The Bottom Line

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In the last quarter of 2021 alone, PII costs rose by over 20% on average.

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As the economy reels in the wake of the Covid pandemic and the lengthy lockdowns, and the cost of living spirals ever higher, it’s the sort of increase that’s always going to impact the smallest firms the most.

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The reasons for this ‘hardened’ Pwo-thirdsII market are manifold, and can be traced back to inciting incidents like the Grenfell Tower fire, which brought into sharp relief just how much insurers might be exposed to claims.

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That said, it’s been generally agreed for some time now that the rising cost of PII for law firms particularly has related to the increasing number of claims being made against firms.

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Indeed, in 2020, around t of firms had no claims against them at all. But, the value of the claims against that remaining one-third exceeded the sum total of premiums being collected.

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This was never a situation that could last.

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Conveyancing Concerns

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Probate is catching up as one of the primary sources of claims being made against firms, an area where errors can be very costly indeed. However, the bulk of claims still originate from conveyancing matters.

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Many of these conveyancing matters are related to Stamp Duty errors picked up after the event by claims farms approaching clients about missed opportunities for claims reliefs, such as mixed-use and Multiple Dwellings Relief, which may have significantly reduced the client’s SDLT bill.

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Stamp Duty Land Tax Complexities

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There’s also the factor of the increasing complexity of SDLT as new elements are introduced all the time.

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The 2016 introduction of the Higher Rate on Additional Dwellings (also known as the 3% surcharge) caused several errors as buyers found themselves advised to pay the surcharge when it wasn’t necessary, or had been advised it wasn’t due until after the exchange of contracts, forcing them to borrow more or lose their deposit.

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This year a 2% surcharge on non-UK resident buyers has been introduced, and it’s easy to predict more confusion and chaos with this, carrying as it does similar complexities and caveats to the previous surcharge.

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In the last month alone, two established firms – J Pearlman from North West London and Bradleys Property and Probate Lawyers, have found themselves absorbed into the 360 network. This means they are unable to continue trading due to the spiraling costs of PII.

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Experts predict that though this hardening of the market cannot continue indefinitely, it is unlikely to ease significantly for several years.

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Reducing risk, therefore, needs to be at the forefront of every small to medium-sized law firm, now more than ever. Reduced risk cannot lower premiums across the market, but may help in reducing your own operating costs.

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Combatting Rising PII

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Part of the strategy to mitigate risk can include using SDLT Compass to deal with the SDLT calculations on all transactions.

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Unlike the HMRC online calculator, Compass provides a comprehensive tool that takes into account all relevant factors in a transaction that may impact SDLT.

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It is also fully and constantly updated, to ensure it is in line with the latest changes to legislation. Importantly, it also carries the backup of a fully insured team of experts, de-risking the SDLT calculation process for your firm by outsourcing responsibility to Compass themselves.

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SDLT Compass is the best solution to navigate your firm away from the troubled waters of SDLT and PII!