Licensed Conveyancers – A Risk For Consumers
OPINIONby Peter Mericka B.A., LL.B
Real Estate Consumer Advocate
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd
I was motivated to write this article for The Australian Real Estate after I had received a series of emails from a Licensed Conveyancer, Paul Garson of Stonnington Conveyancing. Garson believes that lawyers, who for many years have been the only legitimate conveyancers in the industry, should no longer call themselves “conveyancers”. It seemed to me that Garson had begun to believe his own lobby group’s propaganda – that through licensing, conveyancers who offer a lesser service and lower levels of consumer safety could now claim to be providing a superior service to that offered by lawyers. The fact of the matter is that conveyancers are a transitory phenomenon, mere middle-persons offering limited services in risky circumstances for cheap prices. The inability of licensed conveyancers to make a positive contribution to the direction of the conveyancing industry in terms of ethics, value for money and consumer protection means that they will always represent a huge risk to those who resort to them.
Introduction – attacked by a conceited licensed conveyancer
I am the principal of Lawyers Conveyancing, and I am a conveyancer as well as a property lawyer. In order to enhance the level of service offered to conveyancing consumers, my firm has gained accreditation as Legal Best Practice law firm, to the Australian industry standard LAW 9000.
Conveyancing clients who use our services for the first time tend to become lifelong clients, and enjoy the benefits of being able to make contact with a qualified lawyer when they need one, at any time, just by picking up the telephone. Being able to provide a full range of general legal services to our clients gives us a competitive edge, and provides our clients with peace of mind.
Paul Garson is the principal of Stonnington Conveyancing, and has recently become a “Licensed Conveyancer”. So proud is Garson with his new status that he felt entitled to attack me because I am not a licensed conveyancer (lawyers are not required to obtain such a licence), and to demand that I cease to use the term “conveyancer” when referring to the mainstay of my business. Here’s how Garson put it:
“I believe that it is misleading and deceptive to those specifically seeking conveyancing services from a Licensed Conveyancer…”
and
“I had better just check that you understand (and there are many possible reasons) why a consumer may deliberately wish to choose a Licensed Conveyancer (and specifically not a lawyer) for their file and that your use of “Conveyancer” in your e-mail footer may be construed as misleading and deceptive? I can tell you are not stupid, so I will quite reasonably assume you do understand all of the above, and will act accordingly.”
and
“…I definitely do have a problem with you calling yourself a “Conveyancer” and if you do not cease doing so, I will take whatever further action I think appropriate in an attempt to prevent you from doing so.”
and
“I see you are still representing that you are a Conveyancer. As you know, I remain unhappy with the possible misunderstanding that may arise from your doing so – will you change it without a “fight”? – better for both of us. I am happy with ‘Conveyancing Lawyer’ or similar.”
and
“I like a challenge too – and many people have underestimated me in the past to their detriment. Do not underestimate my resolve as to your misleading use of the word ‘Conveyancer’.”
Licensed conveyancers believing their own propaganda
Until Garson launched his attack I had come to regard licensed conveyancers simply as benign participants in the legal industry, offering cheap basic services on a “cottage industry” basis, and competing mainly against the publishers of do-it-yourself conveyancing kits.
However, Garson’s attack indicates that conveyancers are now attempting to pass themselves off as property law “specialists” on the basis that they are not “distracted” by having to deal with other legal work, apart from what they are permitted to do under the Conveyancers Act 2006. According to Garson, this “less is more” notion has gained some favour in other states, and is being used by conveyancers to promote their limited services as “specialist”.
Conveyancers believe that the “distraction” argument sounds convincing, and so they promote themselves on the basis that they will not be distracted by the variety of legal work lawyers undertake. In reality conveyancers are renowned for taking on more files than they can manage. The real distraction in any office is having more work than one person can cope with, and a sole practising conveyancer working on the cheap and trying to make a profit by high volume at low prices is going to be very distracted – and very likely to make costly mistakes.
Here are some examples of how licensed conveyancers are delivering the “distraction” argument, and other spurious messages to consumers:
“We believe very strongly that conveyancing should be done only by people specifically qualified as Conveyancers. In many cases, this excludes more generally qualified solicitors as the standard Property Law component in a Law Degree is significantly less in quantity and practical knowledge than that of most of the available Tertiary level Conveyancing qualifications.”
This statement is one of the more misleading items of propaganda put about by licensed conveyancers. All lawyers must study property law as part of their degree course – it is compulsory in every law course. But this does not mean that all lawyers are lawyer conveyancers; in fact many lawyers do not do conveyancing work at all, and confine themselves to other areas of law.
Lawyers who undertake conveyancing work must have more than just a law degree. They must undertake a practical training course, and demonstrate competence in dealing, not only with conveyancing work and property law, but also in all of the other areas of law which have some connection with conveyancing and property transactions. Conveyancers, on the other hand, are taught only what is necessary to assist them to complete a basic conveyancing transaction, and to be able to identify when a conveyancing matter has reached the point at which the conveyancer must refer the client to a property lawyer!
The “practical knowledge” needed by licensed conveyancers cannot be gained through training courses available to conveyancers. As The Allen Consulting Group noted in its report “Conveyancing Regulations 2007 – Regulatory Impact Statement”:
“…the current generation of conveyancers are largely made up of former legal firm employees who, it is assumed, generally have a good understanding of the principles of contract and property law, and the practicalities of running conveyancing files. New, untrained or unqualified entrants to the market for conveyancing services would generally lack this background, and may therefore be more prone to making errors.”
