Here we discuss the implications of using an inexperienced and cheap conveyancer.
That old saying is true – If you pay peanuts, you get monkeys! Most of us pay insurance to protect our houses and our motor vehicles. Although there has been a dramatic increase in the competition concerning insurance premiums for houses and motor vehicles, it seems in proportion to pay anything up to $1,000.00 or more to insure our most valuable assets (i.e. our home and our car).
Why is it then that many people look to cut their costs when they buy or sell a property which is quite often the biggest investment they will ever make in their lives?
Many properties on the Gold Coast would be worth somewhere between $450,000.00 and $1,000,000.00 and yet people seem to think that the transaction of buying or selling properties (conveyancing) is a simple exercise and that this can be done “on the cheap”.
Many of our clients have advised us that Real Estate Agents promise them “cheap conveyancers” who will “do the paperwork” for fees which are ridiculously low ($300-$400). In many cases these conveyancers act for both parties in the transaction with the knowledge and support of the Agents. Not only is this a serious conflict of interest, it is potentially endangering the clients obtaining clear title to their property. The reality is that it is impossible to properly act in relation to a purchase or sale of the property without doing appropriate investigations and searches, as well as giving proper advice to the clients in relation to the contract and the conveyancing process. This simply cannot be done properly for such a cheap fee.
There are also conveyancers who are only licenced to work in NSW in the Gold Coast/Tweed area that regularly conduct conveyancing work in QLD. Not only is this against the law in QLD, there is a doubt about whether their professional indemnity insurance covers them for QLD work. If they make a mistake and you sue them for damages, you may be suing a two dollar company! All lawyers must have compulsory indemnity insurance as well as fidelity insurance for their trust account before they are allowed to practice. Queensland lawyers must also abide by the ‘Conveyancing Protocol’ which has strict guidelines as to the steps to be taken to protect client’s interests in a conveyancing transaction. Bootleg Conveyancers operating from NSW in Queensland are not obliged to observe the Protocol.
There is no doubt that competition is particularly fierce in relation to conveyancing costs. It seems when anyone lists a property for sale they are bombarded by letters, emails and even phone calls from cheap conveyancers and law firms who subscribe to a data service and are informed of the details of any property that is being listed for sale. These firms state that they will act in relation to the conveyance for ridiculously low fees and Real Estate Agents also ‘plug’ cheap conveyancers that they have a relationship with whose sole purpose is to ensure that the matter settles, even if there are serious problems. Unfortunately for the unsuspecting buyers, quite often they are not informed of their correct contractual rights and often proceed with completion of purchases in circumstances where they could legally terminate the contract or alternatively insist on damages being payable where there have been breaches of the contract. They are often told there is nothing they can do about it and to just settle.
Sadly, in many cases, the cheap conveyancers or law firms do not wish to upset the Real Estate Agents who have referred them the clients. Also, they do not have any time to act properly in the matter because of the extremely low fixed fee that they have charged. This may be fine in circumstances where there are no problems with the conveyance but experience tells us that in over 75% of conveyances there are problems encountered which entail the application of legal knowledge and experience in order to protect the clients’ interests. Obviously this cannot be done in circumstances where a conveyancer or law firm is acting for both parties in the transaction and/or where the Real Estate Agent has referred the parties to that conveyancer! Significantly, the indemnity insurer of Queensland lawyers imposes a 200% penalty for their ‘excess’ payment if they act for both parties and there is a claim against the lawyers arising from the transaction. Quite often this can be as high as $15,000 plus the original excess of $7,500! That is a fairly strong incentive not to act for both parties and indicates how dimly the indemnity insurers view lawyers acting for both parties in a transaction.
We point out that the majority of Agents have healthy relationships with reputable law firms and refer their clients to them to ensure all parties are properly represented in the transaction. These agents are usually up front and honest with their vendors and the buyers and do their best to make sure the buyer is aware of any issues with the property. This goes a long way to ensuring there are no problems with hidden defects in the title or issues with the building.
Clients should be aware that buying or selling a property is a huge investment and they should ensure that they are properly represented in any such transaction through experienced Property Lawyers. The added advantage of using lawyers is that in the event of there being a legal problem with the contract, the lawyers can step in and take whatever proceedings are necessary to protect your interests whether it be terminating a contract or alternatively, keeping a party to its obligations under the contract by way of specific performance. If you do use a conveyancer, they are not qualified to handle legal disputes and must refer you off to a lawyer in any event, if there is a problem. Quite often even if there is a problem, a conveyancer will not tell you about this because they do not wish to lose the transaction or have their fees compromised by the matter not settling.
Clients have no qualms about paying insurance premiums in excess of $1,000.00 for their home or car and yet they seem to be shopping around for a cheap fee in relation to the costs of their conveyance. Despite what some people may tell you, conveyancing transactions can be very complicated and it is certainly worth your while to pay the additional fees that a lawyer charges to do this properly to ensure that your investment is protected. Quite often the professional fees for a lawyer are in the vicinity of $1,000-$1,500 and yet this seems to be considered too high. For such an important investment, this fee seems relatively low in all the circumstances.
Don’t skimp on conveyancing costs – this could cost you hundreds of thousands of dollars. Get someone who is a professional and knows what they are doing to act for you, safe in the knowledge they have the experience to protect your investment. If something does go wrong you want to be sure you have the right people in your corner! Steer clear of cheap conveyancers and agents peddling them to you.
You are welcome to contact our office with any enquiries concerning property and commercial advice. Please contact our Property and Commercial Department Manager, Jess Kimpton on direct line 07 5506 8214, email jkimpton@attwoodmarshall.com.au.
