Conveyancers and property lawyers face a fee structure that makes settling complaints cheaper than defending them, following proposals from the Office for Legal Complaints to increase Legal Ombudsman charges by up to 275 per cent. The consultation closed on 2nd September, with the Law Society warning that the tiered pricing will push firms towards unmeritorious settlements to avoid costs that could wipe out the profit on multiple residential transactions.
Under the proposals, case fees would rise from £400 to £600. Fees increase to £750 if the complaint proceeds to investigation, then to £1,500 for a full ombudsman decision. The Law Society's response argues the increases are "not supported by evidence to demonstrate that they are necessary, proportionate or fair," and that smaller practices and legal aid providers face disproportionate exposure.
For a conveyancer handling a £1,200 no-sale-no-fee quote or a £150,000 sale generating £800 in revenue, a £1,500 ombudsman fee represents a significant proportion of income. The tiered structure creates a £900 penalty for firms that defend a complaint through to determination rather than settling at the initial case fee stage.
Cost pressure on marginal defences
Law Society president Mark Evans stated that "there is a real risk that the proposals will encourage firms to settle complaints regardless of merit, simply because it is cheaper than pursuing a legitimate defence." This matters most in property disputes where compliance is a matter of interpretation rather than clear breach. A delay in reporting a local search anomaly, a disagreement over the sufficiency of leasehold information, or a contested view on whether a conflict check was adequate could all fall into territory where the firm has a defensible position but limited appetite to spend £1,500 proving it.
The Law Society also noted that the £1,500 fee "may be tacked onto additional fees in certain circumstances," though the consultation documents referenced in the source do not specify what triggers these additional charges or how frequently they apply. That uncertainty compounds the risk calculation for firms deciding whether to defend.
Legal aid providers face particular exposure. Work serving residential tenants on possession challenges or leasehold enfranchisement clients operates on fixed fees that leave little headroom for ombudsman costs. A £1,500 charge on publicly funded work could exceed total case remuneration, creating an economic incentive to settle complaints even where the legal aid provider acted correctly within tight regulatory and funding constraints.
Professional indemnity and reserve implications
Professional indemnity insurers price cover based on claims frequency, severity and settlement behaviour. If conveyancers begin settling complaints at the £600 threshold to avoid £1,500 exposure, insurers may interpret increased settlement volumes as heightened risk rather than rational cost management. That could feed through to higher premiums or revised excess structures, particularly for sole practitioners and firms without claims-free trading history.
Firms will also need to revisit reserve policies. A complaint that previously warranted a £400 provision now requires £600 at acceptance, rising to £1,500 if the firm intends to contest the ombudsman's provisional view. Finance directors must decide whether to reserve at the worst-case fee from the outset or accept potential volatility in quarterly results as complaints progress through the tiered structure.
The commercial read suggests the OLC is shifting cost recovery from its own budget onto regulated firms, but without sight of the OLC's consultation rationale or cost breakdown, it is impossible to verify whether the increases reflect genuine expense inflation, expanded case handling, or operational inefficiency. The Law Society called for detailed equality and cost-benefit impact assessments before implementation, but the consultation has closed and no timeline for final rule changes has been published.