What Price the Conveyancing Solicitor?

This article takes us through the intricacies of conveyancing work and why the services of conveyancing lawyers should not be undervalued or underpriced.

Marketing gurus hold that if a supplier underprices his services, he effectively makes a statement that his proffered services have no worth. So, caveat conveyancing solicitors.

Rule 2 of the Legal Profession (Solicitors’ Remuneration) Order 2003 mandates that the remuneration of a solicitor other than for contentious business ‘shall be such sum as is fair and reasonable having regard to all the circumstances of the case’. If a conveyancing solicitor grossly underprices his services without any reasonable justification, would he be breaching rule 2 and therefore be committing a professional offence?

I know that this is a twist — outrageous, I can hear some of you murmur — as the immediate inclination that one has on reading rule 2 is to assume that the provision exists to protect the client from gross overcharging and not to stop a solicitor from gross undercharging. But think about it.

Anyway, I digress. The purpose of this short article is to address the issue: what is the worth of the conveyancing solicitor’s services to his client?

There are several types of conveyancing situations and it is not possible to describe here the work that the conveyancing solicitor carries out in each of these situations. For simplicity’s sake, the most typical property transaction, which is that of an individual setting out to sell or to purchase a single property, will be used as the basis to describe the minimal, basic work which the conveyancing solicitor puts in.

Before the solicitor for an intending vendor draws up the sale agreement for his client’s approval, the first important service that he renders to the client is to ensure that the client does not get himself into a big bundle of trouble by committing himself to a contract which he is going to have difficulty in performing. Failure to complete in time or at all will render the client liable for financially painful damages. The common law rule in Bain v Fothergill (1974) LR 7 HL 158, where the vendor breaks a contract owing to an irremovable defect in title, and the purchaser can only recover the cost of investigating title but not for loss of bargain, has been statutorily abolished in Singapore for several years now.

Therefore, even at the pre-contract stage, the solicitor carries out a series of checks and actions, of which the following are some illustrations:

1. making a title check on the property, in case unknown to the client, there has been a hostile caveat or two lodged against the property. If the hostile caveat is discovered after the sale agreement is signed, there may not be enough time for the vendor to get it uplifted before completion.
   

A title check may disclose issues such as, for example, that the property was transferred to the client in his capacity as the administrator of the estate of the person who owned the property and that six years have passed since the person died, thereby necessitating a court order under s 35(2) of the Conveyancing and Law of Property Act (Cap 61);

2. guiding his client along by asking pertinent questions like:
   

   1. whether he has mortgaged his property or he has charged his property to the CPF Board;
   2. if he has not, can he produce the title deeds, if not earlier, then at least on completion;
   3. whether there is any dispute over the property between him and anyone else;
   4. whether he knows of any reason why there may be an objection by anyone in his family or by any other person to his selling the property;
   5. if the property is mortgaged or charged, the solicitor might want to remind his client in either case to check with the mortgagee or CPF Board what are the sums owed so that the client can work out whether the proceeds of the sale would be sufficient to enable him to transfer the title to the property to the purchaser free of the mortgage or charge, after deduction for the real estate agent’s commission and legal fees, and if not, whether he has enough funds of his own to make up the difference;
   6. whether there are any problems regarding the title or condition of the property, so that an assessment can be made on whether these need to be disclosed up front, despite the caveat emptor rule;
   7. whether there are tenants or other occupiers whom he may have trouble evicting in time for completion if he intends to sell with vacant possession;
      

3. discussing with the client issues like GST, and where the property is non-residential property, getting approval from JTC or HDB, just to take two of several cases. In the case of JTC/HDB issued leases, what and how long the process of getting approval could be expected to take, giving redemption notices, etc. Generally, explaining the conveyancing process to and planning strategy with the client so that once the sale agreement is launched, it can proceed as trouble free as possible to fruition.
   

The solicitor then draws up the draft sale agreement taking into consideration all the relevant factors. This is sent over to the intending purchaser’s solicitor.

The first important service that the solicitor for the intending purchaser renders to the client is to ensure that he will not waste his time and money and suffer opportunity costs in negotiating with a prospective vendor who really is not able to contract the sale for one reason or another. At the pre-contract stage some of the checks the solicitor would make and actions which he would take would be:

1. making a preliminary bankruptcy/winding up search on the intending vendor. This is to ensure that the client will not be entering into a contract with a party who has no capacity to carry it through. An option fee is usually paid to the vendor and in other cases, the vendor may insist that a 10% deposit be paid to the vendor directly and not to a stakeholder pending completion. If the purchaser is dead set on accepting these terms, the purchaser’s solicitor would want to ensure at the very least that the vendor is not insolvent;
2. making a preliminary title search. If it is very clear that completion is going to be impossible or difficult, the purchaser’s solicitor would want to inform his client early so that he does not waste his time negotiating and entering into a sale contract. For example, a notice of government acquisition might already have just been issued; there may be a restrictive covenant which prevents the property from being developed in the manner which is intended by the purchaser; the estate, area and other particulars of the property disclosed may be very different from what was represented by the vendor to the purchaser; and so on; and
3. ascertaining that the client is eligible to purchase the property, eg in the case of landed property that the client is a Singapore citizen, and if not, to explain to him the chances of his being able to get the requisite approval and to plan for it.
   

