The cost of conveying on a sliding scale

SOLICITORS have warned that abolishing scale fees for conveyancing work would not necessarily lead to lower charges and might mean more abuses.

Simon Ip Sik-on, a practising solicitor who represents the legal profession in the Legislative Council, said: 'To abolish scale fees in the name of free competition is an over-simplified approach.' He said the primary advantage of scale fees, which bound solicitors to charge fees according to the value of a property, was that it provided for certainty. Consumers knew how much they were expected to pay regardless of the complexity of a transaction.

If the public felt the current scale of fees was too high, then there might be a case for a review by the Costs Committee, which was chaired by a High Court judge and whose members were not dominated by solicitors, he said.

But abolishing scale fees could lead to more abuses by unscrupulous solicitors, who might entice clients by quoting a low fee and subsequently raise it by claiming the work involved was more complex than expected.

There was also the danger that competition would force solicitors to lower their charges and then try to maintain their profit margins by cutting corners affecting the quality of their work.

Ip said a small minority of solicitors were already known to leave all the difficult work to be done by solicitors representing the other side. Abolishing scale fees would put more pressure on honest solicitors. At present, it is an open secret that some solicitors have under-the-table agreements to give rebates to real estate agents who refer conveyancing work to them.

Many solicitors also openly circumvent the scale fees rule by waiving some related charges, such as mortgage fees, so that the total cost of a transaction to the client is lower.

To consumers, these practices are evidence that the scale fees are grossly inflated. People also question the scale's rationale when the work involved in processing a more valuable property is not much different from that for a cheaper property.

But Ip said solicitors who gave rebates were acting criminally or contrary to professional rules.

'The profession should not bend to their level. We should crack down on those members who bring the profession into disrepute,' he said.

Law Society vice-president Patrick Sherrington said the society's view was that scale fees were a good thing, although they could be classified as a restrictive practice.

He agreed rebates and discounts had undermined the public's faith in scale fees, but noted that recent amendments to the Legal Practitioners Ordinance had given the society the power to appoint inspectors to investigate abuses.

Legislative Councillor Anna Wu Hung-yuk, also a practising solicitor, said the public did not like scale fees because rebates and commissions given by some solicitors to estate agents made them think solicitors could manage with lower fees.

What the legal profession needed to tell the community was solicitors had to pay for their overheads, staff costs, indemnity fund, personal liability, qualifications and privilege.

'The market must make it viable for me [as a solicitor],' said Wu.

Ip said it was a myth to think that conveyancing work was very standard.

'Hong Kong still has a deed registration system which requires lawyers to trace a property's title.

'The scale fees do not always cover the full costs of the time spent, especially for properties at the lower end of the market,' he said.

Even though profit margin was greater for properties on the higher end, costs could exceed the prescribed fees when a transaction turned out to be complicated because the scale was applied invariably, he said. Wu said scale fees had an element of cross-subsidisation.

If scale fees were abolished, financial institutions and landlords whose bargaining power was big might be able to drive down their fees, but fees could go up for individuals whose bargaining power was small.

Both Wu and Ip agreed that the issue should be dealt with sensibly because property transactions provided a major source of income for many solicitors and that the speed and volume of such transactions in Hong Kong was high.

Wu said that the public should not just look at the level of fees; the issue must be seen together with simplifying conveyancing procedures and the titling system, so that fees could be lower as a result of reduced workload.