Spring '17 Scotland

SPRING 2017 ISSUE

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FIRST COMMENT IN THIS ISSUE: • THE BENEFITS OF A RESIDENTIAL PROPERTY LAWYERS’ ORGANISATION • TELEPHONE QUOTES FOR RESIDENTIAL CONVEYANCING: FINDING THE MISSING MILLIONS • UNDERWRITING CASE STUDY • CLAIMS CASE STUDY • PRODUCT CASE STUDY - POPP

Leading Title Insurance

Welcome to the spring edition of our newsletter. We trust that you have had a successful start to 2017. In this issue we have contributions from Professor Stewart Brymer who discusses the benefits of establishing a Residential Property Lawyers’ Organisation and from Nicola McCluskie who considers the subject of title conditions and where title insurance may be able to help. Finally, we have the first of four submissions from business development expert Professor Ian Cooper. In his first article, Ian looks at telephone call handling and how a review of this approach may pay significant dividends.

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FIRST COMMENT

The benefits of a Residential Property Lawyers’ Organisation

By Professor Stewart Brymer Brymer Legal Ltd

Introduction

A possible way forward

The extent of change in what we loosely describe as conveyancing has been dramatic.

Compared to the position even ten years ago, we now have standard missives; standard documents; a new Land Registration statute and work towards completing the Land Register by 2024; the electronic discharge of standard securities; an increased use of case management; the advent of ScotLIS and many other developments. When one adds to this the increasing issues around secured lending; complaints against the profession; poor risk management and professional negligence issues, one begins to get a better picture of the position that individual conveyancers feel they are in when faced with fee pressures, increasing professional indemnity insurance premiums and more. The natural place for them to turn to has always been The Law Society of Scotland.

While that is to be applauded, is it not now time for a more radical approach?

A model for a possible way forward can be found in Denmark where legislation was enacted a number of years ago to remove the legal profession’s monopoly on conveyancing.

At first, property lawyers worried for their future. To them, this was the ultimate change.

After a period of reflection, however, an opportunity to reform and remodel themselves was identified. This involved the formation in 2000 of a new Society of Property Lawyers who came together under the auspices of the Danish Law Society. Essentially, this meant that those lawyers who practised residential property law formed a new organisation (Danske Bolig Advokater (DBA)) as a sub-set of the Danish Bar. See: www. danskeboligadvokater.dk Members pay a fee to DBA which markets itself and its members.

DBA worked with the Danish Consumer Council in producing a Complaints Policy for consumers. DBA is now a vibrant organisation 3

with over 200 member firms. Indeed it is now the ‘go to’ body if the media requires a comment on anything to do with the sale and purchase of residential property in Denmark. Could a similar model work in Scotland?

Some might argue that such an initiative would result in an added layer of bureaucracy and control. It is suggested that such criticism would only be valid if the Law Society were still to have a controlling hand in the running of the new Society.

An affiliation is, of course, beneficial but no more than that. The badge of ‘solicitor’ is still seen as being a trusted sign that one of a client’s biggest life transactions will be handled properly and to recognised standards. Since members will be solicitors, they will still be subject to regulation and complaints management by the Law Society and the SLCC. The objective of the new body, however, should be to develop a better system for the sale and purchase of residential property in Scotland.

This would build on the good work done by the local Conveyancers’ Forums across Scotland, and its strength will be that it is an organisation for property lawyers run by property lawyers with the aim being to provide the best service to clients.

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What next?

The first step is for a special discussion forum to be convened of all those who have an interest in the practice of conveyancing and who wish to build for the future. Hopefully, there will be considerable benefits from such a forum. No-one is saying that this is the only way forward – but it is one step on the way to finding new conveyancing solutions fit for the 21st Century when we have the whole of Scotland mapped on the Land Register. That is what the Scottish Government want to see be the case by 2024 and, as at December 2016, 60% of Scotland’s titles were registered. What do we want the conveyancing system to look like in 2025? If we want a say in that, we have to organise ourselves and engage with those parties who are already developing transformation programmes. It is not just in Scotland that this is happening. We should not play ‘follow the leader’.

