The reform, detailed in a government White Paper to be included in draft legislation next year, will allow investors to own up to 100 per cent of law firms, subject to oversight by the regulator, the Legal Services Board.
This will pave the way for brokers to offer their own in-house legal services and the ultimate one-stop-shop for clients.
The legislation announced by the Lord Chancellor, Lord Falconer, this week will overturn the restrictions on solicitors practising with other professionals, taking on outside investors and floating on the stock market.
Lord Falconer said the reforms will increase competition and benefit consumers by reducing the cost of legal services.
Earlier this month Mortgage Introducer revealed how brokers had warned about the complications in using free legal services from lenders where delays and problems were occurring.
Jonathan Burridge, director of Quantum Mortgage Brokers, said he would expect some of the bigger broker firms to start looking into acquiring their own legal firms.
He said: “This has to be welcomed as it will be an opportunity for firms to increase their revenues. But we would rather keep this at arm’s length. If you own the legal firm, it makes it more difficult to resolve any problems or disputes if they arise. People may still prefer to go to independent legal firms.”
Eddie Goldsmith, senior partner at solicitors Goldsmith Williams, played down concerns that lenders could create a monopoly for themselves by buying out all the major law firms and conveyancers or that the proposals would create a conflict of interest.
He said: “There will be strict controls over the professionalism of the law firms. Also lenders know if the law firms aren’t up to scratch there could be a big problem so they will not seek to put themselves at risk by acquiring large portions of the sector.”
