Referral deals where agents are incentivised to encourage buyers to use trusted services can be good for consumers, a conveyancing regulator says.

The Council for Licensed Conveyancers (CLC) has come to the conclusion in interim findings of an investigation following a BBC Panorama documentary which aired last year.

The programme raised concerns about ‘conditional selling’ where agents are incentivised to encourage buyers to use in-house conveyancing services.

But the CLC says such deals should be transparent and properly documented.

A statement from the council says such deals are a long-established, if controversial feature of conveyancing, with estate agents reportedly demanding anything from £50 to over £1,000.

Alongside the interim findings, the CLC has also put forward a series of suggested recommendations intended to strengthen transparency and consumer protections.

The review found that referral arrangements can play a legitimate role in conveyancing, helping consumers access services conveniently and supporting collaborate working between estate agents and conveyancers, provided they operate clearly, consistently and in the interests of consumers.

However, it also identified some inconsistencies in record-keeping which meant that firms did not always have sufficient evidence to support their compliance, creating a potential “regulatory blind spot” for the CLC.

The review looked at 12 practices of varying sizes and included interviews with 15 lawyers, in-depth analysis of data gathered during inspections and of each practice’s compulsory annual regulatory return, plus insight from the CLC’s professional and consumer reference groups.

All 12 practices had referral arrangements in place, although five were unable to produce written agreements and disclosures to clients were not always complete or available for review.

Three of the practices relied on referrals for at least 85% of their work, whilst for others it was less than 15%.

“Consumers do appear to be informed of the existence of referral arrangements within a practice’s terms and conditions, as part of the client care or engagement letter,” the review found. “However, this is likely to be too late in the process for the consumer to make an informed choice about their provider.”

The review noted the responsibilities of estate agents in disclosure and recommended working with both trade and consumer organisations to improve awareness.

Although it was unable to determine whether higher referral fees impacted conveyancing fees or service levels, it concluded that this did raise important ethical questions about how such incentives operate in practice.

“No one spoken with, admitted that high referral fees were passed onto the client through higher conveyancer fees” although it suggests that there may be implications for how some practices absorb these costs and sustain investment in service delivery.”

The review also found that the 12 practices’ websites did not consistently meet the regulator’s rules on costs transparency and suggested a wider web review to assess compliance.

The review’s interim recommendations, which will be finalised later in the year, include earlier and clearer disclosure of referral arrangements so consumers can make informed choices at the outset, strengthening expectations around written agreements and record keeping, working with the property sector and consumer bodies to improve awareness of disclosure responsibilities, and targeted monitoring to assess how effectively any changes are operating in practice.

Stephen Ward, the CLC’s director of strategy and external relations, says: “Given the strength of feeling we have encountered in our research, and the diverse opinions held by stakeholders, we feel it is important to take a sounding on our interim findings and recommendations, invite any evidence not already shared with us, and provide further opportunity for discussion with the sector having had the benefit of seeing the interim report.”

The CLC is the regulator of licensed property and probate lawyers.

You can read the interim findings in full here.