“As conveyancers do not undertake court work they are more immediately available to their clients.“
Lawyer conveyancers do not attend court. Barristers are briefed by lawyers to appear in court on behalf of clients. But what about situations where a conveyancing client’s matter is heading for court (as can occur if the person handling the conveyancing lacks the skills necessary to steer it in the right direction)? A client requiring a barrister’s advice, or a barrister’s appearance in court cannot access a barrister through a conveyancer – the conveyancer would have to refer the client to a lawyer anyway.
“Generally speaking, when you trust your property transfer to a Solicitor, you end up dealing with a Conveyancing Clerk. A good Conveyancing firm is normally considered a better option as they are more hands-on, and property conveyancing is ALL they do…Good Conveyancing firms retain a Solicitor, so you don’t need one.“
It would appear that using a conveyancer who needs to retain a solicitor to help with legal work and advice is somehow better than going direct to the solicitor who may have a clerk handle the clerical tasks. What has been left unsaid is the main problem with this assertion. If the conveyancer is more capable than a solicitor, why would the client “need” a solicitor all? And if the client does need a solicitor, despite engaging the conveyancer, the conveyancer’s solicitor will be too busy looking after the conveyancer to assist the client.
“Conveyancing is our specialty – we will not be distracted by other legal matters not associated with conveyancing.”
Being unable to assist clients with legal advice on areas of law “not associated with conveyancing”, such as estate agent disputes, the distribution of the proceeds of the sale in a Family Law matter or probate issues, means that the conveyancer does not have to be “distracted” from simple and straight-forward conveyancing tasks. Presumably such “distractions” would be referred off to a lawyer, at an additional cost to the client.
“Unlike solicitors, we do NOT have the distraction of having to perform litigation work, probate – or any other form of law that makes us less efficient on your property transaction. It is ALL we do!“
Again, a conveyancer does not want to be “distracted” by dealing with the whole of the client’s problem. Apparently, the conveyancer wants to pick and choose, dealing with the simple conveyancing component of the problem, then sending the client off to a lawyer to have the other matters dealt with. Does this conveyancer send clients away if the matter is associated with a probate application, or do they deal just with the conveyancing and refer the client off to a lawyer for the probate? Lawyers who look after probate matters are also lawyer conveyancers, so it would be cheaper to have the lawyer handle the lot.
The economy of a holistic, all-inclusive service is not considered important by the conveyancer, but it matters a great deal to consumers.
Cindy Brown Licensed Conveyancer
“I am solely a conveyancer and I won’t be busy with other, time consuming, legal matters.”
Does this mean that Cindy can squeeze in many more conveyancing matters than a lawyer who is asked to deal with a variety of legal matters, of which conveyancing is just one part? That’s great if Cindy is trying to impress a developer who is interested in the volume of conveyancing matters Cindy can churn through in a week, but not much help to a client who wants to deal with one expert offering a comprehensive, all-inclusive service.
Why would a consumer seek out a licensed conveyancer rather than a lawyer conveyancer?
According to licensed conveyancer Paul Garson, “…there are many possible reasons why a consumer may deliberately wish to choose a Licensed Conveyancer (and specifically not a lawyer) for their file…” but he provides no examples of such reasons.
I have never heard of a consumer who would avoid a lawyer conveyancer in order to engage a non-lawyer conveyancer for a conveyancing matter on the basis of expertise. Let’s look at it this way, when a conveyancing matter gets so difficult, and so complex, that legal problems may ensue if the matter is not dealt with properly and with a high level of expertise, will the consumer turn to the licensed conveyancer or to the lawyer? The fact of the matter is that conveyancers, when confronted with legal problems that are beyond their limited expertise, advise their own clients to seek out a lawyer.
There are only two reasons why a consumer would seek out a licensed conveyancer rather than a lawyer conveyancer. First, conveyancers are perceived to be cheap – if the consumer is extremely cost-conscience, expertise may come second to cost. (However, it should be noted that the price difference between conveyancer and lawyer has quickly closed since the introduction of the Conveyancers Act 2006.) Second, many consumers seek out licensed conveyancers if they are told to do so. (See below regarding the corrupting effect of “referral fees” paid to estate agents.) Estate agents prefer conveyancers because conveyancers rarely argue with the estate agent. And of course, the propaganda of the licensed conveyancers themselves can sound convincing to those who take it at face value.
Why don’t lawyers become licensed conveyancers?
Where are the conspiracy theorists when you need them? It would be a simple answer to the nonsense of of Paul Garson regarding lawyers vs. conveyancers if lawyers could also become licensed conveyancers. Consumers would automatically seek out licensed lawyer conveyancers, leaving the newly licensed conveyancers withering on the vine after having paid their licence fees and professional indemnity insurance premiums to the government-nominated private insurer.
The Conveyancers Act 2006 states that its purpose is to regulate non-lawyer conveyancers, and there is no provision under the act for a lawyer to obtain a conveyancer’s licence. The government line on the issue is that lawyers are already conveyancers, and so they don’t need to be licensed. However, the Conveyancers Act 2006, through poor drafting, has inadvertently created some ridiculous situations. (See “Conveyancers Act 2006 – an Act of stupidity!” below.)
Licensed Conveyancers will always be a high risk option
The reality for consumers is that licensed conveyancers are still a very risky choice for consumers, and will always remain so. In its recent Conveyancing Regulations 2007 Regulatory Impact Statement, prepared in light of the introduction of licensed conveyancers pursuant to the Conveyancers Act 2006, the Allen Consulting Group had this to say about the risks associated with the use of a licensed conveyancer as compared to a qualified legal practitioner (lawyer):
“Consumers may generally find it difficult to judge the quality of conveyancers (because of the nature of the product) and may choose ‘poor quality’ conveyancers (e.g. those that make errors and mistakes). Problems associated with conveyancing transactions can impact on third parties.
