I heard a story on the radio the other day and it made me think. I’ve decided to write about it and to also talk about a bit of stuff that has been on my mind of late given what’s going on with the economy. There is a solicitors in Chester called Aarons who helped me out a few years ago with some conveyancing and during that time I got to know my solicitors Phil quite well. I remember having a chat about the effect of the economy during the recession.
Law firms can not afford to pay Conveyancing Solicitors or any other member of staff to be sat around twiddling their thumbs. That is the sad fact of the matter. Since the beginning of the credit crunch prior to the recession in September 2007, nowadays there are not even half the amount of conveyancing transactions and for that reason not even half the quantity of work with Conveyancers.
Every conveyancing firm continues to be impacted by this. Some firms have already been in a position to transfer staff into other departments however many have experienced to create redundancies. Recently legal requirements Society Gazette reported that recruitment agencies were becoming inundated with Conveyancing and Conveyancers Solicitors who had previously been made redundant.
Up to August 2007 Conveyancers were in great demand that was reflected within their remuneration packages. Many are now being made redundant, suffering pay cuts or faced with extremely poor job security. It is not easy to recall recently every other trade or profession to become devalued by a great deal in this short time. It is not only the employees used in the profession that are suffering but individuals who have spent years training to be Conveyancing Solicitors or Licensed Conveyancers, many now discover the skills they may have obtaining are practically worthless.
Many Conveyancing Solicitors Firms will be in a fortunate position of having the ability to downsize. Many smaller solicitors offices and sole practitioners who are entirely dependent on conveyancing work are unable to take such action, however. They now face a challenging decision whether or otherwise it really is worth continuing or closing down. Not many Solicitors have shut down up to now. They have insurance until 30th September 2008. That is the reason for this. The cost of insurance for conveyancing firms is set to increase considerably as it is predicted that the drop in house prices will cause more negligence claims against Conveyancing Solicitors, however.
The issue is compounded by the development of Home Information Packs (HIPs) [http: //online-conveyancing-solicitors.co.uk/home-information-packs/] in August 2007. Their purpose ended up being to accelerate the Conveyancing process, however effect continues to be to place the commission from the HIP in to the hands from the selling agent. They are in a position to direct the customer regarding who ought to be preparing the rest and for that reason influence which Solicitor performs the Conveyancing. Many Conveyancing Solicitors now find it hard to determine as to what extent they may have lost the work they do due to the loan crunch or because of the Introduction of HIPs.
Conveyancing Firms also face another obstacle from what is known ‘run off’ insurance. If they close down without a successor practice, this is an additional insurance premium that a Solicitors Office must pay. Nobody would like to buy or dominate a conveyancing firm right now! The elope premium is generally between 200 – 225% from the initial premium. By means of a good example: –
A Conveyancing Solicitors firm paid their indemnity insurance premium of £20,000 for October 2007 to September 2008. 000 if they wish to close down before 30th September 2008 they will have to pay an additional ‘run off’ premium of £45. This could be quite a motivation to not close down but to carry on trading. Reports suggest that their insurance premium will increase by at least 25% which would mean that they would have to pay £25,000 to insure between October 2008 and September 2009. To compound matters virtually all predictions are for your real estate market to carry on to slow therefore and down increase the likelihood of them closing down the coming year. They might then need to pay a ‘run off’ premium of 225% from the higher premium. Within this example the solicitors firm would need to pay an extra £56,250 ‘run off’ insurance premium on the top of their £25,000 premium if they close down the coming year. A relatively worrying £81,250 altogether.