Tuesday, 2 December 2014

Implications for conveyancers of the draft Consumer Rights Bill

Introduction

The UK Government has announced plans to merge all existing UK consumer protection laws and regulations. On 23 January 2014 the draft Consumer Rights Bill (the “Draft Bill”) was introduced into Parliament and is currently under review. It is likely that the Draft Bill will come into force during late 2015/early 2016.

There are four distinct sections of the Draft Bill relating to Goods, Digital Content, Services and Unfair Terms, that will impact retailers and their dealings with consumers.

The implications of some of these changes for conveyancing lawyers and their relationship with their clients are likely to be far reaching and will clearly need to be made the subject of early consideration.

Here are details of the main proposals in so far as they impact on the supply of conveyancing services.

Pre-contractual Information

The Draft Bill seeks to provide clarity on what representations and statements will be incorporated into the contract as terms, giving contractual force to any spoken or written representations and anything that is taken into account by the consumer when deciding to enter into the contract or when making any decision about the service after entering into the contract.

Those working in new business and who speak with potential clients when supplying a quote and securing business will clearly need to exercise care following these changes.  Representations about price, about fixing a price and later altering it, the likely duration of a transaction and the status of the fee earner who will be dealing with the work will all  become the subject of scrutiny and could unless due care is exercised automatically become terms within the client care agreement.

Representations within websites could be treated and viewed similarly.

A review of website content and pre establishment of client care processes will be essential to avoid future problems should issues with the client and the delivery of the service arise.

Statutory Guarantees

The Draft Bill sets out statutory guarantees that services will need to be performed with reasonable care and skill, within a reasonable time, and for a reasonable price, if this has not been expressly agreed.

This begs the question of what amounts to a reasonable time for the delivery of the service. How long should it take a conveyancer to complete a transaction is like asking how long is a piece of string.  Conveyancers will tell you that they can only go as fast as the slowest party in the chain permits. So what will happen if despite best effort a delay occurs due to the failing of a third party which places the conveyancer in breach of the statutory guarantee as to time?   

Will the legislation expect conveyancers to become ‘whistle blowers’ on the failings of their counterparts, lenders, search providers and other suppliers? 

Clearly to avoid all of these possible ramifications client care agreements and agreements with suppliers will need to be re drawn to ensure the inclusion of express terms on not only the timing of the completion of the transaction but also price. 

If there is any uncertainty over the price for the job it is clear this legislation will give the courts to impute a ‘reasonable’ price for the job. It will be interesting to see what bench mark will be used to determine the reasonableness or otherwise of a conveyancing charge.   Interestingly what is reasonable could excess what many conveyancers routinely charge for the work!

Statutory Remedies

Under the Draft Bill, two tiers of statutory remedy in relation to services are proposed. The Tier 1 remedy provides that the retailer should either redo the element of the service which is inadequate, or perform the whole service again. The Tier 2 remedy allows the retailer to provide a reduction in the charge to cover the element of the service that has not been provided with reasonable care and skill.

It appears at this stage that a disgruntled client will have two options - either to make a complaint about the solicitor to the Legal Ombudsman or to take the solicitor to the small claims court and allege breach of the terms of the statutory guarantee.  It is unclear as to whether the client would first have to exhaust the solicitor’s complaint process and the Legal Ombudsman procedure before going to court, but what is certain the introduction of these changes will undoubtedly fuel more complaints than are presently pursued.

Once again the solicitor faced with an unjustified complaint will be left with the dilemma of either fighting the complaint or settling it knowing that if it proceeds it will result in loss of time and expense.   

Fairness Test

The existing fairness test would continue to apply to all terms of the contract other than the price or subject matter, both of which can be excluded from the application of the fairness test provided they are “transparent and prominent”. The prominence test proposed by the Draft Bill is whether the term has been brought to the consumer’s attention in such a way that the average consumer would be aware of it.

This may mean that if as is often the case the client care letter/agreement runs to several pages it will be necessary for the client to be presented with a one page summary of the main terms and conditions as well as exclusions.

Transparency Test

Under the Draft Bill, all written terms offered to a consumer must be “transparent”, which is a change from the current test of “plain and intelligible”. Transparent is deemed to mean plain, intelligible language and, if in writing, legible. The Competition and Markets Authority is expected to prepare guidance on this new requirement.

No more legal jargon!  Most conveyancers already produce client friendly client care agreements; however it is clear that if a term or condition is not clear any ambiguity will be construed in favour of the client.  Moreover there will be little scope for attempting to hide terms or argue that terms were implied through custom or oral representation.  There will need to be complete transparency on fees and on added fees if a fixed quote is given.

The “Grey” List

The Draft Bill proposes to add three new terms to the current “Grey List” of terms presumed to be unfair. These include:

• disproportionately high charges in the event that a consumer decides not to conclude or perform the contract, or for services which have not been supplied;

Greater care and clear terms on what fees will be charged in the event of an abortive sale/purchase will need to added to the client care agreement if not already present and it is clear that punitive charges will not be permitted.  

• terms allowing the retailer to determine the characteristics of the subject matter after the contract has been formed; and

• terms which allow the retailer to determine the price after the contract has been formed.
There should be care taken when looking to include provision for additional charges for the work since if the terms are not made clear and there is absolute transparency the terms could be held to be unfair and unenforceable.

Conclusion

Practitioners should be prepared to review and update their procedures, both online and in-house, in order to comply with the new changes when they come into force.

There is scope for conveyancers to use these changes to introduce more realistic pricing for the supply of their services bearing in mind that when looking at the delivery of terms of the statutory guarantees and requirement for reasonableness it may mean that for the first time for a long while both the Courts and the client will be required to look more carefully at the vast amount of work and car and skill and  which goes into conveying a property.  

By David Pett - Director and Solicitor with MJP Conveyancing - Residential conveyancers 

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