For years, the economics of conveyancing have been underpinned by something that has little to do with legal work and everything to do with money sitting in client accounts. The reality is that many firms depend on the interest generated from these accounts to make the numbers add up.
In fact, in some cases this interest is hugely significant to the overall finances of the firm. A news story in the Law Society Gazette recently revealed that O’Neill Patient Solicitors LLP’s income from interest in its 2024 financial year was £5.1m, up from £4m in the previous year.
But is this type of income flow from client interest just presenting an artificial reality which has allowed firms to operate at fee levels that do not reflect the true cost of the work being done?
When interest rates rise, as they have in the last two years, this inflow of additional income makes firms appear more robust than they are. But what happens when interest rates fall again? Suddenly that cushion disappears and firms may find themselves in serious difficulty. And this is not a risk confined to smaller operators – some of the largest and most recognisable names in conveyancing would not be profitable without the income generated by client money interest. That should be a sobering thought.
This is not just about the business models of conveyancing firms. It goes directly to the question of what clients pay, how fees are structured, and how advisers prepare their clients for one of the most important transactions they will ever undertake. Today, many firms can compete in the marketplace because of two factors: their reliance on client account interest, and a lack of transparency around what fees actually cover. Too often the initial headline quote is attractive but does not reflect the true cost, which only becomes clear when add-ons and extras are revealed at the end of the process.
For advisers, this presents two challenges. The first is ensuring clients understand what they are signing up to and are not misled by low initial quotes that mask higher eventual costs. The second is recognising that the conveyancing sector itself may face major upheaval if rules on client accounts are changed. And there are strong signs that change is coming.
The Bank of England’s Synchronisation Project, for example, explores the possibility of moving away from firms holding client money altogether. If that happens, the model of subsidising low fees through client account interest would vanish almost overnight. That would be a seismic shock for the sector and would leave many firms needing to reset their fee structures. Clients would no longer be able to benefit from artificially suppressed headline costs, and advisers may find the firms they regularly work with forced to increase fees significantly. In the worst cases, some firms might struggle to remain solvent.
This begs the question: is it sustainable, or indeed desirable, for conveyancing to be underpinned by a revenue source unrelated to the work itself? Regulators have long been uncomfortable with firms effectively thriving from the interest earned on client money, and it is not hard to see why. Clients expect that fees reflect the cost and value of the service provided, not that firms are balancing their books thanks to interest rate fluctuations.
For advisers, the message is clear. Transparency matters more than ever. At conveybuddy we have always taken the view that fees should be upfront, fair, and transparent for both advisers and their clients. There are no hidden extras and no reliance on outside factors such as interest on client accounts to make the service viable. That approach protects clients, gives advisers confidence, and ensures firms providing the service are competing on quality and efficiency rather than accounting quirks.
The coming years are likely to see significant changes in how conveyancing is funded and how firms operate. Advisers should prepare their clients for the possibility of higher fees in future and should prioritise working with conveyancers whose models are sustainable without reliance on client account interest. While this may feel like a distant policy debate, the reality is that when change comes, it will reshape the economics of the sector overnight.
Conveyancing has always been central to the property transaction, but the way it is funded and delivered is under more scrutiny than ever before. Advisers who understand the pressures, who can explain them to clients, and who ensure clients work with transparent, reliable providers will be best placed to navigate this potential upheaval.
For all the uncertainty, one thing is clear: a model that depends on client account interest is not built to last, and the sooner the industry addresses that reality, the better prepared it will be for the changes ahead.
Harpal Singh is CEO at conveybuddy
