Recommended fee levels for conveyancing transactions

Sir,

Recently, there have been some comments calling for the introduction of recommended fee levels for conveyancing transactions. I believe that there is some common sentiment, amongst the solicitors’ profession, that while agents can organise themselves and be paid relatively higher fees, why can solicitors not be united together to do so?

In economic terms, when a seller sells real estate, the seller has a minimum sale price in mind. When a buyer buys real estate, the buyer has a maximum purchase price in mind. The role of an agent is to create a zone, the bargaining zone, between the seller’s minimum sale price and the buyer’s maximum purchase price for a transaction to occur.W hen a transaction occurs, this is usually above the seller’s minimum price and below the buyer’s maximum price. The parties to the transaction, at the time the transaction is settled at the transaction price, end up feeling that they have each made an economic gain or value. The satisfaction from the feeling of economic gain or value is why buyers and sellers are more willing to pay agency fees.

In contrast, by the time that solicitors are involved in a conveyancing transaction, the parties have already agreed to the economic terms of the transaction. The common perception is that solicitors are simply engaged to conduct the necessary paperwork. That is, they do not add any economic value to the transaction. In fact, solicitors act as: (1) the facilitators; (2) the insurers of title; and (3) the recourse providers for the transaction. Also, they may be assisting in the funding of the transaction. Without solicitors, there would be no transaction. This is known to more sophisticated and informed clients who are more willing to pay reasonable legal fees.

It would appear that if solicitors attempt to implement recommended fee levels for conveyancing transactions, especially in light of competition concerns, the public needs to be educated as to the reasonableness of the fee levels, which should take into consideration the economic value of the work conducted by solicitors.

Further, if such recommended fee levels are widely publicised by the profession, agents and banks, the parties to the transaction would probably price such fees as part of their economic costs under their initial price assumptions during the negotiation process for the transaction. They should then be prepared to pay the reasonable fees at the recommended fee levels.

In addition, I would also urge firms to consider innovation such that their clients do not walk away from a conveyancing transaction with a bill of costs and some unintelligible paperwork.

Mohan Datwani
Solicitor

Discharge of mortgage: the need to affix a seal

Dear Sir,

Dr Mok’s argument (in Hong Kong Lawyer, July) that it is not necessary to affix a seal on a deed of release does not wash with me. As pointed out by the academics, the seal has the purpose of preventing fraud (see Grand Trade Development Ltd v Bonance International Ltd [2001] 3 HKC 137). Also, Barnsley’s Conveyancing Law and Practice,
4th ed (1996) states that execution of a deed by a corporation aggregate requires the affixing of its seal (cited in Grand Trade [2000] 4 HKC 57). More importantly, the seal serves as evidence of authorised acts of a company, which must be used pursuant to the manner stipulated by the company’s articles of association.

Section 56 of the Conveyancing and Property Ordinance (Cap 219) concerns receipt which does not expressly comprise a release. While a legal charge involves an estate in land and covenants running with land are enforceable between the relevant parties, a release of the legal charge, if not made by a statutory receipt, must be made by a deed
corresponding to the charge which creates legal interests by a deed. Only the formalities complied (by affixing a seal) by a discharge will make the company chargor redeem the legal charge and discharge its obligations and liabilities. Academically speaking, an equitable interest will only be redeemed if no formalities are complied with. However,
in practice, it is held that the chargee is not bound by the act of the discharge for the defective execution resulting in no redemption of the legal charge by the chargor. In my opinion, prudent solicitors should avoid tainted title of this kind.

Tony WH Luk
Solicitor
Ko & Chow