They were set at 0.75% of the realty value, until encouragement by the Regulator led to the Guernsey Bar removing the rule that set the fee and allowed competition on price – it happened some six years after Jersey.
Since then legal costs as a percentage of the property value has fallen almost every year.
The Guernsey Competition and Regulatory Authority has released a report it commissioned from Critical Economics about the impact of the change.
It revealed that “a small number” of law firms still charge a percentage of the property purchase price, although less than 0.75%, but the majority now charge a set amount for standard conveyancing
During the last decade, total realty property transactions amounted to £5.8bn, on which conveyancing legal fees amounted to £30.2m or an average fee of 0.52%. This percentage has dropped to an average of 0.38% in the last couple of years due to the rapid increase in property prices.
If the pre-2013 fixed fee of 0.75% on total realty property sales had been charged during this ten-year period, then legal fees would have amounted to £43.4m.
About 60% of the saving, £7.7m., related to the local market.
Michael Byrne, CEO of the GCRA said: “This is an example of where an industry voluntarily elected to address a potentially anti-competitive practice as a consequence of encouragement by the competition law regulator. The tangible benefit to consumers is clear to see, with a sustained and real reduction in costs over a prolonged period, in a significant market for Guernsey.”
Critical Economics conclude that “undoubtedly, the cessation of a fixed percentage legal fee in the local conveyancing market has been very beneficial to the property market. This reflects what was experienced in Jersey following the implementation of a similar course of action in 2006″.
