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With e-conveyancing due to begin an incremental national rollout during 2007 some conveyancers are worried. As the Government is keen to see conveyancing carried out by large institutions such as banks and supermarkets on the grounds that this will increase choice there is a concern that the introduction of e-conveyancing means that such institutions will enter the market and force small conveyancers out of business.
Are such fears justified? In fact just as e-conveyancing is unlikely to reduce the cost of buying and selling houses for the consumer it may also turn out to have less impact than anticipated on the structure of the legal profession.
This does not mean that e-conveyancing - assuming that the Land Registry can overcome the remaining technical and security challenges that could still derail the project - will have no impact on conveyancing. Inevitably there will be radical procedural changes in the way conveyancers work.
But it is much more difficult to accurately predict the external consequences, particularly economic ones, of technological development. Even Bill Gates, the founder of Microsoft, famously failed to spot the importance of the Internet. In fact the introduction of new technology often has unforeseen results – as the recent history of conveyancing illustrates. The widespread adoption of the fax machine in the 1980's brought a big change to conveyancing. But in the same way as safety improvements to motor cars meant people could drive more dangerously the fax led to a fall in standards as conveyancers could now be slapdash and careless in preparation knowing that, say, forgotten enquiries could be faxed over at the last moment.
The fear that the market will become dominated by the large institutions may in part be due to the emergence of the concept of e-conveyancing coinciding with the expansion of Countrywide Property Lawyers (CPL), www.cwpl.com part of Countrywide plc, www.countrywideplc.co.uk. Countrywide plc is primarily a residential estate agency business - it is by some distance the largest chain in the UK - but also provides financial and conveyancing services and owns a 47% share of TM Property Service (one of the three NLIS channel providers). From its creation seven years ago CPL has rapidly become the largest single conveyancing practice in the UK carrying out over 86,000 transactions in 2003. It spends heavily on IT having invested £5.1 million in its new computer system.
The growth of CPL and the appearance of other smaller direct conveyancing operations have led some to believe that e-conveyancing favours such firms. After all a small firm cannot hope to match the IT spending power of CPL or a clearing bank which might enter the conveyancing market.
This overlooks the fact that CPL's success is intimately connected to its ownership by Countrywide plc. As the largest UK estate agent - 865 offices at the start of 2004, and a seven per cent share of the number of estate agents offices nationally - the sale of a property through the agency side of Countrywide will often lead to CPL being instructed as the conveyancers. CPL still only has a small part of the total market - there are close to 1.5 million residential housing transactions each year - but given Countrywide's share of the UK estate agency market there is scope for CPL to grow still further. But for the same reason it is difficult to see any other organisations replicating the success of CPL.
The dream of the "one-stop" financial supermarket that saw Building Societies and Insurers rushing to buy estate agencies in the late 1980's ended in failure - hardly surprising as the clearing banks had never succeeded in doing this. A large institution that wished to enter the conveyancing market now would naturally prefer to take over an existing business to avoid having to build a practice from scratch, but that is effectively impossible because the market is so fragmented. It is difficult to see how the slim profits from conveyancing would produce the return on capital that shareholders in a bank or supermarket would demand for such a long-term investment. Significantly there is nothing to suggest that e-conveyancing changes this.
It also seems unlikely that economies of scale really apply where IT investment is concerned. Larger firms might be more able (or more willing) to spend large sums on IT but there is little evidence to suggest that the "per head" IT spend is less for large firms than small ones.
There are also some respects where e-conveyancing clearly does not give an advantage to larger businesses. Electronic searching – the part of e-conveyancing which is already with us – merely requires a PC with an Internet connection. There is a comparison here with e-mail - the sole practitioner gets exactly the same benefit as the largest City firm. This is particularly significant as electronic searching may turn out to be the element of e-conveyancing that proves to be of the greatest benefit to the public.
The idea that IT gives a competitive advantage to a business is, for obvious reasons, assiduously promoted by the IT industry. But even this is now being challenged. For example, Nicholas Carr, in his book "Does IT Matter? Information Technology and the Corrosion of Competitive Advantage" argues that IT has been commoditised and that, whilst there may be a temporary "first-mover" advantage, the fact that technology is available to everyone makes it less likely that use of IT will offer a strategic advantage in the long run (see www.nicholasgcarr.com).
In fact the Land Registry have no desire to favour large firms over small firms. There would also be an unpleasant political fallout if e-conveyancing led to the disappearance of lawyers in less affluent or rural areas. Of course e-conveyancing might, quite possibly will, cause unforeseen problems for conveyancers. Security, insurance and usability are all potential problem areas but they are problems for all conveyancers.
None of this means that small firms should ignore e-conveyancing but, as with the typewriter, fax machine and word-processing software (technological developments which all changed the way that lawyers work) the important point is that the benefits are available to everybody.
Raymond Perry is a partner in Davies and Partners Gloucester and a writer on
issues involving the Law and IT. He is the author of a forthcoming book on the
e-conveyancing revolution, Future Conveyancing due to be published in early
2005. Aimed at the general practitioner the book will explain what
e-conveyancing is, how it works and its likely economic impact on the
conveyancing market. Website www.raymondperry.co.uk
Email mail@raymondperry.co.uk.
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