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SHINING A LIGHT ON REFERRAL FEES

When you last bought a property, did the estate agent suggest an appointment with their in-house mortgage broker? Or recommend their contacts in legal services for ‘competitive’ conveyancing, or even perhaps give a recommendation for a firm of removers? If so, did you ever stop to ask yourself why that agent was so keen to push these third-party services? Well, the answer is referral fees, and for many of the big corporate brands, their whole business model is predicated on the hundreds of pounds-worth of additional fees they can receive by pushing those services.

David Knapp of Hart Brown Solicitors in Guildford argues that the whole business of referral fees raises ethical issues. If conveyancing solicitors are good at what they do, why would they pay to get the business? If solicitors are paying referral fees, does that impact on the fee charged to the client, or on the quality of the service? Alarmingly, one survey last year concluded that 59% of buyers and sellers had no idea how the referral process worked, and had not been informed by their agent.

At Quay Living, we often hear from frustrated buyers who have been recommended to huge conveyancing factories. It’s not always the agent – mortgage companies do it too, but the resultant poor conveyancing is often the biggest frustration to the whole buying process.

The charging of referral fees by estate agents is covered by the Consumer Protection from Unfair Trading Regulations 2008, but the National Trading Standards last month saw fit to issue further guidance for estate agents, reaffirming the need for transparency. If the client’s transactional decision is likely to be affected by the referral, then the law is clear – an agent should tell you how much they are receiving and from whom.

At Quay Living, we’ve never recommended conveyancers in return for referral fees. We’re often asked to recommend solicitors, but we’ll only ever refer clients to firms we know and trust, and to individual solicitors we know will do a good job. As an RICS-Regulated firm and a member of the NAEA, we put our clients’ interests first, and we think that’s as it should be.