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Conveyancing tariff debate

4 June 2004

Whatever one's view, I feel it would be a worthwhile exercise to look at the arguments for and against having a conveyancing tariff.

The argument for having a tariff
Generally where the tariff is a fixed fee charged according to the value of the transaction or a sliding scale, more expensive property transfers subsidise less expensive ones - the rich subsidise the poor. Such profits might even subsidise less remunerative aspects of the legal practice. By allowing attorneys to negotiate, conveyancing has for some attorneys become unprofitable as costs have increased. Conveyancing could therefore end up being the preserve of a limited number of big firms.

On a purely practical level a fixed fee allows the attorney the time to practice law instead of hassling over the reasonableness or not of the fee. As Anon wrote last week:
Regrettably attorneys are their own worst enemies when it comes to this - if you are not prepared to justify your fee and explain why a client is getting value for money and opt for the easy route of allowing a discount, then the impression given is that the attorney is making a killing and a discount is justified and is there for the asking. Another way of addressing the problem is to ask what part of the service you are going to render that they are prepared to forfeit ... do they even know what the "job" entails?

You are providing a responsible and professional service for which you are entitled to charge a reasonable fee ... ask what part of the fee is unreasonable. Do not cheapen the service you provide by giving a discount just because a client asks. When buying groceries upon arriving at the checkout do they ask for a discount? Did they ask the estate agent for a discount on commission? Our standard answer is a quick "No we cannot afford discounts, and believe we are giving you a first class service" and end it there...we proceed to justify our fee where the client is more persistent.

The argument against having a tariff
This view has been expressed eloquently by Graham Paddock in the January De Rebus, in which he sees the ad valorem tariff as being a threat to conveyancing. He thinks that attorneys should move to charging for conveyancing services on a "time and attendance" basis. Only by adopting a scale of fees related to the value of the work done, will attorneys be able to retain conveyancing work and make a reasonable profit from it. Other arguments against the fixed tariff run along the lines that such tariffs amount to anti-competitive, price-fixing behaviour, in that the free market is not free to find its own levels.

A mixture between the two?
Last year the Law Society of Singapore abolished conveyancing scale fees, yet ironically its members then asked for fee guidelines. Different modes of charging, types of conveyancing transactions and the sizes of firms were considered. The guidelines therefore represent an attempt to help the solicitor and client reach an agreement as to what is a fair and reasonable fee given the circumstances of the transaction.

These circumstances include:

  • the importance of the matter to the client,
  • the skill, labour, specialised knowledge and responsibility involved on the part of the solicitor,
  • the complexity of the matter and the difficulty or novelty of the question raised,
  • the amount or value of the property,
  • the time expended by the solicitor,
  • the number and importance of the documents prepared or perused, without regard to the length,
  • the place where, and the circumstances under which, the services or business or any part thereof are rendered or transacted, and
  • the professional risk attendant to the transaction.
These guidelines are similar to the Law Society of South Africa's (LSSA) Guidelines for Determining Fees for Conveyancing. They are not binding, yet fulfil a very useful function in giving the public an idea of what the likely costs of transferring property are. This is not anti-competitive behaviour, yet has been interpreted as such. It is always assumed that a tariff can be negotiated down. What if the guidelines where to reflect the lowest price arrived at by natural market forces; would that constitute fixing and anti-competitive behaviour?

Competition
Writing in the July De Rebus of last year, the Chairperson of the LSSA Competition Committee, Saloshna Moodley, set out the LSSA's position regarding competition issues. In seeking to have the attorneys profession exempted, she notes competition issues cannot be addressed in isolation and that substantial information must be gathered about the market for the provision of legal services.

She thinks that even though the Competition Act 89 of 1998 contains novel provisions, it lacks helpful precedents. For example, in Part C, concerning exemptions from the application of the chapter, section 10 (3) reads as follows:
"(3) The Competition Commission may grant an exemption in terms of
subsection (2)(b), if-
(a) any restriction imposed on the firms concerned by the agreement, or
practice, or category of either agreements, or practices, concerned,
is required to attain an objective mentioned in paragraph (b); and
(b) the agreement, or practice, or category of either agreements, or
practices, concerned, contributes to any of the following objectives:
(i) maintenance or promotion of exports;
(ii) promotion of the ability of small businesses, or firms controlled or
owned by historically disadvantaged persons, to become
competitive."


Such a provision has to be interpreted according to the purpose of the Act as provided in section 2, to wit:
" 2. The purpose of this Act is to promote and maintain competition in the
Republic in order-
(a) to promote the efficiency, adaptability and development of the economy;
(b) to provide consumers with competitive prices and product choices;
(c) to promote employment and advance the social and economic welfare of
South Africans;
(d) to expand opportunities for South African participation in world markets
and recognise the role of foreign competition in the Republic;
(e) to ensure that small and medium-sized enterprises have an equitable
opportunity to participate in the economy; and
(f) to promote a greater spread of ownership, in particular to increase the
ownership stakes of historically disadvantaged persons."


