All change: switching regulator
For Paul Hajek, adapting to the changes brought in by the Legal Services Act involved converting his firm to an ABS and eventually moving away from the SRA â€“ and he has no regrets
My firm Clutton Cox achieved a long-term goal of becoming an ABS on 1 October 2018. On the same date, we chose to change regulator, switching from the Solicitors Regulation Authority to the Council for Licensed Conveyancers (CLC).
Why would a small two-office conveyancing firm in South Gloucestershire embark on such a strategy?
On the same day, three other solicitor firms also converted – one firm hived off its conveyancing department to do so.
Will these be isolated examples or could we be witnessing a trend for specialist firms, especially in the conveyancing field, choosing different ownership structures and more specialised regulators?
Back to BABS
But, first take your mind back, if you will, to 2011 – BABS as I call it – that’s ‘Before Alternative Business Structures’. The implementation of the Legal Services Act 2007 had arrived.
Many law firms large and small were worried about the impact of such dramatic change in the liberalisation of legal services and the threat of new entrants from outside the profession.
Susskind’s future of law warned of a disintermediated future for legal services dominated by BigLaw and unspecified New Entrants. In the words of Corporal Fraser from Dad’s Army – we’re doomed, we’re doomed, we’re all doomed.
I’ve lost count of the number of ‘Future of Law’ conferences I have attended over the years exploring the options for law firms in the advent of ABSs.
The overriding thrust of the conferences had been unequivocal. There were three ‘Wild West’ options: ‘Circle the wagon’ – carry on as before, drive down costs and drive out inefficiencies, and keep fingers crossed that some form of regulatory or combined marketing venture or other will come to your rescue; ‘Wave the white flag’ – simply give up conveyancing and concentrate on other areas of the law or; ‘Come out all guns blazing’ – fight back and truly set your law firm apart with great service, innovation and embrace the challenge and opportunities of ABSs.
Alright on the night
I remember my early career in the early ‘80s when the ban on advertising fees was relaxed. I also recall when the Sellers’ Pack was mooted in 1997, which eventually morphed, some ten years later, into the Home Information Pack.
Much the same hype and fretting surrounds Blockchain and artificial intelligence at the moment. But, we solicitors are a resilient bunch and change is very much a fact of life.
I remember thinking that with the advantages of ABSs for future-proofing law firms and potential non-lawyer ownership, why would some law firms not want to consider changing status to an ABS?
Solicitors are a resilient bunch and change is very much a fact of life. I remember thinking that with the advantages of ABSs for future-proofing law firms and potential non-lawyer ownership, why would some law firms not want to consider changing status to an ABS? We adapt and move on and more often than not, it’ll be alright on the night.
To ABS and incorporation
In 2011 we removed the word ‘Solicitor’ from our branding and simply referred to the areas of law where we specialised: conveyancing, wills and probate. I felt over time, there had been confusion in the eye of many consumers.
The competitive advantage once enjoyed by solicitors had been eroded by the unchallenged (in a trade mark sense) term “Property lawyers and will writers”.
And, who has any clue how the new arrangements where the SRA allows solicitors to work as freelancers or to offer services to the public through non-regulated firms are going to play out?
In 2014, I applied to the SRA for a change of status from sole practitioner to limited company. Such a move had two-fold benefits: it gave me the right corporate structure to build on and, at the time, a considerable goodwill tax advantage.
The Companies House procedure was a straightforward paper exercise and painless. The opposite was true with the SRA process, which I considered to be rather burdensome and overly bureaucratic, even though the transfer was part of its streamlined conversion procedure.
In effect, although I was transferring from sole practitioner to a limited company and there were no other changes, I had to reprove myself to the SRA with new business plans and forecasting etc. as if forming a new law firm start-up.
At the end of 2016, we opened a further office in Thornbury. We decided to close our wills and probate department and rebranded as Clutton Cox Conveyancing.
Commercially aware regulator
I was invited to join the Conveyancing Association and became a member in January 2017 after the previous year attending various events and presentations.
My new ‘elevator pitch’ is that the association is made up of the top 80 or so conveyancing firms in England and Wales and…Clutton Cox.
Many of the members of the association are ABSs and CLC regulated. My experience of networking within the association is that much of the innovation in conveyancing comes from ABSs with the guidance and support of a more commercially aware specialist regulator.
When I spoke with other solicitors in the association, many considered and some mentioned that they would consider a transfer of regulator to the CLC.
Many felt that the SRA had an extraordinary job on their hands regulating the whole of the profession with all the divergent demands and problems from the biggest law firms to the smallest.
And both ends of the profession had perceptions that the other end was being favoured disproportionately. The only reason for not changing to another regulator – and it was a huge obstacle – was the payment of six years’ run-off cover for the privilege.
This was not commercially viable for most firms and especially not for us.
The SRA rules changed on 1 October 2017 to make moving from one regulator to another less of a financial burden by removing the obligation to have run-off cover in place.
So long as the legal work previously carried out would be the same as undertaken by the new regulator then run-off cover was not required, but incorporated into new professional indemnity insurance.
In September 2017, at the LFS Conveyancing Conference, I sat next to Stephen Ward, CLC director of strategy and external relations.
Our conversation confirmed and reinforced my idea that a change to ABS and CLC would be a benefit to my firm’s long-term future.
I started exploratory talks about the process with the CLC in November 2017 and started the formal process of conversion in earnest in April 2018.
We found the process to be straightforward and we were helped very supportively by the CLC throughout. The SRA was also very helpful and efficient in making the transfer happen on time. Clutton Cox is now an ABS with four directors, two legally qualified – myself and Sarah Howe – and two non-lawyers – our finance director Kim Rudge and our head of sales and people, Lou Elliott.
I feel we now have the corporate structure and a forward-looking specialist regulator to help and guide us and to thrive in the current and future legal landscape.
It’s been a journey of some eight years and timing has been fortuitous. I sense we will not be the only conveyancing firm to make the change.
Competition is promoted among law firms so it is only fair that competition among regulators is also.
Paul Hajek is managing director at Clutton Cox cluttoncox.co.uk