David Jabbari is chief executive of Muve

There are essentially two ways that estate agents can form direct links with conveyancing providers. Firstly by direct instruction to a single firm, or by taking part in a panel arrangement where instructions are allocated to a small group of firms, usually administered by a third party that runs the panel.

The heyday of panel management was when law firms were a lot smaller and could not handle the capacity required by a large estate agent referrer. With increasing consolidation of conveyancing law firms into large corporations, this issue now only affects the very biggest agency groups, where a panel still makes sense.

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Mortgage Brain notes continued upward trajectory in ESIS

In every other case, panel management is unlikely to be the optimal solution for the estate agent, the customer, or the law firm. At a time when conveyancing was more fragmented firms were not set up to cope with the volume of work that larger agencies could send their way. For the agent, the benefit of panels was the ability to cope with the volume.

Capacity no longer an issue

Property solicitors and conveyancers have now gotten their act together and specialists are emerging to support the industry. They have invested in people and technology and are able to ramp resource up and down to cope with demand.

Land Registry statistics show that the top 100 conveyancing firms by Land Registry volume have grown their market share. As the specialist conveyancing firms get better at capacity management, what is the attraction of using a panel manager, where there is a risk of agents losing control over the transaction?

Complications with panel management

The key problem with panels is that the panel manager has very little real influence over the running of the firms in the panel. Expecting disparate organisations with different levels of investment, culture, and competence to behave in the same way and deliver the same standards simply does not work.

While SLA’s will dictate some of the basics, that is no substitute for dealing directly with the senior management of the firm, with who you can haul over the coals when things go wrong.

The other big problem is that the panel managers can attempt to extract too much revenue from the referral process, leaving both the agents and the law firms short-changed. It is a vicious spiral downwards.

The panel manager’s return such a low fee to the conveyancers that the firms involved become disaffected and de-prioritise that work in favour of more lucrative work streams, thus impacting quality.

Equally, estate agents who should be expecting a minimum of £200 to £300 in referral fees end up having that shaved. Lastly, the customer pays an inflated price for a poor legal service.

Technological inefficiencies

Panel management systems are unable to take advantage of the investment in technology that conveyancing firms have made as, in more cases than not, there is no two-way interface. This results in endless re-keying of data into the consumer portals designed to keep all the parties up to date.

The bottom line is that panel management looks very outdated. There is no substitute for an estate agency working with a modern high-capacity law firm that can build a first class legal product tailored to its needs, and who is answerable directly for any service issues.

Economical unviable

Speaking to contacts in the sector, I come across so many people who will no longer do panel work because the fees simply do not make economic sense. It seems crazy that all this capacity is there and available to the estate agents, but it cannot be used because a third party panel manager takes so much money out of the process, even at the expense of delivering a first rate service to customers.

Research regularly shows that many estate agents would forgo a referral fee if it meant their client was dealt with properly. They should not need to make that choice. Agents who deal directly with a one-stop shop conveyancing law firm can also expect a proper return for their referral.

Why compromise? Working with the new breed of conveyancing firm saves much of the administrative hassle, provides consistency of service and quality, improves speed of transaction and most importantly ensures your client’s best interest are at the heart of the matter.