The Victorian Government has introduced the Conveyancers Act 2006, which amongst other things will require conveyancers to be licensed, hold professional indemnity insurance, and hold certain competencies. Although this (and a number of other mechanisms such as the industry’s code) addresses some quality problems, some risks would still remain. Indeed, the Conveyancers Act 2006 will allow conveyancers to do all of the work — including the legal work — associated with conveyancing which could introduce new risks if not supported by other consumer protection initiatives.
It is estimated that if the value of conveyancer errors (that would otherwise be made once conveyancers are allowed to do the legal work associated with conveyancing) is $50 000 on average, and conveyancers make between two and five times as many errors relative to lawyers, the total cost of these errors would be between $30.6 million and $76.5 million NPV over ten years. These estimates do not reflect other, unquantified aspects of the problem, for example they do not cover the distress experienced by consumers or the other costs they incur resolving such errors, or the costs associated with loss of confidence in the property market and the conveyancing process (which means that the actual size of the problem is likely to be greater).“
and
“The Review of the Regulation of Conveyancing in Victoria found that, although there is a paucity of evidence to suggest that there is a significant problem with the provision of conveyancing services in Victoria at the present time, there are factors suggesting that — in future — there may be an increased number of costly problems:
- The review acknowledged that it was likely to be skewed to capturing information from the more reputable elements in the industry. Further, a complete picture of the conveyancing market was not available.
- Problems associated with conveyancing have a long lead time and may only become apparent when the property is next sold. The Land Registry advises that the average turn over of a house is every seven years. Given that the current regime of deregulated conveyancing services has only been in place for ten years, there may not have been sufficient time for some problems to become apparent.
- • Prior to the current arrangements, only lawyers could offer conveyancing services. When the lawyers’ monopoly on conveyancing was removed, anybody could offer conveyancing services but only lawyers could do the legal work associated with conveyancing. At this point, a number of employees from legal firms left those firms to set up their own conveyancing practices. These conveyancers took with them their experiences from working with lawyers, and at present it is considered that these ex-employees of law firms have been the‘backbone’ of non-lawyer conveyancers. The concern is that at least some of the new conveyancers entering the market lack the training, the practical experience, or contacts and association that current conveyancers maintain. If practical experience gained by conveyancers while working as employees in legal firms is a contributing factor to the relatively low number of problems now, then the absence of formal requirements for qualifications coupled with a lack of practical experience, may mean that future conveyancers are more likely to provide sub standard conveyancing services.“
One of the main problems for conveyancers is knowing the limits of their capacity, both in terms of legal knowledge and expertise in the area of property law, and the ability to recognise when the client needs the expertise of a lawyer to prevent problems from arising or to deal with problems that have already occurred. I have often had to advise clients that what they propose could constitute fraud, or criminal deception – a non-lawyer would be unable to identify such problems, some of which can be very subtle indeed.
Example 1:
A client was advised by the estate agent that the purchaser had withdrawn her offer to purchase the client’s property. The estate agent advised the client that she should quickly sign the contract so that the estate agent could ensure that the sale would proceed. I was able to advise the client against following the advice of the estate agent, as she would be committing a serious crime. The estate agent commented that the client should have used a conveyancer, as lawyers tend to be “too pedantic”.Example 2:
A purchaser bought a property through a “buyer’s agent”, who signed the contract in his own name. The buyer’s agent then nominated the purchaser as substitute purchaser. The contract had been made “subject to finance”, but as the contract had been entered into by the buyer’s agent, the purchaser (as nominee) did not have the benefit of the finance condition. The purchaser was advised against accepting the nomination until her finance was approved.
While conveyancers may be able to apply basic legal principles to simple conveyancing transactions, other principles of law, not taught as part of a conveyancer’s licensing course, leave the conveyancer unable to cope with the myriad difficult or subtle legal issues that can arise in any seemingly standard conveyancing matter.
Having to admit to shortcomings in skill or legal knowledge can be embarrassing and costly. Licensed conveyancers who have worked hard to convince clients to use their services are loathe to have to tell a client when the time has come for a qualified lawyer to become involved, and it can be difficult to respond to a client who, in anger and despair, tells the conveyancer, “If you’d told me before that you can’t handle difficult situations I wouldn’t have come to you in the first place!”
The reluctance or inability of conveyancers to acknowledge their limitations can lead to over-confidence, or a naive hope that “somehow everything will turn out for the best”. Compounding the problem is the embarrassment and humiliation of having to admit that mistakes have been made. The temptation to cover up mistakes, rather than appear incompetent or unwilling to admit to limitations in competence and capacity, can be overwhelming. If the conveyancer succumbs to such temptation a small problem can escalate, with prolonged processes of complaint hearings, expensive negligence actions, and even possible criminal proceedings a real possibility.
The best approach for any consumer to take is to seek out a Legal Best Practice LAW 9000 conveyancing law firm, and compare price, expertise and consumer safety, before making any final decision on whether to engage a non-lawyer conveyancer or a lawyer conveyancer.
Conveyancers Act 2006 – an Act of stupidity!
