order of the buyers conveyancers for completion the next day. I can tell you that this in itself would alleviate a number of the touch points of stress and provide greater completion certainty. 

I won’t spend too much time on leasehold properties as I appreciate that you have Strata Title over here which is akin to Commonhold in England and Wales - we envy you as Commonhold has not taken off and we are presently stuck with 1 in 5 properties being leasehold. I appreciate you do have leasehold title over here but not as far as I am aware to the same magnitude as the UK. 
It is fair to say that most UK houses will be freehold – but all flat are leasehold and that is where the problem lies. A  lease administrator - it could be the freeholder themselves or more likely a professional management company appointed by them has the role of collecting  service charges and ground rent to pay for the  repair and maintenance  of the common parts, building insurance and fund exceptional items of repair.

No redress scheme
 
That is all fine but the issue is that this industry is not regulated formally and although various managing agents will be part of voluntary schemes of redress the reality is that a significant proportion ( we think around 40% ) are unregulated and not part of any redress scheme. 

Statutory protection extends to certain aspects of the relationship between the landlord and the tenant but it isn't comprehensive and many administrators can virtually charge what they want and take as long a time as they want to provide important notices of compliance with the rules of the management company.  Even where there is some limited scope of protection by applying to a lands tribunal the reality is that in the heat of selling a flat and obtaining registration of the new owners details at Land Registry there is just not the time to make any application and so many buyers are held to ransom for obscene amounts of money for routine management tasks. 

We as the CA are committed to fighting for this to happen and we have had a measure of success in appealing to Government to improve the protection to tenants and I’m pleased to report that both the Law Commission and Land Registry are looking to see what they can do to alleviate this unsatisfactory situation.

Before the crash of 2007 it was possible to have a mortgage agreed in principle in 3 minutes

Of course it’s the same here as in the UK that buyers need to have their mortgage finance in place in order to purchase their property. Lending and the practice of lending institutions have changed dramatically over the last few years - and certainly since the crash of 2007. Before 2007 it was possible to have a mortgage agreed in principle in 3 minutes. Now it can take routinely three weeks and often longer. It's not all the fault of the lenders but our Financial Conduct Authority  leans heavily on them to ensure " responsible lending "- but really in this day and age do we have to wait for weeks for a lender to carry out their due diligence to offer a mortgage on a property which is secured against the loan?- it doesn't take unsecured lenders anything like the same length of time - admittedly its not for the same magnitude of funds but those sums are sometimes quite tasty and even lenders of small advances carry out due diligence on the ability of borrowers to repay.
 
So if we are looking to provide the environment for buyers to commit early doors to the purchase we need to have greater certainty on whether they will be granted the funds from the lender - and that is something again which the CA is working with lenders on. At the moment a credit search by a lender can leave a hard footprint on the borrowers credit history and that can impair their ability to obtain finance - we need therefore to ensure that such searches do not leave a footprint and yet obtain sufficient financial information on the borrowers to provide the confidence to the lender to lend - companies such as equifax and Experian are currently working on such products and we are confident their launch to market will be very soon. 

That will have a beneficial effect that will allow early commitment - subject still to valuation but that is an obstacle which is often easily resolved by a financial compromise rather than a withdrawal completely.

Push required for simpler, more customer friendly reports

I have mentioned above the issue with local authorities and the non centralisation of the relevant information with 348 custodians and the issues of delay that can cause. To some extent the market has provided a solution in that private search organisations can carry out personal searches where they either attend local authority offices or telephone them and that in most cases will expedite the return of the search. As above the issue is still the disparity of cost across the local authorities but Land Registry is stepping in to at least centralise some of the information at a uniform price. Other solutions are insurance from the likes of Stewart Title and First Title for lenders who are happy to accept.
 
What we need however is a push for further digitalisation of local authority records and simpler and more customer friendly reports - some of them are incomprehensible to the conveyancers - let alone the clients!

The sexy part of my romp through the UK conveyancing process...

So I am now coming to what is (at least for me) the sexy part of my romp through the UK conveyancing process - and the vision of the future as set out in the CA White Paper ....
A trusted e-community where all the stakeholders in the process can communicate with each other safely and free from risk of fraud – where clients can see not only their own progress but others involved in the chain – where properties have their own unique property log which is fixed through block chain technology – where through the use of pre-contract packs and swifter commitment properties can be exchanged within 3 weeks and completion routinely within 4 weeks.

The UK is  behind Australia in terms of digital signatures and e-conveyancing
 
This  may already be the Australian PEXA reality and from what I have seen so far I commend you and your state governments  for the vision and determination to help create the reality of e- conveyancing in Australia. The UK is presently behind Australia in terms of digital signatures and e-conveyancing generally.

Australia is transforming the conveyancing process. Most importantly your Government is behind you

I for one am very excited about the future. It is clear that there is not just a desire in Australia to transform the conveyancing process which of course will also help bring about a harmonisation of State Property Law but most importantly your Government is behind you in this. Having had the pleasure of being with you and learning about the exciting changes transforming your conveyancing process I am jealous that we in the UK are lagging behind – I seriously believe we are also changing and if my Association can help to facilitate that change then we will have achieved an important milestone in bringing the UK Conveyancing Process into the 21st Century.

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