FIRST COMMENT

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Telephone quotes for residential conveyancing: finding the missing millions

By Professor Ian Cooper Law firm skills trainer / consultant, Author of the Financial Times Guide to Business Development

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FIRST COMMENT

Every single day most firms with a residential conveyancing department receive telephone calls from prospective clients who ask the question ... “Can I have a quote for conveyancing please?” Every day, most of these firms lose potential new business that they could win, because of the way these calls are handled! How much are you losing?

This article looks at this daily challenge, the potential opportunities being missed and reviews the recent survey / report into this topic ‘Converting Telephone Enquiries: Residential Conveyancing’, which I coauthored. The study is based on reviewing the results of mystery calls for quotes to 387 firms nationwide; interviews with senior management from residential conveyancing departments in over 100 firms and feedback from over 1,000 call handlers.

This first article in my series of four on this topic, is simply meant to make you think and provoke you into looking again at your own ‘quotes’ handling approach, performance and results. It will I hope, challenge you to reexamine whatever you are currently doing and ask yourself … “is there anything that we could do differently to get better results?” The stakes are high!

Let me explain in blunt financial terms why this is the case. From a business development and marketing perspective, though most firms don’t appreciate it, this issue is the number one priority. Why? The answer is simple. Because, what is the point of spending time and money trying to generate enquiries, if the firm then fails to convert them and loses potential new clients to competitors?

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Did you realise for example, that if just one office in your firm receives an average of just three ‘quotes calls’ per day, collectively these enquiries are easily worth around £1 million of potential new business in a year.

Increase your conversion rate by just 10% and your extra success is worth an easy additional £100,000 of revenue, without any further marketing spend!

One firm I went to train ‘in house’ last year, was getting 12 quotes calls per day across its four offices. Their average single transaction quote was around the £675 mark plus VAT. Do the sums on this and believe it or not they were dealing with 3,000 calls per year and a potential of just over between £2 million - £4 million worth of new business, depending on whether the quotes were for single or double transactions.

Their conversion rate before the training was 35% and afterwards around the 70% mark. This additional 40% gave them an extra £800,000 £1.6 million. Not bad for a couple of days training!

I am not telling you this, to impress you with how effective the training was, but to impress upon you what is possible and what you might be losing, in terms of missed business.

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So what is the problem? How difficult can it be to give people a price? Well let me share some of the findings in the survey and you will begin to realise what is really going on and why the terrible truth, is that the majority of firms condemn themselves to the inevitability of quotes conversion failure.

Amongst the many findings, the study shows that:

85% 91%

or more of firms treat ‘residential conveyancing quotes’ as a purely ‘low level’ administrative task. of firms make no attempt to differentiate themselves from competitors, either during the telephone enquiry, or in any follow up email. Ask yourself this question: If your firm is more expensive than a competitor, why should the caller choose you?

If you do have an answer, how is this communicated to the caller? Most don’t. If call handlers don’t get this message across, then it is hardly surprising that a potential client might choose a cheaper option!

FIRST COMMENT

90% 85% 69%

of call handlers admit that they don’t actively like handling quotes, or are not very good at it. Not exactly a recipe for conversion success. of firms have not given any skills training to call handlers to help them maximise conversion rates. of firms use email as a way of actually avoiding a proper conversation at all and lose business as a result of it.

These firms are simply taking the basic transactional details in a minute or two and then immediately sending out semi-automated emails. Many of the firms who do this, then pride themselves on their efficiency for speeding up and simplifying the process.

Yes, it might be quicker, but if the results are poor, it is false economy. Many firms are failing to realise that this method limits conversion rate success. If the emails that go out only contain the figures, it forces the caller to choose on price!

