Why Conveyancing Fee Structure Matters for Your Law Firm
Residential conveyancing is a volume-driven practice area. For most UK law firms, it generates steady cash flow but carries thin margins. Getting the fee structure right is essential to protecting profitability, managing client expectations, and staying compliant with the SRA Accounts Rules and the SRA Code of Conduct for Solicitors.
This article explains the main conveyancing fee models used by UK law firms: fixed fee conveyancing, the no completion no fee offer, and how referral fees interact with both. It also covers the regulatory and accounting implications of each model, so you can choose the right approach for your firm.
The Three Main Conveyancing Fee Models
Fixed Fee Conveyancing
Fixed fee conveyancing is the dominant model in the UK residential market. The solicitor quotes a single price at the outset, covering all standard work up to completion. Typical fixed fees range from £800 to £2,500 depending on the property value, location, and complexity of the transaction.
Advantages for the law firm: Predictable revenue, easier budgeting, and simpler client communication. The client knows the total cost upfront, which reduces billing disputes.
Disadvantages: If the transaction becomes complex (e.g., a leasehold with onerous covenants, a probate sale, or a chain collapse), the fixed fee may not cover the solicitor's time. Many firms mitigate this by including a "disbursements and extras" clause in the client care letter, listing items such as expedited searches, bank transfer fees, and ID verification costs that are charged separately.
Accounting treatment: Under FRS 102, revenue from fixed fee conveyancing is recognised on an earnings basis. You recognise fee income as the work is performed, typically at the point of exchange and completion. WIP (work in progress) must be valued at the lower of cost and net realisable value. For a fixed fee matter, WIP is the time cost incurred to date, less any amounts already billed. This is a common area of confusion for law firm accountants, so ensure your solicitor accountant reviews your WIP policy regularly.
No Completion No Fee
The no completion no fee model is increasingly popular, especially among online conveyancing firms. The solicitor charges nothing if the transaction does not complete, regardless of the reason. If the transaction completes, the full fixed fee is payable.
Regulatory considerations: This model creates a potential conflict of interest. The solicitor has a financial incentive to push a transaction to completion even if it is not in the client's best interests (e.g., if a survey reveals serious defects). The SRA Code of Conduct for Solicitors requires you to act in the client's best interests at all times. You must have clear policies in place to manage this risk, including a documented process for advising clients to withdraw from a transaction when appropriate.
Accounting treatment: Under the no completion no fee model, you cannot recognise any fee income until completion occurs. All costs incurred (searches, disbursements, solicitor time) must be expensed as incurred if the fee is contingent on completion. This can create a significant timing mismatch: you pay out costs in month one but recognise revenue in month six. Your COFA should review your cash flow forecasts to ensure the firm can absorb these costs before completion.
Client money implications: If you receive a deposit from the client to cover disbursements (e.g., search fees), that money is client money and must be held in a client account under the SRA Accounts Rules. You can only transfer it to the office account once the disbursement is actually paid. Do not treat it as your own money before that point.
Referral Fees
Many law firms receive conveyancing instructions through referral arrangements with estate agents, mortgage brokers, or online comparison sites. The referral fee is typically a fixed amount (e.g., £200 to £500 per instruction) or a percentage of the conveyancing fee (e.g., 20% to 30%).
Regulatory compliance: Referral fees are legal under the SRA Code of Conduct, but you must comply with the following rules:
- You must disclose the referral fee to the client in writing before the client is committed to using your services.
- The referral fee must not compromise your independence or your duty to act in the client's best interests.
- You must not pay a referral fee to an unregulated introducer (e.g., an individual who is not authorised by the FCA or the SRA).
- You must keep a record of all referral arrangements and the fees paid or received.
Accounting treatment: Referral fees paid to introducers are an allowable trade expense for corporation tax or partnership profit allocation purposes. Referral fees received from other professionals (e.g., a solicitor referring a client to a surveyor) are taxable income in the period received.
Be careful with VAT. Referral fees for conveyancing services are standard-rated for VAT (20%). If you pay a referral fee to an introducer who is not VAT-registered, you cannot reclaim the input VAT. If you receive a referral fee from a VAT-registered introducer, they will charge you VAT, which you can reclaim subject to normal rules.