The Conveyancers Act 2006 is truly an Act of stupidity. For example, before the Conveyancing Act 2006 became law, all law firms could employ conveyancers and conveyancing clerks to perform the legal work associated with conveyancing matters. Now, none of the major law firms operating in Victoria as incorporated legal practices can employ conveyancers or conveyancing clerks – only a fully qualified Australian legal practitioner can carry out conveyancing work on behalf of an incorporated legal practice.
Other absurdities include the ban on estate agents providing a fully combined sale/conveyancing service, lawyers being ineligible for conveyancer’s licences, and restricting professional indemnity insurance rules.
Act of Stupidity #1 – Incorporated legal practices must use lawyers for conveyancing work
According to Section 8 of the Conveyancers Act 2006:
“(1) A person who is not a licensee must not carry on a conveyancing business.
Penalty: For a natural person, imprisonment for a period of 2 years or 240 penalty units;
For a corporation, 1200 penalty units.
(2) Sub-section (1) does not apply to a person who is—
(a) an Australian legal practitioner; or
(b) an incorporated legal practice if the conveyancing work is carried out on its behalf by an Australian legal practitioner.“
Thus,
- Incorporated law firms cannot employ licensed conveyancers to perform conveyancing work;
- Incorporated law firms can no longer employ conveyancing clerical staff to perform conveyancing work;
- Unincorporated law firms can employ licensed conveyancers and conveyancing clerical staff to perform conveyancing work;
- Conveyancing businesses can employ licensed conveyancers and conveyancing clerical staff to perform conveyancing work.
Will incorporated law firms terminate their conveyancing staff, and replace them with legal practitioners in order to comply with the Act of stupidity? I doubt it; no-one is going to attempt to enforce such a stupid rule, and changing it will only cause headaches for those whose role it to work out the implications of any changes.
Act of Stupidity #2 – Estate agents cannot act as conveyancer and estate agent
According to Section 50:
“(1) A licensee must not carry out any conveyancing work in relation to a particular transaction if the licensee is acting, or is to act, as an estate agent for a party to the transaction.
Penalty: 240 penalty units.
(2) A client of a licensee is not required to pay any amount in respect of anything done by the licensee in contravention of sub-section (1).“
There is absolutely no reason why an estate agent should not be entitled to provide an holistic service for the vendor of a property in terms of preparing the sale documents, negotiating the sale, and then completing the conveyancing transaction upon completion. In fact, consumers would benefit from the elimination of the conflicts of interests that arise when an estate agent makes direct contact with both parties to a sale transaction. The estate agent/conveyancer would be bound by the requirements of the Conveyancers Act 2006, and the improper methods currently used by estate agents and condoned by the regulators would disappear.
An excellent opportunity to reform the corrupt real estate industry was lost, through an Act of stupidity.
Act of Stupidity #3 – Lawyers not eligible to obtain conveyancer’s licence
Legal practitioners are not eligible to obtain a conveyancer’s licence. Lawyers are the only professionals in the community who have the skills and training to be able to assist consumers with all aspects of a real estate/property transaction, and yet, for some inexplicable reason, they are not eligible to obtain a conveyancer’s licence. Section 11 of the Conveyancers Act 2006 states:
“(1) A natural person, other than an Australian legal practitioner, is eligible to obtain a licence if he or she—
(a) is at least 18 years of age; and
(b) has the competency qualifications and work experience referred to in section 12 for the issue of the licence; and
(c) is not a disqualified person…“
and
“(2) A company, other than an incorporated legal practice, is eligible to obtain a licence…“
Supposedly, lawyers are the original conveyancers and do not need a conveyancer’s licence to carry on a conveyancing practice. However, consumers are confused when lawyers offer conveyancing services, but cannot obtain a conveyancer’s licence, and conveyancers market themselves on the basis that lawyers are not conveyancers.
Consumers could have been given the opportunity to determine for themselves whether a lawyer who is also a conveyancer can offer a better range of services than a conveyancer who cannot do anything beyond the simple conveyancing transaction represents value for money according to the needs of that consumer. The Act of stupidity appears to have more to do with “conveyancers’ rights” than with genuine consumer rights.
Act of Stupidity #4 – Professional indemnity insurance debacle
Lawyers cannot employ licensed conveyancers unless each licensed conveyancer takes out professional insurance with a private insurer nominated by the Minister for Consumer Affairs. Even though a lawyer’s professional indemnity insurance covers employees (including those employed as conveyancers), the employee conveyancer cannot obtain a Conveyancer’s Licence unless he or she takes out another policy of insurance with the insurer nominated by the Minister.
Section 11 of the Conveyancers Act 2006 states that a person or a company is eligible to obtain a licence if the person or company:
“(d) holds—
(i) the professional indemnity insurance required under section 41; or(ii) if the person is, or is to be, employed by a licensee, evidence of employment with, or an offer of employment from, the licensee and evidence that the person will be covered by the professional indemnity insurance required of the licensee under section 41…”
Section 41 states:
“(1) A licensee must not carry out any conveyancing work unless the licensee is covered by professional indemnity insurance in accordance with this section.
(2) The insurance required by this section must satisfy the conditions and requirements specified under sub-section (3).
(3) The Minister may, by order published in the Government Gazette, specify the required insurance and the conditions and requirements that the insurance is to satisfy, including the minimum level of cover provided.(4) The insurance, conditions and requirements specified under sub-section (3) may vary according to classes of licensees or conveyancing work or other circumstances.”