It is therefore necessary for the profession to determine:
  • the structure of the market for the provision of legal services,
  • geographical and sectoral analysis of the conduct of practitioners in the delivery of legal services.
Without having a thorough understanding of the dynamics of the attorneys/conveyancing profession, its nature and the needs of the public, the imposition of the provisions of the Competition Act could result in more harm than good. The recent outcry on medicine -pricing rules could be a lesson. One would hate to read something like, "... regulations which govern the tariffs which conveyancers may charge are unlawful, unworkable and irrational".

Overseas research
Guidance can be had from overseas research. Three papers below give an indication as to what issues will have to be addressed and the approaches adopted.

The paper, An Economic Perspective on the Regulation of Legal Service Markets, submitted by Professor Frank H Stephen to the Justice 1 Committee's inquiry into the regulation of the legal profession in England and Wales, concerns itself with the more general issue of whether there is a need for a specific regulatory regime for legal service markets distinct from general competition law.

It provides a fascinating introduction to the extensive economic literature on the regulation of the English legal profession. It concludes that the theoretical literature on the whole suggests fairly strong recommendations to policy makers regarding self-regulation, even though limited empirical evidence does not always support such strong theoretical predictions.

The paper, Regulation of the Legal Profession, by Ian McEwin, is also instructive. It comes:
"... at an important time for the future of the legal profession in New Zealand. Regulation that is specific to the legal profession has been the subject of increasing debate in recent years. Such regulation relates to the use of the coercive powers of the government to control the terms on which people may supply legal services. It is distinguished from voluntary arrangements that are enforced by contract in accordance with the law that applies to all activities".

Finally, an old - 1996 - paper from Australia, entitled Conveyancing fees in a competitive market, gives an indication of the depth of research which should be done to empirically evaluate the deregulation of the legal profession and is "... the first to demonstrate the impact of competition on an important segment of the legal services market".

Conclusion
What started as an enquiry into the conveyancing tariff debate has lead me to conclude that it cannot be conducted in isolation from the broader interests of both the attorneys profession and the needs of society. To a large degree the issues extend far deeper than simply regulating the profession in accordance with the Competition Act and a lot of research will have to be conducted before a satisfactory regime is found.

Reader Comments: 2
Anon again... 04/06/2004:

A collegue once had a bill of costs drawn for an average straight-forward transfer file on the high court tariff and had the taxing master cast an eye over it...the fee that the client would have paid on a taxed bill, as opposed to the tariff fee would have been more! I do not forsee a decrease in the cost to the public having regard to the Guidelines. But yes, conveyancing will end up in the hands of a few firms that see value in the service that they provide, as opposed to others who to their detriment, will subidise the cost of the services they render to their clients and find their practices unsustainable.

wanda luus 26/01/2005:

Ek as aktesekretaresse wat die werk al vir 28 jaar verrig, wil net onder u aandag bring dat die werk aan die registrasie van hetsy 'n transport of verband, het seker driedubbeld vermeerder. Die uitgawes het vermeerder aangesien daar aanhoudend seloproepe gemaak word. Die kliënte verwag al hoe meer van die prokureur om hul opbrengs uit hul verkoop aan verskeie persone en instansies uit te betaal. Die prokureur moet sy kostes tot op die been sny sodat die koper die huis kan "bekostig".

Dus, die prokureur word in effek "mede eienaar" met sy finansiële hulp aan die kliënt om die huis te bekom. As in berekening gebring word die volume werk wat die prokureur verrig teenoor die werk wat die eiendomsagent verrig, is die prokureur net 'n aalmoes toegeken. Die ordes moet weer soos in die verlede die prokureurs verbied om van die voorgestelde tariewe af te wyk. Sommige van die kliënte loop van prokureur tot prokureur om uit te vind wie nie vir BTW geregistreer is nie (sela, watter prokureur kan oorleef as hy nie eers BTW-waardig is nie) sodat daardie prokureur sy oordrag moet doen sodat hy minder hoef te betaal. Die prokureur se werk word op so baie gebiede van hom weggeneem.

Daar word nie in aggeneem wat dit 'n prokureur kos om al die rekenaars te koop, laser drukkers, regsprogramme, modums, personeel, fooie vir elke elektroniese opdrag, docex ens ens ens. Die prokureur word 'n bedelaar en die publiek behandel hom so. Prokureurs, aarde tog, trek julle sokkies op, los jul lamlendigheid en eis jul respek wat jul verdien terug asook eis betaling vir jul werk wat jul doen en waarvoor jul geleer het. Die banke se werk is ook op die prokureur oorgeskuif en die prokureurs doen dit maar gelate verniet om net nie van die paneel verwyder te word nie. Hou op om lamsakke te wees en staan op julle reg.

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