The solicitor will also advise the client on some basic tax, inheritance and estate duty laws and financial planning where necessary by assisting the client to address issues like whether the property would best be purchased in his own name or jointly with his spouse’s or his children’s; the implications of holding the property as joint tenants or tenants-in-common; the shares, how all these may impact on his ability to raise financing on the security of the property, etc.

The purchaser’s solicitor advises and assists the purchaser to negotiate the terms and conditions of the sale contract. He advises his client what would be the necessary provisions to ask for which would enable the client to rescind the sale contract, if investigations made after signing it reveal title or other problems which materially affect the value of the property, and to recover from the vendor the deposit and other part payments made without any undue difficulty. The usual lay person will not be able to anticipate the contingencies and to make provisions for them. In the usual bargaining process it may not be possible for a purchaser to obtain a 100% fail-safe contract but with his solicitor’s advice he can at least reduce the risks as far as his bargaining strength will permit.

The sale agreement having been signed, the vendor’s solicitor carries out, amongst other things, the following activities:

1. helping his client to give notice of redemption to the client’s mortgagee and/or CPF Board;
2. getting in the title deeds;
3. liaising with his client to ensure that property tax and outgoings are paid up to date;
4. answering requisitions on title and other queries served on him by the purchaser’s solicitor;
5. approving the draft transfer prepared by the purchaser’s solicitor;
6. preparing discharge papers for the mortgagee or CPF Board’s approval and execution;
7. settling the completion account with the purchaser’s solicitors; and
8. attending to his client’s execution of the transfer and other documents.
   

The purchaser’s solicitor, apart from doing some of the things mentioned above, files a caveat to preserve his client’s interests in the property pending completion, sends out legal requisitions to check for things like whether or not there is a road line running across the property, which would reduce its value, and whether or not any of the government authorities have issued any order in respect of the property which would have an adverse impact. The purchaser’s solicitor receives the original title deeds from the vendor’s solicitor and checks them. He checks the completion account rendered by the vendor’s solicitor. If the sale is subject to an existing tenancy, he takes care that the security deposit paid by the tenant is transferred to his client. He ensures that the client’s arrangements for payment of the purchase money are made, including completing all security documents required by the mortgagee and/or CPF Board, all in time for release of the money on the completion date.

Both the vendor’s and purchaser’s solicitors eventually meet up to carry out the completion. On the day of completion, and just before it takes place, the purchaser’s solicitor updates his bankruptcy/winding-up and title searches to confirm that there has been no change from his initial searches. Completion involves the purchaser’s solicitor paying over the balance of the purchase price to the vendor’s solicitor and the latter delivering to the former the transfer, the title deeds and the keys to the premises or serving notice of the change of ownership to the sitting tenant (as the case may be).

The purchaser’s solicitor then arranges either by himself or through the mortgagee’s/CPF Board’s solicitors to have the transfer and security documents stamped and lodged at the Land Titles/Deeds Registry for registration.

Finally, when the Land Titles/Deeds Registry releases the title deeds, the purchaser or the mortgagee’s/CPF Board’s solicitor collects them and delivers them to the purchaser or mortgagee or CPF Board (as the case may be).

The whole process from beginning to end engages both the law firms of the vendor’s solicitor and the purchaser’s solicitor for a stretch of six to 12 weeks as a norm during which time the solicitors navigate their respective clients through a sea of legal rules and practical and commercial considerations.

Apart from the solicitor himself, his secretary and his search clerk are also involved. Stamping of the transfer and security documents are now done solely through the internet via a procedure called E-stamping. Title searches and the legal requisitions are also conducted solely online. All this means that the law firm must maintain the necessary computer paraphernalia at some cost. The solicitor advances a fair sum of money in the interests of expediency to pay the governmental and other bodies’ fees charged for the searches and legal requisitions and takes the chance that he will recover these later when he renders his bill, usually shortly before completion.

If all this seems to require a lot of effort, time, cost and skilful and practical application of the law in the service of the client by the conveyancing solicitor, that is because it does and the solicitor should be remunerated accordingly. Think about this as well — the staff in a law firm, as in every organisation, have a certain sense of self-worth through the work they do at the office. Their self esteem would be affected if their employer puts an unjustifiably low value on their contributions by consistently underpricing his services. It is not always just a question of money for money’s sake.

Together with all the bad lawyer jokes, we have heard the unkind dismiss conveyancing solicitors as just a bunch of form-fillers. And there are those critics of conveyancing fees who fall into the category of critics described by Oscar Wilde as persons who know the price of everything and the value of nothing.

These people can be forgiven as they are ignorant, but let us, in the profession, who know better, not fall into the same trap.

Gan Hiang Chye
Khattar Wong & Partners
E-mail: ganhiangchye@khattarwong.com