Chancellor Rishi Sunak's announcement that he is introducing a Stamp Duty Land Tax holiday to help jump start the economy was welcome news, but it does bring some increased risks for conveyancers.

From 8th July to midnight on 31st March 2021, approximately nine out of every 10 property transactions in England will not attract any duty. Currently this holiday is only available in England, but from 27th July it will also be implemented to the equivalent Land Transaction Tax system operated in Wales.

Zoopla recently reported that the number of property transactions will reduce by as much as 50% this year, so hopefully the introduction of this stamp duty holiday will serve as the catalyst for an economic stimulus that makes this prediction incorrect. A vibrant property market boosts the business of multiple organisations, such as legal practices, DIY stores and furniture, homeware and kitchen shops as well as associated services like removal companies and tradesmen.

While we hope this change to the property market will prove to be a welcome boost to the economy, it does mean conveyancers may face heightened risks, especially when factoring in the time it takes to purchase a property.

The process and time it takes to buy a property varies enormously - sale and completion could be concluded in a matter of weeks from acceptance of an offer, or the process could take many months. Factors affecting the speed of the process include delays encountered by professionals involved in the process, such as when mortgage advisers don't get the required paperwork to lenders in a timely fashion or when surveyors aren't able to conduct a survey. The chain of transactions can also play a big part. The larger the chain, the more variables there are and consequently the chances of things not going to plan increase.

Mitigating the risks

Conveyance is the largest contributor of claims experienced by the legal profession in England and Wales by frequency, and it is also a significant contributor of claim by severity.

While it is true that one failure to obtain savings for a buyer might not impact insurance due to it falling inside a practice's policy excess, the error may still affect its profits.

It stands to reason that there is a greater risk for practices which undertake a large volume of conveyance transactions, both in terms of their bottom line and an insurer's balance sheet.

So what should practices do in order to mitigate these additional risks?

  • Make sure you apply appropriate risk warnings to your clients at the outset, prior to accepting instructions. All staff should articulate this appropriately to clients both verbally and in writing, and include it within the scope of their retainer letter as well.
    • During this process you should advise your clients of the various challenges and potential delays that may occur. Ensuring you swiftly receive any required documentation also helps reduce the chance of further complications.
  • Agree a communication plan with your clients in terms of both their preferred method (for example telephone instead of email) and frequency. You do not want poor communication or lack of progress reports increasing the time your associates are on the phone and not actively fee earning.
  • Rushing work leads to greater risks. Practices need to be mindful of undue pressure being put on fee earners by clients. Appropriate supervision of staff is key.
  • Consider your practice's capacity level and your associates' workload. Although there is a natural temptation to make hay while the sun shines and onboard all matters that come through, make sure you do not get overloaded. Compromising quality over quantity could have serious ramifications long after the stamp duty holiday ends. It may be prudent to identify your capacity numbers per fee earner, and make sure there is some consideration for holiday and illnesses. Additionally, with Covid-19 still present, it's important to factor in the possibility that staff may be forced to shield.
  • Consider the complexity of instructions and ensure you assign work to appropriately skilled individuals.
  • Title – when instructed it's a good idea to explore the availability of title insurance for the property and discuss the benefits of this with your client in terms of helping overcome any potential risks surrounding title issues.

To reiterate, it is crucial that practices establish their capacity level immediately before it is too late. We hope the stamp duty holiday has the desired positive impact, but it does come with some risks, which can be mitigated.

Teal Compliance can undertake a review of your conveyancing retainer letters and your onboarding processes and, as a Lockton client, you will receive a 20% discount on their standard fee. Please contact your Lockton representative to find out more.