Conveyancing Rip Offs – Hidden Charges to Look Out For!

The recent explosion in the number of online conveyancing firms has made conveyancing a hugely competitive industry. As a result, many firms out there are employing unethical pricing methods in order to bring in the business. Typical examples include firms advertising “Cheap Conveyancing From Just £89” etc.

A recent example involves a well-known firm of conveyancers advertising their conveyancing services from £89. Seems a great deal on paper, but on obtaining a quote from them we discovered that you can only qualify for this low rate if you are buying or selling a property for less than £40,000. With the average house price in England and Wales currently sitting at £166,798 (source: Guardian Money, 27 Aug 2010) you can see how this sort of advertising can cause problems for people. Indeed, you won’t have to spend too much time online looking for feedback from unhappy clients that were sucked in by these headline rates and then stung with:

a) ‘Extra’ charges on the final bill

b) A painfully poor service, in some cases resulting in their transaction falling through

To help you steer clear of this sort of practice we recommend that you try to look at conveyancing quotes in two separate sections:

1. The conveyancing solicitor’s basic fee

This is the fee charged for the time it takes and the costs associated in order to complete your conveyancing matter. It varies wildly between firms, and as a general rule of thumb High Street solicitors tend to charge more than online solicitors – because of the timescales involved (online solicitors generally process all searches online and will communicate by telephone and email. Local solicitors tend to prefer a more traditional approach, relying on the post etc, which takes longer).

The basic legal fee is usually calculated in one of three ways:

i) A fixed fee

ii) A fee linked to the value of the property

iii) An hourly rate

The fixed fee is almost certainly going to be the most cost effective.

2. Disbursements

These are third-party payments that are made on your behalf. These should be about the same across a range of solicitors as they are not charges levied by your practice, but rather by other parties such as the Land Registry and Local Authorities. Upon instruction some firms will ask you for a small upfront payment for these disbursements. Expect to pay no more than £50 on a sale and no more than around £250 on a purchase. This is completely normal and just ensures that your conveyancer doesn’t have to phone you every couple of days to take small payments for things like bankruptcy searches at £2 – £5 a time.

Beware of conveyancing solicitors getting creative and ‘inventing’ disbursements, that is, taking tasks that would normally be classed as overheads (and should therefore be included in the basic fee) and including them as disbursements. Although you’re going to end up paying for them anyway, unscrupulous firms are able to benefit from this because it allows them to artificially reduce their basic fee and therefore advertise a low fee to draw you in.

The total fee should enable you to compare like for like but unfortunately all too many firms quote a fee then hide the extras in their small print. So the key is to ask the question and obtain confirmation in writing. This will make it more difficult for the firm to add costs later. If they still refuse you have the regulatory body to complain to and as long as you have the paperwork to hand it should follow as a matter of course that you will be compensated.

Things to avoid

If you get a quote that looks like this…

Your conveyancing quote:

Our Fee: £199 + vat

INSTRUCT NOW

…it is usually too good to be true. It looks great value, but there is no breakdown of the disbursements, so who knows what you’ll end up paying?

Always read the small print

Check the small print for any extra charges not outlined in the initial quote. Some added extras include the following:

1. Professional Indemnity Charge – this is an overhead that the solicitors have to pay and as such should be included in their basic fee

2. Charges for postage, photocopying and phone calls – again, these are overheads and should be covered by their basic fee

3. Completing the Stamp Duty Land Tax form – another overhead. Back in 2003 the form went from being only one page long up to 7 pages. Some solicitors saw this as a massive inconvenience and decided that it warranted an administration fee. That’s not the case and this extra work should be reflected in the basic fee

4. Insurance for “no sale no fee” – you shouldn’t have to pay for this. There are plenty of firms that offer “no sale no fee” as standard

What a quote should include

If you are selling a property your quote should look something like this:

Basic Fee (circa £275) + vat
If you are selling a leasehold property, expect to pay an additional £75 – £150 as this will always involve more work for the conveyancer