When to send out an email quote and what it should contain is a massively important issue. This is part of your sales and business development strategy. I will devote an entire article to this topic later in the year, with many tips.

56% 33% 97%

Conclusion: The truth is, that there is a nationwide ‘equality of inefficiency’ amongst the way the vast majority of firms deal with their requests for residential conveyancing quotes.

The good news however, is that for those firms who recognise the potential and then take steps to improve, there is the opportunity to ‘clean up’ in their marketplace, with results that are transformational.

The really great news is that the strategic changes, skills and techniques needed, are not difficult to understand and master. More of these to come.

The full survey can be downloaded free from this link: http://convertingenquiries.com/ residentialconveyancing/report-launched/

of call handlers who spoke to a potential client failed to introduce themselves. or more of all calls showed neither party knew who they were talking to, as the caller’s name was not taken and the call handler had not introduced themselves! of call handlers failed to ask if the caller wanted to go ahead, even when the caller had responded positively to the quote.

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Title Conditions: Can Title Insurance Assist?

By Nicola McCluskie Commercial Underwriter and Solicitor

Introduction At First Title, we receive many enquiries in relation to development sites with student accommodation, hotels and residential housing being some of the most popular.

It is not uncommon for the title deeds relative to these properties to contain title conditions which are perceived as potentially restrictive / detrimental to the proposed development as a result of the Title Conditions (Scotland) Act 2003.

Examples include the following: (i) a prohibition on any dwellings erected on land being used for commercial purposes and occupied by anyone other than a family (not ideal for, say, a proposed student accommodation site); (ii) a prohibition on the height of a building (not ideal where the site is to be used as, say, a large office development); and (iii) a restriction on the use of land (not ideal where the site is to be transformed from an existing office block to, say, an apartment / hotel).

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Although solicitors can take some comfort from obtaining a Legal Report to check that no Preservation Notice has been served by the former ‘Superior’ to retain the benefit of the relevant condition, there can be concerns in some cases regarding enforcement of the relevant condition(s) where a common scheme may have been created in terms of the Title Conditions (Scotland) Act 2003.

To be successful in challenging the proposed development, an interested party would have to establish that it had both title and interest to enforce the relevant condition which can be a difficult test to satisfy given the lack of consistency in the existing case law. Notwithstanding this, we appreciate that your clients (and perhaps more importantly their funders), may take some comfort from obtaining a title indemnity insurance policy which protects against the risk of challenge by a third party.

How can First Title assist?

We can consider cover in various circumstances although we consider the planning status of the site to be highly significant when assessing the likelihood of enforcement by an interested third party. It

FIRST COMMENT

is, therefore, helpful for us to receive as much information as possible regarding the status of the planning application / issued consent and details of the proposed development on the land. What will be located on the land is the crux of our title conditions risk so it can be a challenge to offer cover where little information is available regarding the proposed development on the land.

Reviewing any planning objections can help us consider how well received the development may be and whether any objections raised relate to the specific nature of the title conditions.

It can sometimes be a challenge to offer cover prior to planning permission being granted given the comments above. However, we would encourage solicitors to get in touch with us at an early stage so that we can consider further.

It is also helpful for us to see the title deeds containing the relevant condition together with title deeds for the neighbouring properties.

Information regarding the current use of the property and whether any neighbouring properties have been developed in a similar manner can help us assess the perceived risk and give us some comfort as an insurer.

Confirmation from the solicitors as to whether they have carried out their own assessment of a third party having title and interest to enforce the relevant condition(s) is also beneficial.

Other conditions Cover for title conditions is not restricted to those referred to above – we can also provide cover where a pre-emption right is contained within the title deeds.

Details of the current and proposed use of the land are relevant in this case but what is more significant for us in these circumstances is the relationship between the parties, i.e. that the seller is not a party to the deed which contains the pre-emption right – we take comfort if the party is ‘a step removed’ from creation of the condition.

