August 21, 2013 | Posted in:Conveyancing
No Sale No Fee Conveyancing
What are no sale no fee conveyancing services?
Most people will be familiar with the term no-win no-fee in connection with making legal compensation claims. In these cases, no fee is paid to the solicitor if the claim is not successful and no compensation is received by the claimant. No sale no fee conveyancing works in much the same way. When buying or selling a property, you will need to hire a conveyancing solicitor to undertake all the legal work involved and to ensure the transaction goes smoothly. If the solicitor you choose to instruct works on a no-sale no-fee basis, then you will not be charged if the conveyancing transaction fails to complete. In other words, you will pay no legal fees to your solicitor unless the sale or purchase goes through successfully.
Are solicitors obligated to work on a no sale no fee basis?
The simple answer to this question is ‘no’. It is at the discretion of the solicitor whether or not they will offer a no sale no fee deal. In reality though, most solicitors currently do work on this basis. It is especially common for online conveyancing firms to work on a no-sale no-fee basis. Such firms complete the conveyancing work using phone, email and postal correspondence. In normal circumstances, a client will never meet with a solicitor from an online conveyancing firm face-to-face, nor have cause to visit their office. Smaller, local and more traditional firms that meet with clients face-to-face may be less likely to offer a no-sale no-fee deal.
What are the advantages of no sale no fee solicitors?
The obvious advantage of a no sale no fee contract is that it removes any risk of being left with large legal fees to pay on a sale or purchase that has fallen through. On average, around 30% of conveyancing transactions fall through prior to completion in the current market. It is possible that you will be in the lucky 70% of people whose conveyancing transactions go all the way to completion. However, if you are not, you could be left with substantial legal fees to pay for work that is entirely useless when the transaction collapses. If your solicitor was not instructed on a no-sale no-fee basis, you will have to pay them for the hours they have spent working on your conveyance. This money is essentially wasted, as the work your solicitor has done cannot be carried over to a new sale or purchase. If the solicitor was instructed on a no-sale no-fee basis, then this risk disappears; even if the transaction fails to complete, you will have no legal fees to pay.
Solicitors working on a no-sale no-fee basis know from the outset that they will not be paid for their work if a transaction fails to complete. They therefore have an extra level of motivation to work as efficiently as possible and push for the conveyance to go through has quickly and smoothly as possible. They should work extra hard on your sale or purchase, as they know that if they leave anything to chance, they stand to not get paid.
Are There Any Disadvantages?
Slightly Higher Fees
Of course, with 30% of transactions falling through, solicitors firms need to recoup their losses from somewhere so that their businesses do not collapse. This means that legal fees charged by no-sale no-fee solicitors are on average 15% higher than solicitors who do not offer this service. The extra money goes towards making up for any losses suffered and ensuring the firm can stay afloat. You can think of this 15% extra fee as a payment towards an insurance policy, as you could stand to pay a lot more if your sale or purchase collapses close to exchange and you did not hire a no-sale no-fee solicitor.
You need to be wary when comparing solicitors’ fees. As with most things in life – if a quote seems too good to be true, it probably is. Be wary of solicitors who quote low fees and work on a no-sale no-fee basis. Chances are, there are hidden fees in the small print of the instruction document or listed as disbursements. Disbursements are third party costs that will still be payable, even if the transaction falls through. It is wise to familiarize yourself with the main components of the conveyancing process and the work that is normally done on every case by a conveyancing solicitor. When you receive a quote, look through the small print for anything listed as an extra cost.
Some unscrupulous conveyancing firms hike up their fees by charging for work that should be included in the legal fee as an extra cost. This means that the price you are quoted at the outset and amount you pay on completion will be very different. It also means that even though the legal fees might be waved should the transaction fall through, these extra costs will still be demanded. Things to look out for a charges for completing forms, such as the Land Transaction Return or Transfer Deed, or fees for doing standard work such as checking the mortgage offer or dealing with a management company on a leasehold property.
Disbursements are legitimate third party costs that will be encountered on all conveyancing transactions. These are costs that have to be paid to agencies that complete work necessary to the transaction, which is requested by the property lawyer. These include things like the cost of obtaining searches, Energy Performance Certificates, or office copies from the Land Registry. These costs cannot be avoided. Because they are extra to the legal fees charged by the solicitor, disbursements must be paid even if the sale or purchase falls through and the solicitors fees are waived. If the solicitor did not ask the client to pay the disbursements, they would have to cover the cost themselves. This would mean not only would the solicitor not get paid for the work they had done on the conveyance, but they would also be out of pocket from paying the disbursement costs on behalf of the client. No solicitor will do this. Always ask for an itemized list of possible disbursements before instructing a solicitor and ensure that nothing that would normally be included in the legal fees is listed on it.