The Ministerial Order of the Hon. Tony Robinson, Minister for Consumer Affairs, states:
“Insurer means Resource Underwriting Pacific Pty Ltd (ABN 51051374228)
master policy means the master contract of professional indemnity insurance number 08STH-071-12213 with the Insurer“
and
“Every licensee under the Act must be covered by the master policy of the Insurer.“
The following is an example of the way this ridiculous requirement affects my own office:
I employ an experienced and professional conveyancer who has completed two years of tertiary training to become eligible for a conveyancer’s licence. Her application for a licence was rejected because she does not hold professional indemnity insurance with the government’s nominated private insurer, even though she is covered by the firm’s professional indemnity insurance.
Catch 22: My conveyancer cannot be insured by the government’s nominated private insurer because the insurance on offer is too limited, and is inadequate for a conveyancer who is employed by a law firm. Even if my conveyancer could be insured both as a law firm employee, and as a conveyancer, there would undoubtedly be disputes as to which insurer would meet a claim related to a conveyancing transaction.
Because my conveyancer cannot obtain a conveyancer’s licence, she cannot call herself a “licensed conveyancer”. If she leaves my office and works for a conveyancing business offering fewer services than my law firm, and a lesser standard of conveyancing expertise, she can call herself a “licensed conveyancer”. The truly unfortunate aspect is that if my conveyancer should set up a business as a licensed conveyancer after 10 years’ service with me, she cannot claim to have held a conveyancer’s licence for 10 years.
So, by taking the sensible step of gaining experience in a law firm before embarking on a career as a licensed conveyancer, my conveyancer is disadvantaged as against a conveyancer who simply completes a conveyancing course, and works for a non-lawyer conveyancer before “going solo”.
These absurdities appear to have arisen from a misguided attempt to keep the roles of lawyer, conveyancer and estate agent separate, when the interests of consumers would be best served by having all 3 combined.
The Conveyancers Act 2006 – creating confusion
According to the Conveyancers Act 2006, its purposes are:
“to protect the interests of consumers of conveyancing services by regulating the carrying out of conveyancing work by persons other than Australian legal practitioners.”
In my view, the Conveyancers Act 2006 is a dog’s breakfast, but a conveyancer’s treat. It protects the interests of non-lawyer conveyancers at the expense of lawyer conveyancers practitioners and consumers by creating a false division between legal services offered by lawyers and legal services offered by non-lawyers. Conveyancers see the Act as having created a new monopoly, with lawyers and estate agents prevented from operating as true competitors.
Because the Conveyancers Act 2006 prohibits the “Licensed Lawyer Conveyancer”, consumers will remain confused and unable to properly assess the services on offer. Conveyancers will use this confusion in an attempt to prevent lawyers from using the title “conveyancer”, and by generating mischievous propaganda that suggests lawyers are too qualified or too “distracted” to properly service consumers of conveyancing services.
Professional indemnity insurance problems for licensed conveyancers and clients
Licensed conveyancers limited to Conveyancing Work
Licensed conveyancers in Victoria are required to have cover under the master insurance policy as specified by the Minister for Consumer Affairs, and employees of a licensed conveyancer have similar cover. Unfortunately for consumers, the professional indemnity insurance carried by conveyancers covers a very limited area of legal work, namely “Conveyancing Work” as defined in the Conveyancers Act 2006.
According to the Conveyancers Act 2006, “Conveyancing Work” means:
“legal work carried out in connection with any transaction that creates, varies, transfers, conveys or extinguishes a legal or equitable interest in any real or personal property, such as, for example, any of the following transactions—
(a) the sale of a freehold interest in land;
(b) the creation, sale or assignment of a leasehold interest in land;
(c) the grant of a mortgage or other charge.”
Basically, this means that a licensed conveyancer can perform the basic legal work one would expect to encounter in a simple and straight-forward conveyancing matter (something conveyancers have been doing for at least a decade, and which (until the Conveyancers Act 2006 was introduced, unlicensed conveyancers argued is not really legal work).
The real problem for consumers comes in the section which explains what “Conveyancing Work” does NOT include. According to Section 4(3) of the Conveyancers Act 2006:
“conveyancing work does not include:
(a) legal work carried out for the purpose of—(i) commencing or maintaining legal proceedings; or
(ii) applying for a grant of probate or letters of administration; or
(iii) establishing a corporation or varying the constitution of a corporation; or
(iv) creating, varying or extinguishing a trust; or
(v) preparing a testamentary instrument; or
(vi) giving investment or financial advice;
or
(vii) investing money otherwise than as provided for in Part 5; or(b) legal work connected with the sale of a business (including the sale of goodwill and stock-in-trade and the transfer of any business licence), other than legal work connected with a sale or lease of land or any other transaction involving land; or
(c) the provision of legal advice in relation to—(i) obtaining the consent of a person or body under an Act or regulations to the development or use of land; or
(ii) an application for an order under Division 5 of Part IV of the Transfer of Land Act 1958; or
s. 4
Part 1—Preliminary
Conveyancers Act 2006
Act No. 75/2006
7(d) work prescribed by the regulations as not constituting conveyancing work for the purposes of this Act.“
As most conveyancing matters involve legal issues beyond the simply transfer of ownership of real estate, it is inevitable that the licensed conveyancer will become involved in legal work that goes beyond the narrow definition of “Conveyancing Work”.
Licensed Conveyancers not covered for legal work
Licensed conveyancers‘ professional indemnity insurance does not cover them for legal work, other than that included in the definition of “Conveyancing Work” at Section 4 of the Conveyancers Act 2006.
In its “Guide for Conveyancers“, Consumer Affairs Victoria provides a number of FAQs, among which are the following:
“What activities does this master policy for professional indemnity insurance cover me for?