As with all of our risks, we also expect that there has been no contact / approach made either to or by any third party likely to have the benefit of the pre-emption right. Depending on the nature of the condition and the proposed use of the land, we may sometimes ask solicitors if an opinion has been obtained due to the complexity of enforceability for such conditions.

Cover can also be considered for redemption rights.

Summary As the interpretation and application of title conditions is often not straightforward, and the assessment of the likelihood of enforceability can be difficult, we appreciate that provision of a title policy can be an effective remedy for your clients and may satisfy a proposed lender or purchaser. Whilst the existence of title conditions can be a challenge for us to cover in certain circumstances, we are happy to consider all enquiries so please do not hesitate to contact us for an informal discussion outlining the nature of the condition(s) you are concerned about and we can provide details of the cover available (with any issued policy covering a claim by a third party in relation to the known risk).

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Claims Case Study:

FIRST COMMENT

Following the right road Access rights can be tricky to resolve.

This case demonstrates how appropriate insurance can help even when the situation seems insoluble.

Having completed the purchase of an old farm, the Insured commenced renovation works. These involved large lorries delivering materials to the farm, which was served by two accessways, both of which were insured for lack of a legal right of access by First Title Insurance plc.

‘Accessway A’ was across a field owned by the neighbouring property and was used for the delivery of materials as it was a more direct route to the property.

Previous owners had used this route for over 40 years. ‘Accessway B’ was via a narrow residential street and involved a steep hill and sharp turn, making it unsuitable for use by lorries and in adverse weather conditions.

Once renovation works were underway the Insured found their use of Accessway A had been blocked by a skip placed over the entrance by the neighbour. The Insured politely asked the neighbour to move the skip, but he refused and disputed that the

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Insured had a legal right to use his field for access to their farm. Delivery lorries tried to use Accessway B as an alternative route but this was entirely unsuitable and their efforts were unsuccessful.

Panel solicitors, instructed by First Title Insurance plc, liaised with the neighbour’s solicitors to try and bring the matter to an amicable conclusion and avoid court proceedings. Unfortunately they were unsuccessful and within months of the claim being received, proceedings were issued against the neighbour for a declaration that a legal right of way existed over his field in respect of Accessway A. During these proceedings, the parties agreed to a mediation hearing which resulted in the Insured being transferred part of the neighbour’s field to place an alternative accessway through to their property and if this was not possible due to planning regulations, then they would be granted an express right of way of Accessway A. First Title Insurance plc made payment under the policy for the settlement amount and all legal expenses.

FIRST COMMENT

Product Case Study:

Property Owner’s Protection Policy (POPP) Background First Title were approached to assist lawyers acting for a property fund with the acquisition of an entertainment complex consisting of restaurants, bars, cinema and various entertainment areas.

A concern for the property fund was that it wanted to strategically dispose of the asset within the next five years and wanted assurance that it would have no contingent liability.

Challenge

Solution

The property fund was acquiring the property from administrators and was using bank finance to part fund the acquisition. Both the bank and property fund were keen to protect themselves from any unknown issues due to buying from administrators, where information and disclosures were at a minimum and no title guarantee was provided.

First Title was able to structure the policy to cover the unknown risks, the identified known risks and cover an immediate successor to the fund within the next five years, thus enabling a clean exit for the fund in the future.

The lawyers had undertaken some due diligence and requested First Title’s POPP coverage along with various known risks as endorsements to the POPP.

The lawyers completed the acquisition and placed the policy on risk at completion.

Both the property fund and bank were happy that their risk profile was greatly reduced with a bespoke insurance policy.

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To find out more about our products and services email scotinfo@firsttitle.eu or call +44 (0)141 413 8800

www.firsttitle.eu

First Title Insurance plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. First Title Insurance plc is registered in England under company number 01112603.

Registered office: First Title Insurance plc, ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU.