Peter Ambrose explores the challenges of risk management in residential conveyancing, examining how firms can balance error prevention with commercial realities. Drawing on his experience as CEO of The Partnership and Legalito, he provides practical examples of process improvements and considers how technology, including AI, can help navigate an increasingly litigious landscape.
It is well known that residential conveyancing bears the highest risk of claims, which is why we remind our lawyers that our role is like doing an exam in which you have to get 100% right.
However, it is neither possible nor commercially practicable for every lawyer to be 100% confident in the advice we give, so how we approach risk management in the increasingly litigious world, and whether it is practical to change our practices every time we have a narrow escape from a potential client claim, must be carefully considered.
The harsh reality of insurance
I recently shocked my colleagues by telling them about a competitor who stated, “who cares if we make a mistake, that’s what insurance is for.” My colleagues were adamant this would result in the firm not being able to obtain professional indemnity insurance.
Only they can and are still trading.
While those firms with less than impeccable claims records may pay a little more, it is the population of law firms that meet the overall cost of their negligence. It tends to only be small firms that are closing due to affordability rather than individual errors.
Pareto – the 80:20 rule
We must first accept that the traditional approach of trying to control all the risks using current technology and processes is not suitable for the challenges of todays and tomorrows conveyancing consumers.
The fundamental problem is that exceptions are the rule and irrespective of outcome, the client may take action against a firm which they must resist because the economics just do not stack up. Whether its fighting negligence claims or lengthy discussions with the Ombudsman, clients know that settling out of court is cheaper for insurers, which encourages them to pursue seemingly frivolous cases.
We need to look at how much time, money, and inconvenience we cause not only our clients, but ourselves, when it comes to risk management. A strong argument can be made that we should apply the Pareto principle, where we accept that 20% of our cases will account for 80% of our costs.
For example, whenever we have a near-miss or a difficult complaint, we immediately update our Report on Title to take these into account and hopefully defend against a future issue. The process is not flawless, because although we use technology to include wording to protect against such issues, this does not stop them being inadvertently removed.
The challenge is balancing this with the commercial reality to deliver results.
There is no such thing as overkill
A common misconception we come across from lawyers is that there is no such thing as overkill, but given the current state of fees, commercial reality dictates that we have to make tough decisions. Here are some examples where we have made process changes in the last 12 months without affecting risk.
- Multiple exchange authorities
Several years ago, we had a case where a client claimed they had not given authority to exchange, but we could not prove this. Our solution was to insist we spoke to clients on the telephone, and they also confirmed by a message on portal. We reviewed the process recently and given that we record our telephone calls, we asked why we were still asking clients to message us, adding days to the process and a lot of frustration.
We scrapped it immediately and eliminated delay for no additional risk.
2. Duplicating work – checklists and tasks
Years ago, we introduced a completions team to reduce the risks involved in post-exchange. To make sure they carried out their roles, we automatically created seven tasks on exchange that they had to complete, in addition to their checklists.
We realised that as the tasks and checklists were carried out by the same people, this was an unnecessary duplication of effort and having a large number of tasks had a negative effect on morale.
We replaced seven tasks with one, which was “Process Completion” and saw an immediate improvement in quality and morale, with no additional risk.
3. Confirming the title plan
Finally, a current issue of ours arises when we are acting for a client buying a property. We always confirm with them that the title matches the extent of the property. We see this as a precaution against risk, ensuring we do not miss any element of the property in searches, for example.
We have now had two cases where this did not protect us; one where there was a rogue piece of land belonging to the property across the river that neither of us knew about and the other where the seller had falsely marked the extent of the property.
Both these cases cost money to be settled, so we are currently assessing the benefits of confirming the plan, versus the risk it causes – no decision has been made yet.
Does AI have a role to play?
When we analyse the problems we are trying to solve, if the same person is checking their own work, this does not effectively reduce risk. This is where we believe artificial intelligence (AI) has a critical role to play.
For example, someone might forget to update client data, resulting in paperwork being sent inadvertently to their old address and causing a data breach. Instead, a machine could check the documents, identify if a mortgage had been redeemed, and flag a potential data error to the user.
It is the end of a long day, and a lawyer is sending out paperwork to a client but is tired and forgets to check the attachments, accidentally sending another client’s mortgage offer. AI could be used to check the contents of the mortgage offer and flag to the lawyer that they are about to make a mistake.
Finally, a lawyer reporting to a client on a leasehold purchase might miss an S20 notice in the management pack. AI could check the wording of the report against the contents of the pack, flagging a potential issue.
Can we compromise on risk management
Some will argue strongly against the concept of weighing up the risks on each case, insisting that we apply the same level of due diligence to all cases, irrespective of content. However, despite our regulators requiring us to carry out risk assessments on cases – which we comply with – mistakes still occur.
We have to balance this generic risk management against the potential claims of clients, which requires compromise. Lawyers who want to reduce risk tolerance from 95% correct may be forced to accept a figure closer to 75% correct.
Whilst we may consider this unacceptable, with increasing case complexity and litigation, we may simply have no choice in the matter and must either accept the price of increased claims or seek out technology to help us address this.
Peter Ambrose is the CEO of The Partnership and Legalito – specialists in the delivery of transparent and ultra-efficient conveyancing software and services.
Peter Ambrose: pambrose@thepartnershiplimited.com, 01483 579978
Press enquiries: Tracy Holland, tholland@thepartnershiplimited.com 01483 579978
English 