Ban Referral Fees For Agents - petition demands gover...

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06 December 2021

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By Graham Norwood

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Ban Referral Fees For Agents - petition demands government action

A petition is being started, urging the government to ban the payment of referral fees to estate agents.

It’s reported to have been set up by a member of the ‘When Conveyancing Goes Rogue’ group on Facebook, and has been prompted by the long-running computer crisis at the Simplify Group, which handles some five per cent of transactions.

The online petition says:

The payment of referral fees to estate agents is not in the best interest of the public.

The payment of referral fees denies the consumer choice. The Payment of referral fees allows for an environment where estate agents can apply pressure or manipulation to use the 'Pet' conveyancer.

The buyer/seller are not given the time or opportunity to explore the market; look at reviews or gain other quotes and make their own choice on who is best to serve their interests.

Often there is no transparency and full disclosure that a referral fee is involved and the amount being paid.

The payment of referral fees to gain conveyancing business denies investment into improving systems, training and delivery of quality services.

Instructions should be gained by delivery of a quality service, repeat business and recommendations from previous users. It will necessitate that the conveyancing companies to become more 'Client Focused' rather than looking at other opportunities to buy business.

The first comment beneath the petition explicitly links this to the Simplify Group crisis, which began on November 7 and is now entering its fifth week. It has severely impaired the work from most of the Simplify-owned conveyancer brands, including JS Law, DC Law and Advantage Property Lawyers as well as Premier Property Lawyers.

Commenting on the issue Rob Hailstone, chief executive of the Bold Legal Group, told EAT: "Referral fees have been about since I started in the mid-70s, but back then I saw brown paper bags with cash being handed from conveyancer to agent, over a boozy lunch. I have chosen to never pay them and have lost work as a result. But those agents still preferred to instruct me for friends, family and complicated matters. Read into that what you will. I also have first-hand experience of agents saying they don’t want to recommend certain firms but are told they must do so by their bosses.

"However, I think a complete ban would therefore send us back to the murky days of brown paper bags, or a modern equivalent. I think a better solution would be to see absolute transparency, better policing and a cap on referral fee level of say 15 or 20 per cent of the legal fees. But this, thankfully, will not be my call.{

There is already a police investigation into the Simplify Group issue, suggesting the crash may have been the result of a ransomware attack - although the company is remaining tight-lipped about the cause.

This in turn has caused a backlash on social media and in the national press, typically involving people whose transactions have been derailed by the inability of Simplify buyers and vendors in the chain who are unable to progress their deals.

Now a Conservative MP has raised the possibility of a formal investigation into the incident, and compensation to consumers hit by the problem.

Bob Blackman - a member of the House of Commons Levelling Up, Housing and Communities committee - has told The Express newspaper: “Whilst [Simplify] are working around the clock to restore their systems, we have heard numerous stories of home buyers not being able to complete or exchange.

“Indeed we have heard several stories of people having to sleep in their cars as they had to leave their old house and had not been able to complete on their new home. I would certainly welcome an investigation by [the] committee to investigate how this happened and what steps are been taken to prevent such an incident from happening again. Whilst it remains down to [Simplify] how they handle the situation, I would welcome any efforts to offer some sort of compensation.”

Meanwhile the latest statement from Simplify itself continues to give few specifics, no idea as to how many transactions are affected, nor any indication of why the problems arose nor when they will be rectified.

The statement says: “An ever-growing proportion of our conveyancing colleagues are back up and running on core systems and progressing transactions. We continue to prioritise the most urgent cases, and are working with clients to help them move forward towards exchange and completion.

“We very much regret any uncertainty and disruption that our clients and others may have experienced. Our team, supported by external experts, are working non-stop to get the remainder of our systems safely back up and running, with progress being made every day.

“If we have not already contacted you, please help us by completing the form here so that we can prioritise our response.”

You can see the referral fee petition here

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- S S
- 06 December 2021 08:28 AM
Referral fees are not the problem - PB charge the client if the client does NOT use their conveyancer! That is what stops free choice. A GOOD agent may receive a referral fee but they offer the referral because they TRUST the service/company and would pass on the details. Low % rates, expectations and legislation compliance high - referral fees are only an issue if the referral is FORCED.

- Richard Copus
- 06 December 2021 10:41 AM
Referral fees have got out of hand with many agents recommending conveyancers who'll provide them with income but who are quite frankly not up to the job. Referrals are meant to be to the best practitioners in the business for the benefit of the client whom the agent has a duty to work for to his best endeavours. It smells.

- Hit Man
- 06 December 2021 12:02 PM
Referral fees should just be banned altogether simple as, it should also apply to other services such as mortgage broker introductions and surveyors etc.

- D A ALawyer
- 06 December 2021 12:36 PM
Just Rejoice at That News!

A complete ban is needed. This will stop the big Conveyancing firms “buying business”. By “big” I refer also to the larger local/regional firms who use their power to shut out sole practitioner & small conveyancers who can’t afford to pay £200 or even £300 ‘referral’.

Those many firms who do pay such ridiculous fees to agents can pay for it ONLY by using unqualified or inexperienced ‘Conveyancers’.

We as conveyancers are supposed to be professionally obliged to inform our clients who we pay fees to, and how much, but the big Conveyancers, embarrassed at the figure, either ignore this requirement or obfuscate the fees they are paying agents.

The agents ‘encourage’ the conveyancer NOT to be full and frank with their Clients, and this is a source of shame for the profession.

Roll on the Ban! And then let’s increase legal fees to a level which better ensures the competence of the Conveyancer on the case. It’s in the public interest.

- James
- 06 December 2021 22:43 PM
Have any commentators actually read the petition “ The payment of referral fees to estate agents is not in the best interest of the public.”

Since when did it become a requirement for private companies to have to act in the best interests of the public? As far as I was aware the requirement is to act in the best interests of the shareholders.

I think we all know what happened here and “estate agents referral fees” are an easy target.