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Opening doors
Law Society Gazette – 9 February 2006

With the advent of home information packs, solicitors fear competition from estate agents. Could solicitors acting as estate agents themselves be the answer? Mark Smulian investigates

Solicitors are generally respected by the public, whereas estate agents inhabit a lowly place alongside journalists and politicians when opinion polls ask people how they view different professions. So why would any solicitor wish to become an estate agent?

It is a question that an intrepid band of firms is answering as the solicitor-as-estate- agent concept spreads south of the border from its Edinburgh base. Fees that are several times that of conveyancing charges is one obvious appeal. Scotland's different property culture has long since seen the Edinburgh Solicitors Property Centre (ESPC) become dominant in the local market, offering homes for sale for all the solicitors who subscribe to it.

It acts as a one-stop shop that offers estate agency, conveyancing and financial services advice. Other property centres are established elsewhere in Scotland, including a fast-growing one in Glasgow, and overall solicitors are estimated to hold around half of the estate agency market north of the border.

Back in the mists of time, property selling was a major part of solicitors' work in England and Wales, but that disappeared in the face of competition from estate agents.

There was a revival of interest in the 1980s in the wake of the conveyancing monopoly coming to an end, but that was largely blown away by the property recession of the early 1990s.

The ESPC-backed advance into England, where the name Solicitors Property Shop is used, has been slower and more difficult than hoped since its launch in 1998. An early attempt to set up in London foundered through insufficient support, and in 2002 it changed its model. It closed down both its flagship property display centre in Newcastle and property newspaper, in favour of concentrating on individual firms' display centres and advertising in local newspapers.

But as solicitors gear up for the launch in July 2007 of compulsory home information packs (HIPs), which sellers will have to pay for and offer to buyers, the concept may yet gain in popularity.

HIPs will invert the present system by making sellers pay for surveys and searches, and some solicitors see a substantial threat from estate agents to be the main provider of packs. If they offer 'no sale, no fee' packs, law firms could be hard put to compete.

So could SPS be a weapon that will help solicitors fight back? Last year, England's 58 SPS firms sold 1,313 properties - a 10% increase on the previous year - worth 164.3 million in all.

SPS gives member firms a common branding, training and marketing support, but they operate independently and it is not a franchise. Simon Fairclough, ESPC's director of corporate communications, is looking for a 'quite considerable increase in the number of solicitors' firms joining us in the next 12 months'.

He expects HIPs to be a key factor and says it is 'very clear that SPS has to deliver an HIP solution that will be a central resource members can draw upon, and we have employed people to do that'.

'Firms that join were originally quite a mixture, but now it is more common for them to be medium-sized right down to sole practitioners,' Mr Fairclough says. 'They are firms that retain a serious interest in private client work and want to provide more services. Those with a healthy conveyancing operation want to supplement that and gain control over services offered at present by others.'

SPS's first English launches were in Newcastle and Darlington. It is slowly expanding across the midlands, then the rest of England and Wales. It levies a registration charge for each property and then a share of sales, which varies between 0.1-0.2% of the value of a transaction 'so we share the risk', he says.

Mr Fairclough says estate agency is an opportunity for law firms because they can generate extra revenue from their client base by offering additional services, including financial services. But they need to think carefully about how they will tackle this new field. SPS offers training courses, and these can be delivered at firms' offices.

Mr Fairclough says most firms employ someone experienced in estate agency, rather than assume that staff from a legal background will cope in this different sector - the forthcoming legislative changes that will allow non-lawyer partners may also better enable firms to attract talented staff.

Solicitors also need to copy agents by having, perhaps costly, eye-catching premises on busy shopping streets to entice buyers. 'The reality is that no solicitor can go into this operation half-heartedly and they really need experienced estate agency staff to do it,' he says.

One firm that has recently taken the plunge is Carltons, based in the Small Health district of Birmingham. It joined SPS in mid-January because, says senior partner Raj Padhiar, 'this is a nervous time for all conveyancers with HIPs coming in, and it seemed quite a good business approach'.

Mr Padhiar says he has seen estate agents 'making four times the fees we do, and they are not qualified or regulated. This is an opportunity for us to get more work by offering a service through a regulated profession, which gives the public confidence'.

Mr Padhiar has not taken on a former estate agent but has recruited people with sales experience. 'It is often best to employ people who might not be experienced but who are enthusiastic,' he says.

However, Carltons has 'gone to town with our shop front and converted two offices for a more modern look. 'We are in a good location anyway in a busy community and we have done a big refurbishment so the estate agency is like a separate entity from our office,' he says.

Andrew Milne has a year's experience of SPS under his belt as conveyancing partner at Addison O'Hare, a six-partner practice in Walsall. 'We did it primarily to keep up our share of conveyancing,' he says. 'With HIPs coming we want to be the first port of call, otherwise estate agents, especially the national chains, may direct clients to their own solicitors.'

Unlike Carltons, Addison O'Hare did not invest heavily in a shop front and found that the bulk of its business has come from telephone enquiries, many from existing clients, with few customers coming in off the street.

Most of its costs came in setting up the business, marketing promotions, mailshots and advertising properties in local newspapers and magazines, which can be 'a considerable cost depending on which publications you use', Mr Milne says.

Despite SPS's advice, Addison O'Hare chose to train its existing office staff rather than take on an estate agent who 'might not be used to working in the way we do'. Mr Milne concludes: 'The housing market in Walsall has been quite slow for a year or so and it is too early to say whether we have protected our position as we hoped to, but we are glad that we took the step. I would like to see other solicitors join SPS so that the brand becomes better known.'

The advantage of the concept is that multiple law firms operating under the SPS banner in the same locality market each other - 'for sale' boards, for example, have both the SPS name and the firm's name on them. At the same time, the need for law firms that usually compete with each to co-operate in this one area of practice has often been seen as holding the concept back.

The solicitor/agent concept does have its sceptics, notably Paul Marsh, a partner at Kingston upon Thames firm Carter Bells, and chairman of the Law Society's land law and conveyancing committee.

'The first problem is the capital involved,' he says. 'If you do it properly, you need a lot of capital and getting that is a problem generally for solicitors. He cites the need for intensive capital spending on high street premises with a shop window, which solicitors do not necessarily have.

There will also be expenses in information technology, staff recruitment and training, production of sales promotion and regular advertising in local newspapers and colour magazines. Mr Marsh says: 'The second problem is that estate agency is a high-risk business because there are already a large number of estate agents and it is a very saturated market. It is the classic feast or famine market because it goes with property cycles.'

Solicitors who enter it would be likely to lose work they get through existing contacts with estate agents, because they would become competitors. This would be a particular issue in small towns, he maintains, where there will usually be long-established estate agencies that dominate the market.

However, other evidence suggests that when solicitors analyse the quantity and quality of the referrals they receive, the results are not as good as they might have imagined.

Solicitors often also overlook the amount of work that goes the other way - one of the most successful SPS firms built its estate agency operation on the back of sales generated by its probate department.

Mr Marsh considers that many solicitors are temperamentally unsuited to the cut-and-thrust world of estate agency.

'Solicitors tend to be intellectuals,' he says. 'This is an intellectual profession and whatever you think of lawyers, you need to be highly intelligent to qualify, but that does not necessarily mean you have the different skills for a very competitive entrepreneurial field.'

Such concerns have not deterred the firms that have joined SPS, which is determined on its expansion bid. The Law Society has announced plans to launch its own HIPs solution for solicitors, and while Mr Fairclough and Mr Marsh may have different views on how to achieve it, they both have the same goal - to put solicitors at the heart of the post-HIP home-buying process.

Mark Smulian is a freelance journalist