Choosing the Right Model for Your Law Firm
There is no single "best" conveyancing fee structure. The right choice depends on your firm's size, target market, and risk appetite.
Sole practitioners and small firms: Fixed fee conveyancing with a clear list of excluded items is often the safest option. It avoids the cash flow risk of no completion no fee and keeps regulatory compliance straightforward. If you offer no completion no fee, ensure you have a robust cash reserve or an overdraft facility to cover costs before completion.
Mid-size and large firms: A hybrid model can work well. Offer a fixed fee for standard transactions, with a separate "complexity uplift" for leasehold, probate, or new-build matters. Some firms also offer no completion no fee as a premium option for price-sensitive clients, but only for straightforward freehold purchases under a certain value (e.g., £500,000).
Online conveyancing firms: The no completion no fee model is almost standard in this segment. It works because online firms typically handle high volumes of simple transactions and have automated processes that keep costs low. However, the regulatory risks are higher, and you need a strong COFA and COLP to manage them.
Common Pitfalls in Conveyancing Fee Structuring
Underpricing Fixed Fees
Many firms quote a fixed fee that covers only the solicitor's time, forgetting to include the cost of support staff, office overheads, and regulatory compliance. A conveyancing matter that takes 10 hours of solicitor time at £200 per hour costs £2,000 in direct time. But the true cost to the firm is higher when you add supervision, secretarial support, IT systems, PII premiums, and SRA fees. A common rule of thumb is to multiply the direct time cost by 1.5 to 2.0 to arrive at the minimum viable fixed fee.
Ignoring the Impact on WIP
Under the fixed fee model, WIP builds up over the life of the matter. If you have 50 conveyancing matters in progress, each with an average of 5 hours of solicitor time at £200 per hour, your WIP is £50,000. This WIP is not cash in the bank. Your firm must have sufficient working capital to fund it. Many law firms underestimate this and run into cash flow problems. Use the SRA client account reserve calculator to model your cash flow requirements.
Failing to Disclose Referral Fees
The SRA takes a dim view of non-disclosure. In 2023, several firms were fined for failing to disclose referral fees to clients. The fine can be up to £25,000 per breach, and the SRA can also impose conditions on your practising certificate. Always include the referral fee disclosure in your client care letter, and keep a copy of the signed letter on file.
How to Implement a Conveyancing Fee Structure
Follow these steps to implement or review your conveyancing fee structure:
- Analyse your costs. Calculate the average time spent on a standard conveyancing matter, including solicitor time, support staff time, and overheads. Use your practice management system to extract this data.
- Set your fixed fee. Add a profit margin of 20% to 40% to your total cost. Test the fee against competitor pricing in your local market.
- Define exclusions. List all items that are not covered by the fixed fee (e.g., leasehold management packs, expedited searches, bank transfer fees). Include these in your client care letter.
- Decide on no completion no fee. If you offer this model, set a clear policy on when you will advise the client to withdraw. Document every instance.
- Review referral arrangements. Ensure all referral agreements are in writing, disclosed to clients, and compliant with SRA rules.
- Update your accounting policies. Work with your solicitor accountant to ensure your WIP recognition, revenue recognition, and client money handling are correct for your chosen fee model.
- Train your team. Ensure all fee-earners understand the fee structure and can explain it to clients clearly. The COFA should train staff on client money rules related to disbursements.
Final Thoughts on Conveyancing Fee Structures
Your conveyancing fee structure is not just a pricing decision. It affects your cash flow, your regulatory compliance, your client relationships, and your firm's profitability. Fixed fee conveyancing remains the safest and most transparent model for most UK law firms. No completion no fee can work for firms with strong cash reserves and robust compliance systems. Referral fees are a legitimate source of instructions, but only if you disclose them properly.
Every law firm's situation is different. The right fee structure depends on your practice area mix, your client base, and your risk tolerance. Speak to a legal-sector-specialist accountant who understands conveyancing compliance and accounting. They can help you model the financial impact of each option and ensure your policies are SRA-compliant.
If you need help reviewing your conveyancing fee structure or your accounting policies, contact our team for a confidential discussion.