Conveyancing fees take a beating

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Published June 27, 2006

Conveyancing fees take a beating
Fees have more than halved in a decade, further falls will make business uneconomical, say some lawyers


By WEE LI-EN


(SINGAPORE) Lawyers are complaining that their fees for buying or selling a home are less than half what they were ten years ago.


While these conveyancing fees averaged $3,500 to $6,000 for a transaction in 1997, fees are said to have tumbled to between $2,000 and $3,000.

'Fees have hit rock bottom and if they drop any further, it would be simply uneconomical to carry on business,' said a lawyer.

Fees have dived so low that lawyers say the returns are sometimes simply not worth the effort required for a transaction.

Legal firms which charge a fee of $2,000 for the work involved in buying or selling someone's home make only a few hundred dollars, as stamp duty and other necessary payments average $1,300 to $1,600 for each transaction.

'A transaction can take a few months to a few years to complete. Each file is about two to four centimetres thick,' lawyer Daniel Xu said.

Faced with falling profit margins, lawyers have diversified into other areas and reduced their reliance on retail conveyancing.

Mr Xu, who is a lawyer with MyintSoe & Selvaraj, said that his firm's conveyancing partner gave up the practice and left the firm a few years ago.

The pummelling that conveyancing fees have taken is attributed to various factors such as the financial crisis in 1997 and the replacement of scale-fees in 2003 with voluntary fee guidelines.

Scale-fees involved an agreed set fee based on the value of a transaction.

Although the guideline fees are about 30 per cent lower than the scale-fees, lawyers say that in actual practice the fees charged are even lower as lawyers undercut each other in the search for business.

Another downward pressure on fees is said to come from banks for lawyers to keep their prices within the legal subsidies given to borrowers.

A check with some local banks indicate that the going market subsidy is 0.4 per cent of the loan subject to a maximum of about $2,000.

But despite the low fees, many firms are staying in the business of conveyancing so they can provide clients with a full range of services.

Michelle Lim, a partner at Colin Ng & Partners, said that one reason why her firm maintains a sizeable retail conveyancing department is to support the conveyancing requirements of its other departments.

For other firms, it is not a matter of choice. PK Wong, executive director of PK Wong & Associates, said that conveyancing is still a source of income for many firms which have to take whatever business is going.

'Of course, lawyers prefer certain types of work but you don't always get what you want,' he said.

Meanwhile, other firms which still bank on retail conveyancing rely on volume to make up for razor thin margins.

'Conveyancing is no longer a piecemeal type of work but something we must do in bulk to enjoy economies of scale,' Kenneth Tan, director of Asia Law Corporation, said.

To handle a large volume of transactions efficiently, his firm has tightened up its work processes to prevent duplication of work. It has streamlined operations and relies on technology to organise its work better and cut costs.

The opening up of the HDB loans market in 2003 also created a new source of income for conveyancing firms and an estimated ten law firms have set up shop at Toa Payoh where the HDB Hub is to tap into the new market.

Colin Ng & Partners, which is understood to have been the first to make the move, has its retail conveyancing portfolio evenly split between private and HDB transactions.

While lawyers are not optimistic that fees will be restored to pre-1997 levels despite the property market picking up, they say that increased activity means a larger pie for all.

'There will be more work for us, but whether fees will rise depends on the unity of the profession not to undercut one another,' Mr Tan of Asia Law Corporation said.

Falling conveyancing fees have caused some people to suggest that professionalism might be compromised.

'At such low fees the lawyer will probably take no interest in the work,' Bernard Doray, director of Bernard Rada & Lee Law Corp said. 'To squeeze lawyers will lead to malpractices and that is beginning to show up with many errant lawyers and complaints about unprofessional conduct by lawyers.'

Philip Jeyaretnam, president of the Law Society, said that the offering of fees below the guidelines should be a red flag to consumers.

'They should be thinking to themselves, is this firm going to provide me with the right level of service?' he said.

In a recent message to lawyers, Mr Jeyaretnam called for solidarity among lawyers not to allow their fees to be beaten down below economic levels.

'If you agree to do something at an uneconomical fee, I suppose you have yourself to blame, right?' Mr Jeyaretnam said in an interview with BT.

'I know that of course people have gone through hard times and therefore they will take any scrap of work which comes, but we need to kind of stick together a little bit,' he added.