‘Clementi’ breaks deadlock on referral fees

It seemed that the unstoppable forces of deregulation at work at Chancery Lane had come unstuck over lifting the ban on referral fees. Try as the reformers might – and the topic had been on the Law Society agenda for the best part of ten years – but the stick-in the mud traditionalists refused to budge. That was until last month.

It was interesting timing as the crucial vote came shortly after the Lord Chancellor addressed the Council, the first time that that has ever happened. Lord Falconer told the members – ever so politely – to get cracking on the liberalisation agenda. As reported in last week’s LawZone (Lord Falconer: don’t wait for Clementi to reform), he urged the profession’s leaders not to let “the welcome fact of the work of the Clementi Review” put a stop to all progress in the meantime.

It was the profession’s survival instincts, rather than solicitors being won over by the merits of the argument that led to the change of hearts. “We have a better chance of survival in a recognisable form following the Clementi review if we move on this now,” council member Philip Hamer, who proposed the change, was reported to have said.

It was hardly the enthusiastic embracing of reform that is frequently heard from Chancery Lane. Andrew Holroyd, chairman of the Society’s Standards Board, vented his frustration to LawZone last year over the profession’s intransigence on referral fees which he said was strikingly at odds with “our stance on every other issue”.

He contended that solicitors had sanctioned arguably more fundamental acts of deregulation, such as lifting the prohibitions on employed solicitors offering legal advice direct to the public and fee sharing. Add to that the fact that the ban on referral fees had been more honoured in the breach than the observance. “If lawyers wish to remain their own rule makers we’re going to have to show we can make sensible rules in the public interest and consistent ones at that,” Holroyd noted.

Of course, that line of thought will do little to allay the fears of hard-pressed conveyancing solicitors, who are convinced that their already tight profit margins will shrink even further if they are forced to pay estate agents’ fees. But if the Law Society secures a rule that adequately protects clients (such as preventing cold-calling and ensuring that solicitor advice is not compromised), then it is hard to argue against change.