On the 9th March 2004 The Law Society liberalised the rules concerning fee sharing and the payment of referral fees by solicitors. Solicitors are now able to directly pay mortgage introducers and lenders for new business subject to various conditions.
The Law Society have finally realised that for the conveyancing element of the solicitors profession to survive they must be permitted to enter into commercial arrangements with introducers. Forward thinking introducers and solicitors can now take control of their referral relationships and make these mutually profitable. Clients will undoubtedly benefit from increased competition and choice.
At a meeting last December the ruling council of The Law Society narrowly voted in favour of permitting referral fees and in March of this year brought the new rule into effect. Prior to this change solicitors were banned from paying referral fees for conveyancing or other introductions.
Janet Paraskeva, The Law Society's Chief Executive says that the new rule will be clear, enforceable and in the public interest.
“It will allow solicitors to pay referral fees to introducers who agree to uphold certain standards,” she adds. “For example the introducer must not cold call clients, must tell the client of the payment and must not influence how the solicitor advises the client.
“All our rules are under review to enable the profession to modernise its approach and work on a more competitive platform.”
From the introducer's point of view, the conveyancing market has been instantly transformed and made transparent. Introducers can now look forward to the inevitable barrage of marketing material tempting their conveyancing introductions in return for a referral fee.
It remains to be seen but referral fees are unlikely to spiral upwards. The introducer and solicitor will inevitably find the balance between the extent of the referral fee gained and offered with remaining competitive in the marketplace. The extra revenue stream for introducers will be welcomed though, particularly if the market stabilises as many have predicted.
The introduction of an authorised referral fee system is the first step in a progressive modernisation programme aimed at providing the client and introducer with more choice. The extra competition will encourage solicitors to offer a better service as they will have to run their practices more like businesses than traditional law practices.