Land Registry Office Copies (£8)
These documents confirm that you are the registered owner of the property

Telegraphic Transfer Fee (£30) + vat
This applies if you have a mortgage

If you are buying a property your quote should look something like this:

Basic Fee (circa £275) + vat
If you are selling a leasehold property, expect to pay an additional £75 – £150 as this will always involve more work for the conveyancer

Land Registry Office Copies (£8)
These documents confirm that you are the registered owner of the property

Local Area Searches (£170 – £300)
These vary depending on the location of the property you are buying but to keep things simple any overpayment should always be returned to you on completion. Unless you are buying for cash, your lender will always insist on this. Usually the only room for manoeuvre is whether the lender will accept a personal local search as opposed to an official local search. The former is usually cheaper and quicker to obtain but some lenders do not like them. Even if you are buying for cash, we would always recommend one

Drainage Search (£30 – 40) + vat
Checks that your property is connected to fresh and foul water services. If the property is not connected you would need to be certain that there are alternative arrangements in place such as drainage to a septic tank and the costs associated with that. Again unless you are buying for cash, your lender will always insist on this. Even if you are buying for cash, we would always recommend one

Chancel Repair Search (£10 – 20) + vat
Checks whether you are liable to pay for repairs to the local parish church (if required). This may not be included at the initial quote stage but if the searches are required your conveyancer should advise you at the earliest possible moment and certainly before the cost is incurred on your behalf. Not compulsory but advisable in certain cases

Environmental Search (£30 – £35) + vat
Checks for any evidence of contamination on or around the land that you are purchasing. Not compulsory but advisable in certain cases

Mining Search (£40) + vat
This is location specific and difficult to anticipate at the quote stage, so is sometimes left out.. A good conveyancer will be able to advise you on this if they are aware of your location. If the property is located in a mining area then you must obtain this search

Bankruptcy Search (£2)
This ensures that you haven’t gone bankrupt recently. Only applicable if buying with a mortgage and this is per person

Priority Search (£4)
This ensures that you haven’t gone bankrupt recently.Sometimes the bankruptcy search and priority searches are referred to final searches and occasionally they are bundled in with the Land Registry fees to keep things simple but the total cost should be just the same.

Land Registry Fee (£40 – £700)
This depends on the property purchase price and is calculated on a sliding scale as follows:

£0 – £50,000 £40
£50,001 – £80,000 £60
£80,001 – £100,000 £100
£100,001 – £200,000 £150
£200,001 – £500,000 £220
£500,001 – £1,000,000 £420
£1,000,001 upwards £700

Telegraphic Transfer Fee (£30) + vat
This is to enable completion monies to be sent to the seller’s solicitor

Stamp Duty Land Tax
This is a taxation on the purchase price of the property and it varies depending on the price of the property, as follows:

£125,000 – £250,000 1%

£250,001 – £500,000 3%

£500,001 upwards 4%

Some firms will attempt to make their quote look cheaper than it is by neglecting to include the stamp duty

New rules

The Law Society has recently introduced some new rules to their code of practice, stating that headline prices should not be employed in order to mislead potential clients. These new rule are quite explicit in their references towards ‘creative’ disbursements and overheads, so hopefully we will see an end to such unethical pricing and a much improved experience for consumers. If you are interested in reading about the new rules in more detail, please follow this link to the Law Society’s site.

In summary

Always read the small print, and if you can only see the basic fee ask for a breakdown of the disbursements. If you are able to see the disbursements, make sure that none of them are actually overheads that should have been included in the basic legal fee.

If you have received a quote and are unsure about its authenticity then we are very happy to look over it for you. Just give us a call on 0800 6129097 and one of our specialists will be able to help.

If you’re looking for a conveyancing quote with no hidden fees, visit us at www.arcpropertysolicitors.com or call our quotes team on 0800 6129097.