The policy only provides cover for Conveyancing Work as defined by Section 4 of the Conveyancers Act 2006 (Victoria). The policy only covers Conveyancing Work in the state of Victoria…
What about non-conveyancing work which is conducted as a part of my conveyancing business?
Any activities, past and future, not deemed Conveyancing Work under the Conveyancers Act 2006 (Victoria) are not covered under the policy, even if they are conducted as part of your business.”
The first part of the problem is that it is openly acknowledged by Consumer Affairs Victoria that licensed conveyancers may well include as part of their businesses “activities” which are not “conveyancing work” under the Conveyancers Act 2006.
Consumers are at serious risk when a licensed conveyancer is likely to perform tasks, some of which are covered by professional indemnity insurance, and some of which are not covered at all.
Licensed conveyancers cannot tell the difference when it comes to legal work
Before the Conveyancers Act 2006 was introduced, non-lawyer conveyancers simply denied that any of the work they performed in relation to a conveyancing transaction was legal work. Conveyancers would provide legal advice (much of it wrong) to clients, without even knowing that it was legal advice. The only way a consumer could obtain insured legal advice was to obtain it from a lawyer conveyancer.
The position for consumers has now changed. Conveyancers are permitted to tell consumers that they carry professional indemnity insurance to cover the legal work associated with a conveyancing transaction, but they are not required to explain to the consumer the severe limitations on the type of legal advice that can be offered. This, in turn, creates a problem for the consumer who may not know whether the legal advice being offered by the conveyancer is insured. In many cases the advice will not be insured at all, and the licensed conveyancer’s professional indemnity insurer will not meet a claim made in relation to it.
Compounding the problem is that fact that most licensed conveyancers cannot differentiate insured legal advice from uninsured legal advice.
Example:
The estate agent for a vendor client contacts the conveyancer and advises that the date on the Contract of Sale must be changed, so that the purchaser of the property can qualify for the extended First Home Owner Grant. The conveyancer, who relies heavily on referrals from the estate agent to keep her business operating (see also “Licensed Conveyancers and Corruption” below), agrees to discuss the matter with the vendor. The vendor is keen for the sale to proceed, and agrees with the agent’s proposal that the date on the contract be changed.Problem: The changing of the date on the contract may be in the context of a conveyancing transaction, but there are issues associated with fraud and criminal law involved in the estate agent’s proposal. The licensed conveyancer, having no training in criminal law, will not know what offences the vendor may be committing by agreeing to the proposal. Further, the licensed conveyancer would not be permitted to offer legal advice in relation to the criminal law aspects. Finally, if the conveyancer does advise the client regarding the criminal law issues, the advice offered by the licensed conveyancer will not be covered by her professional indemnity insurance.
Conclusion
The attempt by the Conveyancers Act 2006 to categorise some legal work as “conveyancing work” and other legal work as non-conveyancing work has created unanticipated dangers for consumers. Every conveyancing transaction has the potential to become problematic, and it is when a simple transaction goes “off the rails” that a legal professional is needed most and a consumer is entitled to believe that they will have the benefit of full professional indemnity insurance if their legal representative makes a mistake.
Licensed conveyancers are not permitted to perform all of the legal work that may arise with a conveyancing transaction, and they are not insured for problems that go beyond the simply and straight-forward conveyancing process. As the average licensed conveyancer will have difficulty in determining the difference between insured and uninsured legal advice, consumers remain at risk when utilising the services of a licensed conveyancer.
Licensed conveyancers and corruption
When I first entered the conveyancing industry I assumed that the course of most conveyancing transactions was determined by the parties to the transaction, guided by the terms agreed to in their contract, and governed by the law. Instead, I found a corrupt industry in which estate agents would dictate the game-plan to lawyers and conveyancers, and that the most successful conveyancing professionals seemed to be those who had close relationships with estate agents.
When I use the term “corrupt” to describe some licensed conveyancers and the way they interact with estate agents in the industry, I am referring to a range of behaviours which include criminal behaviour (such as the offering of secret commissions in return for referrals) at one end of the range, the condoning of improper practices (such as allowing estate agents to draft special conditions in contracts) at the middle of the range, to passive acquiescence through naivete (for example, accepting that the role of the conveyancer is prepared the Section 32 only, so that the estate agent can prepare the sale contract) at the far end.
Licensed conveyancers and the problem of estate agent relationships
When conveyancers arrived on the scene the power of estate agents soared. It became the norm for conveyancers to set up business by visiting local estate agents and soliciting estate agent referrals in return for cash “Referral Fees”. While cash gifts were standard, free lunches, alcohol, TVs, VCRs and accommodation were also common. The one thing these “referral fees” and gifts had in common was that they were invariably illegal secret commissions.
As at 23 November, 2008 the Australian Institute of Conveyancers (Victorian Division) Inc. acknowledges that this practice still persists. However, instead of condemning the practice outright as a corrupting influence in the industry, AICVIC simply tells its members that it’s a matter of “how you conduct this“, advising them as follows:
“When commencing your Business and establishing contacts you may consider paying Referral Fees. Whilst this is your decision you should remember that depending on how you conduct this, it may constitute an offence under the Crimes Act. It has been brought to the attention of the VCA that the Victoria Police Fraud Squad have been instructed by Consumer and Business Affairs to investigate any complaint made regarding this issue.” (To view the full document CLICK HERE)
Source: Startup Kit – (Download available from Australian Institute of Conveyancers (Victorian Division) Inc. at www.aicvic.com.au under “Members”)
In addition to gifts, it was necessary for a conveyancer to demonstrate to the estate agent that the conveyancer/estate agent relationship was solid, and this meant that the conveyancer would always defer to the estate agent when it came to negotiating and closing a sale or purchase. There is no doubt that lazy lawyers were initially responsible for much of the poor service that is now the norm in the conveyancing industry, but conveyancers have not only perpetuated industry ineptitude – they are often a catalyst for this form of corruption.
