Conveyancing conundrum: Selling out or staying put

BURDENED by a minefield on AML/CTF obligations, “the emotional toll is substantial” as business restructuring becomes a real possibility for conveyancers.

High risk, low returns and 20 years of compliance creep are pushing smaller conveyancers to reconsider their future options, according to industry experts.

“I think there are increasing pressures encouraging sole practitioners and smaller firms to consider merging or leaving the industry,” said Sue Mosely, from Hunter Conveyancing, who helps mentor a group of nine small operators in the Newcastle region.

“There has certainly been a lot of discussion in favour of selling out.”

Mosely said a variety of factors are making the life of the solo conveyancer and smaller operators unsustainable.

“For years, our industry has been built around small practices and sole practitioners who have developed successful small busi- nesses from personal service and long standing relationships with clients and real estate agents,” she told AC.

“Now increasing regulation, technology costs, cybersecurity threats, professional indemnity pressures and growing client
expectations have steadily increased the cost and complexity of running a conveyancing practice.

“Our margins are being squeezed while smaller firms find themselves doing so much more work. But, to remain com-
petitive with the online and high volume providers, they are unable to increase their fees proportionately.

“Add to that the fact property transactions in this climate are becoming far more complicated; finding support staff for a small firm is a constant struggle while trying to stay profitable; and the emotional toll is substantial.”

AICNSW president Jennie Tonner said compliance has become a “huge burden” for conveyancers.

“A lot more time has to be taken on each conveyance now as we are effectively a conveyancer and unpaid contractors to the NSW and Federal Governments,” she said, adding the situation is making conveyancers feel “very vulnerable”.

“They have not only been exposed to the risk of having surcharge duty put on them without any experience or training, they now have another level of even heavier compliance from the Federal Government with AML/CTF,” Tonner said.

“We are being forced to take on so much risk as a conveyancer. As a result, our professional indemnity insurance has skyrocketed.”

Tonner said conveyancers need assistance from government at all levels to help struggling small businesses.

“We need government and other peak bodies to listen to what we have to say and the solutions that we can provide,” she
added.

“This has not happened in the past. We know this industry better than anyone else. We need to be heard. As president, this is one of my main focuses.”

Tonner believes once conveyancers have had time to adjust to the extra AML/ CTF duties, businesses will “adapt” but they need to price their work accordingly.

“I highly encourage conveyancing firms to increase their fees and stop offering low fixed prices,” she advised.

“All low fixed prices do is place risk on the consumer and themselves.”

While anecdotal reports in the conveyancing community abound that Tranche 2 of the AML/CTF obligations is the last straw for some people, Vicki Aird, membership manager at AICNSW, said time will tell the impact of this added layer of reforms.

“From AICNSW’s perspective, it is still relatively early to assess the long-term impact of the AML/CTF reforms on the conveyancing profession,” Aird said.

“While compliance obligations have increased, members’ experiences vary significantly, and business decisions are generally influenced by a range of commercial, personal and regulatory factors rather than a single issue.”

Aird advises that every business is experiencing the introduction of the AML/CTF differently.

“The impact varies considerably depending on the size of the practice, its business model, existing compliance frame-
work and available resources,” she said.

“As with any major regulatory reform, implementation requires an investment of time and resources.

“Some smaller practices have indicated that adapting to the new requirements presents challenges, while others have already incorporated many of the necessary risk management and compliance processes into their businesses.”

In Victoria, AICVIC president Shakila Maclean said smaller conveyancing practices across the state, and the profession more broadly, have felt overwhelmed by the volume and pace of additional compliance requirements with the introduction of AML/CTF obligations.

“However, we have not observed a significant number of smaller Victorian conveyancing practices exiting the industry as a result,” Maclean said.

“What we are seeing is practitioners working their way through the changes and looking to AICVIC for practical information, education and support to help them navigate the new requirements.”

Maclean said, at this stage, AICVIC is seeing Victorian conveyancers adapting to the changes rather than leaving the industry in significant numbers.

“That does not mean the compliance burden should be underestimated,” she cautioned.

“For a sole practitioner or small conveyancing practice in Victoria, every additional compliance obligation can have a disproportionate impact because they generally do not have dedicated compliance teams or additional staff to absorb that work.

“Often, the practitioner is both running the business and doing the conveyancing work.”

Maclean said it’s too early to say whether AML/CTF reform will cause Victorian conveyancers to close their practices.

“The new obligations only commenced on July 1,” she said.

“What we can say is that the implementation has created a significant additional workload and pressure for many smaller Victorian practices.

“AICVIC’s focus is on ensuring those practitioners have access to the education, practical resources and support they need to navigate the changes, remain competitive and continue providing an important service to Victorian consumers.”

Meanwhile, South Australian conveyancers are left feeling “quite vulnerable” with the added obligations of the AML/CTF, according to AICSA president Matthew Kelly.

“AML/CTF has lifted the risk and the anxiety,” Kelly said.

“This change is different to other recent changes, like e-conveyancing or VOI, as there is more at stake.

“AML is a different beast, the model comes with hefty penalties for non-compliance, or simply getting it wrong.

“There is an amplified concern about the consequences of this legislation and ensuring that we all do the right thing.

“This is why the AICSA has been focusing strongly on training and will continue to offer and adapt our training as the situation evolves, and time goes on.

“We also believe that it’s imperative that the training is affordable for all members.”

Kelly tells AC the weight of AML reform on the small operator is a heavy one.

“The burden is significant,” he said.

“Many entered the profession for the flexible lifestyle, however AML reform is expected to shake up their world.

“They will now have to do a whole lot more work and change the way that they operate. Sole practitioners and small firms don’t have the support of being in a bigger practice.

“AICSA provides a community for these practitioners. This is important now more than ever.”

Kelly added there is a lot the smaller conveyancers can do for themselves to remain working productively in the industry.

“To start with, they should look at the fees they charge,” he said.

“Our profession needs to be charging for our work appropriately. There is a significant amount of additional work which needs to be reflected in the fees charged.

“Conveyancers also need to ensure that they are continuing their professional development, to be proficient in more complex conveyancing.

“Conveyancers should be aiming to compete on expertise and value adding, rather than cost for basic residential transactions.

“They should find their point of difference, focus on what they can be and what they offer that a large practice cannot.

“These will be areas such as service, trust, community knowledge and personal service.”