Brexit and the conveyancer

Jennifer Martin considers the latest risk and outlook for the UK property market

Uncertainty is the chief factor raised by the referendum outcome. The impact on UK property prices and transaction levels will take years to play out
and solicitors involved in residential and small commercial property conveyancing are justifiably concerned about the impact on them, and how their insurance will react to any claims that may materialise.

No one can tell yet whether Brexit will cause UK property prices to fall, rise, or hold steady. Expert opinion is mixed. Howard Archer, the chief European and UK economist
at IHS Global Insight, predicts they will slide 5 per cent in six months. Bank of America Merrill Lynch expects a 10 per cent downwards correction over the coming year, while Jan Crosby, the head of housing at KPMG, said a price drop of around
5 per cent is likely in the regions, maybe more in London.

However, other pundits are more bullish. Paul Smith, the chief executive of haart estate agents, said: 'We have every reason to be confident about
the long-term success of the property market.' Although some buyers have pulled out of deals post-Brexit he expects the effect to be 'a small blip'. Ironically, foreign investment may come
to the rescue. Just 48 hours after the referendum, Simon Barry, the head of new developments at Harrods Estates, had enquiries about London property from the Middle East, Africa, and the US.

So, how might the referendum outcome impact solicitors working in conveyancing?
If prices go up or hold steady, expect little change. Transaction volumes may fall independently of prices, with an obvious commercial effect. The most serious impact would be a large fall in house prices, which may indeed decline, perhaps steeply. Past experience shows that when property prices slide, claims increase against solicitors who handle conveyancing. It's a product of human nature: when an asset loses value, those on
the wrong side of the deal tend to seek someone to blame. Solicitors often come into the firing line.

With that in mind, will Brexit affect professional indemnity insurance policies? The short answer is no, but it does
deserve attention. Brexit is unlikely to have an impact on the minimum level of coverage
that conveyancing solicitors purchase (since lenders tend to hold all the cards on this). Nor would the unlikely happening of a string of Brexit-related claims against conveyancers count as 'aggregation' under a policy. The Court of Appeal has found the relationship between the claims must be 'intrinsic' for aggregation to apply. Brexit wouldn't pass this test.

Conveyancing is the bread and butter of many UK high-street solicitors, but many insurers don't cover solicitors who carry out conveyancing and many don't insure sole practitioners. This compounds the problem because smaller firms tend to take on a large share of this type of legal work.

So, nothing to worry about then? Well, not about your insurance, anyway. As for house prices, Countrywide, the UK's largest estate agency group, sums it up best: 'Though the path ahead is currently unclear and short-term volatility is likely, it is too early to speculate what this means for house prices and volumes.'

Jennifer Martin is the managing director of financial lines at Pen Underwriting @Pen_UW_UK www.penunderwriting.co.uk

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