It appears that Goodman Group is willing to play a major role in the trafficking of client referrals, offering the highest “Referral Fees” of all. In an email circulated to estate agents and licensed conveyancers, Goodman Group have issued the following invitation:
“Join the Goodman Group Conveyancing Referral Program
Be rewarded by referring your Vendor(s) or Purchaser(s) to Goodman Group Conveyancing. Every successful referral will earn you $150 upon the contract going unconditional. How you use the referral payment is up to you; keep it, give it to charity, or take it off the cost of the conveyancing.
All you need to do is call or email the referral to Goodman Group Conveyancing internal sales team. Call Chriss today on 1300 134 072 or email: infor@goodmangroup.com.au (7 days).
All referral payments are disclosed to the client so there is no hidden commissions (sic). Call now to find out more 1300 134 072 (7 days).”
As licensed conveyancers try to out-bid each other to buy clients, the price of conveyancing must increase or the quality of the services offered must fall. Consumers will become further confused as they attempt to determine whether referrals are on the basis of merit or money – whether they are clients or commodities.
After spending vast amounts of money for the purchase of clients, what is the likelihood that a licensed conveyancer will advise a client contrary to the advice or wishes of the estate agent? Estate agents have demonstrated that they are quick to punish any lawyer or conveyancer who fails to “co-operate”. See “Estate Agent Referrals – Punishment & Corruption“.
How licensed conveyancers can perpetuate bad habits
Too many licensed conveyancers tend to perpetuate bad habits in the industry by unquestioningly accepting the status quo. The most common confirmation of this is the standard counter-argument offered by conveyancers to just about any legal issue that may be disputed: “I’ve been doing this for 20 years and this is the first time anyone has told me that” or “But this is the way every other conveyancer I know does it, and they can’t all be wrong.”
Most common among the bad habits operating in the conveyancing industry are:
- Preparing the Section 32 vendor’s statement without also preparing the full Contract of Sale of Real Estate;
- Allowing the estate agent (a lay-person with no legal qualifications) to prepare the Contract of Sale of Real Estate;
- Allowing the estate agent to draft and insert special conditions into the Contract of Sale of Real Estate;
- Taking no interest in the preparation of the Contract of Sale of Real Estate until all parties are committed, and it is too late;
- Allowing the estate agent to control sale negotiations, instead of properly representing the client during negotiations;
- Refusing or failing to offer purchaser clients written pre-purchase legal advice;
- Refusing to represent the client in arguments with estate agents over the inclusion or deletion of contractual terms and conditions;
- Failing to advise clients to seek legal advice from a qualified lawyer when the need arises.
The perpetuation of bad habits has also become a means of gaining a competitive edge. A sycophantic licensed conveyancers who allows the estate agent to control the transaction is more likely to receive client referrals than a lawyer who is known among estate agents for protecting vulnerable clients.
The industry has also seen a deterioration in ethics across the board due to competition on the basis of bad habits. For example, some lawyers have attempted to mimic conveyancers, others have even attempted to win business by overtly offering gifts to estate agents. This was unheard of prior to the arrival of non-lawyer conveyancers.
Conclusion
While licensed conveyancers have invested large amounts of time and money in gaining themselves a place in the legal industry, they have made no real contribution to betterment of the industry as a whole. Anecdotal evidence indicates that the payment of bribes and secret commissions to estate agents as “Referral Fees” is rife, and open discussion of ethics and methods of improving the consumer experience in the industry is virtually unheard of. In addition, the low level of competition generated by the separation of licensed conveyancers and lawyer conveyancers has tended to focus on the use of improper behaviours as the most effective means of generating client referrals and keeping the process of conveyancing simple.
The future of the conveyancing industry lies in the development of consumer awareness and conveyancing excellence through the adoption of Best Practice methods and ethics. The best approach for any consumer to take is to seek out a Legal Best Practice LAW 9000 conveyancing law firm, and compare price, expertise and consumer safety, before making any final decision on whether to engage a non-lawyer conveyancer or a lawyer conveyancer.
See also: Licensed Conveyancer Corruption Must Be Stopped!
Evolution and the licensed conveyancer dinosaur
Low cost conveyancing myth
Having entered the legal industry with the promise of promoting competition and reducing, licensed conveyancers have done little more than to confuse consumers and expose them to greater levels of risk.
Typically, licensed conveyancers attract price-conscious clients who accept high risk, and licensed conveyancers tend to respond by adopting a high-volume, low-cost model of conveyancing service. Inevitably, licensed conveyancers must rely on low-overhead “cottage industry” methods, and ensure high volumes of work by maintaining problematic “referral” relationships with estate agents.
Lacking the legal skills and qualifications of lawyers, licensed conveyancers are unable to offer complimentary legal services to clients. This has the effect of encouraging conveyancers to be less than frank with clients who may need a variety of legal services in addition to conveyancing, and who may otherwise enjoy significant cost benefits by engaging a lawyer to perform a suite of legal services.
Because lawyers are able to offer a range of legal services, the cost of conveyancing can be balanced against the level of risk involved. High risk conveyancing matters may attract higher fees, but these are inevitably balanced against a higher level of safety, the cost of which must be considered along with the monetary price of the services provided.
