The Sordid Truth about Referral Fees

Whoever you instruct to act for you: Solicitor or Conveyancer; you need to ask them one question: "do you pay Referral Fees?" Referral Fees are a commission, bribe, or bung, call it what you will, paid by the Solicitor or Conveyancer to someone for introducing them to a client. For many agents "I know a good Solicitor" means "I know a Solicitor who pays me a good referral fee". Some of us in our profession call this corruption, but of course it is perfectly legal, and some firms even tout themselves around estate agents and other intermediaries offering considerable sums for recommendations.

And when I say considerable, I mean it. One Solicitor to whom I spoke about this: I will say no more than her firm was based in Croydon, which you might think was punishment enough; admitted that of fees paid by a client for what seemed to be an uncomplicated transaction, nearly 40% was paid to the introducer.

Now you might very well be thinking: "if these people are so stupid that they will pay all of their profit away, why should I worry?" Well, apart from the fact that your transaction is being handled by people with such clearly defective business acumen, you might conceivably think that your fee is being used to deliver an efficient and thorough service by paying for highly qualified staff who devote a reasonable amount of time to your transaction. Well obviously not! If your transaction's profit margin is paid to some greedy commission agent, then in order to make ends meet, your lawyer is going to have to take on more and more work, and that means your transaction gets off the bottom of the pile now and again, and no more.

This whole process, which makes the "cash for honours" scandal look on the level, has become instutionalised big business. Large corporate agents will have tie-ins with conveyancing factories, and their staff are penalised if they fail to introduce enough cases to them.

The bottom line is that the consumer is paying for all this. Firms that pay referral fees cannot deliver value for money almost by definition. Your cash is being siphoned off to pay bribes.

So ask that question!