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Referral fees to estate agents prop up failing solicitors, legal expert claims

KREMER NS

Lawyers who pay estate agents referral fees do so only because they can’t win the business on their own merit.

That’s the claim from a legal expert who has renewed the call for a ban on the practice.

David Knapp, from law firm Hart Brown, warned that the payment of referral fees raised ethical issues.

He said: “As the agents do not have the same restrictions as solicitors in acting for either side of a transaction they can also refer the other parties in that transaction and so if they are involved with more than one property in the chain earn a number of referral fees. A good little earner.

“My view on this type of arrangement is that lawyers who need to pay referral fees do so due to their inability to obtain business on a meritocracy basis.”

He said that other ethical issues that arose because of the practice included: uncertainty over who “owns” the client; agents putting “huge” pressure on clients to use solicitors with whom they have a referral fee arrangement; and a potential lack of clarity over whether or not a referral fee is being paid.

On the April 1, 2013, the Solicitors Regulation Authority banned referral fees in all personal injury cases.

Hart argued that this should have gone further.

He said: “As an experienced lawyer, I am extremely frustrated at the referral fee ban not extending to all areas of law.

“I am pretty certain that if a poll was taken of all solicitors as to whether referral fees should be outlawed in conveyancing, there would be an overwhelming majority in favour of a ban.”

Knapp’s comments come on the back of NAEA Propertymark’s response to a Government call for evidence into house buying and selling which closed in late December.

In its response, NAEA Propertymark argued that the Government should take further action to enforce current transparency regulations regarding disclosure of referral fees.

It said: “Referral fees must be fully disclosed to the buyer and the vendor to ensure that any fee and commission the agent will earn is quantified.

“The information should be explained clearly in the sales particulars, when the sale is arranged and outlined on the agent’s website.

“To this end, we have long called for the guidance to help agents comply with the Consumer Protection from Unfair Trading Regulations 2008 and the Business Protection from Misleading Marketing Regulations 2008 to be presented in a way that consumers will find easier to understand.

“We also believe that the guidance should go further in including specific examples which will help agents to understand what they should and should not say when dealing with consumers.

“A standard form could also be produced for the industry which must be signed at instruction and evidenced throughout the buying and selling process.”

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Source:: Referral fees to estate agents prop up failing solicitors, legal expert claims