When the true costs associated with conveyancing are compared as between services offered by licensed conveyancers and lawyers, it quickly becomes apparent that “cheap” conveyancing is not the same as genuine “low cost” conveyancing – the latter is a myth.
Licensed conveyancer – just another expensive “middle-person”
Ultimately, when risks materialise as problems, the licensed conveyancer will always refer the client to a lawyer for assistance. The need to always refer clients to lawyers as the ultimate form of assistance makes the conveyancer a “middle-person”. Consumers are always trying to eliminate the “middle-person” in order to save costs, and licensed conveyancers are just one more expensive middle-person.
Licensed conveyancers are just part of a transition in the legal industry
There are 4 factors that contribute to the existence of licensed conveyancers, each of which will gradually disappear over time:
- The myth of “low cost”
- Estate agent referral relationships
- Low levels of client service
- Low overheads
The myth of the low cost licensed conveyancer
There is a difference between “cheap” and “low-cost”, and it relates to quality. Low-cost describes value for money, but at a lower cost than other options available to the consumer. Cheap, on the other hand is best described as low value for low price.
Conveyancers have traditionally offered cheap services in an unregulated laissez-faire environment. No licensing requirements, no insurance requirements, no educational requirements and no recognised standards to comply with meant that conveyancers could seriously reduce the cost of completing a conveyancing transaction, and still make a profit, provided high volumes of conveyancing transactions could be rushed through quickly and without spending too much time on each matter.
Having convinced government and the community that they can provide a low-cost alternative to lawyers, conveyancers have become caught up in their own mythology, and are now expected to provide higher quality conveyancing services at low cost. Licensing and other regulatory requirements are now forcing conveyancers to focus on “cheap” conveyancing, and consumers will again go on the search for low-cost quality, leaving the cheap licensed conveyancer in favour of the competitively priced quality conveyancing lawyer.
Estate agent referral relationships
While it may take a long time to change an essentially corrupt culture of secret commissions, and anti-consumer collaboration between real estate industry participants, the rise of an ethically aware conveyancing industry is inevitable as more lawyers seek accreditation to Legal Best Practice through LAW 9000 accreditation.
When licensed conveyancers are effectively prevented (whether through the effect of market forces, or by the intervention of regulating authorities) from collaborating with estate agents in the referral of clients, and are forced to compete on the open market for conveyancing clients, they will not be able to attract the volumes of conveyancing transactions required to maintain a business based on cheap service.
Low levels of client service
These days consumers want more than simple conveyancing. They want to bundle their conveyancing with other services, such as wills and estate matters, and they want the comfort of dealing with their own “lawyer” as and when necessary.
Lawyers are aware that a conveyancing transaction may well be the start of a long and ongoing association with the client and the client’s family, and tend to offer a higher and more personal standard of service. The move to Legal Best Practice through LAW 9000 will further enhance this level of service. Licensed conveyancers, struggling to maintain the image of low-cost service providers will be forced cling to the “cheap” model, and its inherently low levels of client service and safety.
Low overheads
The costs of operating a business as a licensed conveyancer will continue to rise over time. Tougher competition with conveyancing lawyers offering Legal Best Practice through LAW 9000, together with ever-increasing professional indemnity insurance, compliance costs and general overheads will force licensed conveyancers to cut costs (and service levels) or to increase fees.
Conclusion
The costs and responsibilities associated with operating a business in compliance with legislation, rising professional indemnity insurance costs, inability to diversify, and competition with lawyers whose legal skills and practical expertise is recognised as being of superior quality, will all take their toll on those considering entry into the industry as licensed conveyancers. Those who operate licensed conveyancing businesses will be reluctant to over-capitalise in an industry with fewer newcomers, exacerbating the problems discussed above.
The era of the licensed conveyancer will pass, but its influence as a catalyst for change in the legal industry in terms of motivating lawyers to adopt Legal Best Practice through LAW 9000 and to eliminate the improper practices that currently bedevil the industry will be its legacy.
Conveyancing and Best Practice – LAW9000
Australian Standard – Legal Best Practice LAW9000
LAW 9000 – Legal Best Practice is a standard which uses the internationally recognised ISO 9001 as its foundation and contains best-practice criteria specific to a legal practice.
In order to achieve accreditation a law firm must develop systems and processes that ensure maximum client satisfaction, and risk minimisation. A crucial element of every process is to ensure that a conflict of interests check is done before a client’s matter is commenced.
The certification process involves development of specific, transparent and accountable processes over many months, and culminating in a rigorous audit conducted by external auditors.
The audit examines every aspect of the law firm’s operations to ensure that they meet high quality standards. Some of the key areas audited are:
- The firm’s commitment to quality;
- Commitment to ensuring client satisfaction;
- Processes for delivering legal services;
- Business and risk management plans;
- Human Resource practices;
- Professional obligations of the legal industry; and
- Continuous improvement of the firm.
Lawyers Conveyancing is accredited as a LAW9000 Legal Best Practice law firm.
A new direction for real estate and Conveyancing
In order for the conveyancing industry to shed the corrupt and improper practices that have dogged it for years, and which continue to bring it into disrepute, those offering conveyancing services must demonstrate that the services on offer are reliable and of high quality.
The most effective way for a conveyancing consumer to be satisfied that he or she will receive value for money when engaging a conveyancer is to ensure that the conveyancer is a lawyer conveyancer, certified as LAW9000 Legal Best Practice compliant.
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