Conveyancing Fees and Other Issues

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To most Hong Kong people, buying a property, particularly when the property prices are so high nowadays, can be a major decision and a once-in-a-lifetime experience. It is important for them to make sure that their legal rights are properly protected. Instructing suitable solicitors to handle the transactions is crucial. In deciding who to instruct, factors like good reputation and a sound track record of delivering quality legal service are relevant.

However, a phenomenon has developed, in particular, in conveyancing cases that the amount of legal fees, rather than the quality of service, has become the deciding factor for instructions. The one who charges cheapest gets the job. It leads to cut-throat competition and a severe undercutting of fees. The simple logic is that the cheaper the legal fees are, the less time solicitors can afford to spend on the transaction.

The public may be under the misperception that the transfer of real property is simply the filing of some forms and the witnessing of signatures on standard documents. However, the procedures involved especially in an unregistered land title system like Hong Kong, the expertise required, the amount of money changing hands and the potential repercussions if mistakes are complex, substantial and serious, which means that conveyancing work demands no less time and effort than the transfer of other types of properties.

Rule 3 of the Solicitors (General Costs) Rules (“Costs Rules”) (Cap 159 sub. leg.) provides that the scale of costs for conveyancing transactions set out in the First and Second Schedules of the Costs Rules (“Conveyancing Scale Fees”) “shall” apply as the costs chargeable in relation to the matters specified in such Schedules. The Costs Rules were prescribed by the Costs Committee under Section 74 of the Legal Practitioners Ordinance (“LPO”).

Section 56(1) of the LPO provides that a solicitor and his client can agree on an amount or method of remuneration regardless of any rules made under section 74.

Accordingly, while the Conveyancing Scale Fees are provided under the Costs Rules, a solicitor and his or her client may freely contract out of the statutory scale fees under Section 56(1) of the LPO.

The debate on an abolition of the Conveyancing Scale Fees started with a government consultation in 1995 which resulted in the gazettal of the Legal Services Legislation (Miscellaneous Amendments) Bill 1996. The Law Society raised strong objections to the abolition of the Conveyancing Scale Fees and successfully convinced most Legislative Council Bills Committee members then that the abolition of the Conveyancing Scale Fees was not in the public interest. However, the Law Society’s proposal to amend section 56 of the LPO to prevent contracting out of the mandatory scale fees in the Costs Rules was not accepted. Accordingly, although the proposed abolition of the Conveyancing Scale Fees were defeated, section 56 of the LPO remains in force to allow contracting out of the statutory scale fees. Therefore, since 1997 solicitors have been permitted to negotiate conveyancing fees with their clients.

While the Law Society is looking at how to correct common misunderstandings and misperception of the public on conveyancing work undertaken by solicitors, practitioners should also be careful not to allow themselves to be maneuvered into a price war at the expense of compromised standards. The sustainability of the profession hinges on the maintenance of our professional standards at the highest level. The Law Society is working on ways to assist our members to upkeep the highest standards for the protection of the public and to ensure the sustainability of the profession, and at the same time, to be in a position to charge at a reasonable rate for quality service.

The Law Society is empowered under the law to regulate the professional conduct of solicitors, trainee solicitors and foreign lawyers. For protection of the interests of the public and clients of the law firm, the Law Society is granted statutory power to intervene into the practice of a law firm under specific circumstances, such as dishonesty on the part of the solicitors, breaches of rules etc. Many of the recent interventions commenced by the Law Society involved law firms in the conveyancing practice. The relevant investigations revealed areas that require reform and the Law Society has set up a Steering Committee on Compliance Reform to oversee a comprehensive review on its compliance work including interventions.

Another important aspect related to conveyancing that the Law Society has been working on is the title registration system in Hong Kong. The Land Titles Ordinance (“LTO”), which was enacted in 2004, aims to establish a system with a central title register which will provide conclusive evidence of title. I am very grateful to members of the Law Society’s specialist committee, the Property Committee, for the tremendous effort and substantial time they have spent in the past years in finalising the proposed amendments to the LTO. The Committee is working closely with the Land Registry to resolve the outstanding issues including solicitors’ verification obligations under the LTO.

Many of our members engage in conveyancing practice. In due course, the Law Society will organise a members’ forum to collate views on how this important practice area can be enhanced for the benefit of the future development of the profession as well as for the protection of the public. In the meantime, members’ views are most welcome and please do not hesitate to send them to me at president@hklawsoc.org.hk.

Last, may I take this opportunity to wish our readers a joyful and prosperous 2022!

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President