Seemingly inconsequential changes to a contract or process can have far-reaching effects, says Jonathan Smithers as he muses about recent trends in the conveyancing sector
We are all very proud of the documents we produce. In property matters that might be the contract, the lease or the transfer. Then along comes another eye, a different perspective. If we are the seller, the document has been drawn to protect our interests. While we may think it fair, the buyer will have a
different point of view and may amend it here or there. We may be happy with those tweaks but there is usually an unforeseen consequence.
Most documents are written as a whole piece, they cannot be nibbled off bit by bit. They are usually written with a balance – what is better for one party, in one area, may be better for the other in another. The context of a particular point is important but it is often the context of the whole document that will be paramount.
I learned this lesson to a greater degree still as one of the team involved to negotiate the Standard Conditions of Sale (fifth edition). I could give many examples but taking just one, although perhaps inconsequential in the great scheme of things, the simple change of the word ‘chattels’ to ‘contents’ required more work and thought than you might initially expect.
Chattels’ appeared on numerous occasions through the conditions. It was not simply a case of changing the word but also thinking about the concept. In the fourth edition the deposit was paid as a percentage of the purchase price and the chattels price. That led to considering whether that was the correct stance. In the end it was decided not to be, so the fifth edition pays the deposit only on the purchase price. In that case one thing led to another.
Many people use the short form of
contract simply referring to the standard conditions. Without knowing those in some detail, special conditions can then conflict. I have seen some contracts where the special conditions still refer to ‘chattels’. The draftsmen have simply carried over the fourth edition special conditions, presumably assuming, incorrectly, that they will fit, where in this instance there is no definition of ‘chattels’ occurring at all in the fifth edition which brings into question the validity of the special conditions.
The example is scalable and highly relevant in other areas. This is not just chaos theory where a butterfly in the Amazon flaps its wings and an earthquake occurs in the Far East, but very real in its effect on our everyday practice.
The Land Registry decision to dematerialise the register has led to new methodologies of fraud. It would be simple to say that it has been made easier to steal but that would ignore the more complicated position.
The amount of money in our economy and the ease with which it is transferred has encouraged criminal syndicates to look at ways in which the system can be exploited. That was not the case 30 years ago. The Land Registry’s decision led to lenders no longer holding hardcopy papers. If a property was repossessed they could simply download the entries. The cost of holding paper titles and all the other relevant papers grossly outweighed the statistically rare occasions when repossession took place and the deeds packet was of relevance. If there was an odd occasion when an indemnity was required then buying another one would be cheaper than having to hold hundreds of thousands or millions of papers.
No sale, no fee
I recently had some discussions about the benefit (or not) of ‘no sale no fee’ agreements. Agents are used to working on commission and perhaps do not see why solicitors do not do the same. If I was earning the same commission as an estate agent I would be delighted to do so but I can hardly argue that increasing my costs by a factor of between five and ten on every transaction would be in my client’s best interests.
The discussion ran around how ‘no sale no fee’ affected the behaviour of the legal adviser. A canny operator knows that the majority of transactions that do not proceed fall through in the initial stages. It may be that the buyer cannot get a mortgage offer or decides that their eyes were bigger than their appetite. Perhaps the chain never fully forms, the seller cannot find a property to buy or that cash buyer turns out to need a legacy from deceased Aunt Betty, who may be a little unwell but is some distance from the funeral parlour, let alone probate.
In those circumstances ‘no sale no fee’ means free legal work for a proportion of clients. The natural inclination – indeed good business sense – requires that this is limited so the firm does little or nothing at the beginning of the transaction. The practical consequence may be that searches are not instituted until a mortgage offer comes through. In a number of transactions that will inevitably mean delay which then has its own consequences. The longer the transaction goes through, the greater the
likelihood that something will crop up to stop it happening.
The guiding philosophy behind home
information packs was to load all the information at the beginning, shorten the
timescale and cut down the fall-through rate. The problem in altering the transaction was not in the concept but in its
execution. The new protocol encourages solicitors and their clients to do more work earlier in the transaction. Finding the problems out quickly will make finding solutions easier. Tempers will be less frayed and everybody will be happier. Less time will be wasted by numerous phone calls from solicitors and agents in a chain wondering why if things are not going along swimmingly.
Every conveyancing transaction has some tensions. The competing interests of lenders, agents, brokers, insurers, solicitors, licensed conveyancers and, lest I forget, the buying and selling clients who are usually stumping up the cash for all this.
Designing your firm’s conveyancing strategy around not wasting money is a laudable aim but in doing so there must not only be an understanding but also a willingness to take the consequences that may lead from it, in this example more unhappy clients (probably not your own but somewhere else in the chain) and perhaps an even higher fall through-rate that might otherwise have been the case.
We have a competitive, free and open market. Competition is healthy and to be encouraged but those who pronounce on what may be good for a consumer sometimes need to understand that there is a bigger picture. If you tinker with one part of the transaction, or come up with a ripping wheeze for improvement of your cash flow or bottom line, it will have some consequences. If you have not seen them then you have not looked hard enough
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