Conveyancers sale of business restriction removed

Law Institute Victoria

Conveyancers sale of business restriction removed

Legal practitioners should note that the Victorian government has removed existing restrictions on conveyancers undertaking some legal work in relation to sales of business. The amendments to the Conveyancers Act 2006 came into effect on 1 July 2012.

The LIV has been opposed to the changes for some time. We did make submissions to government over the last few years – but the legislative changes came without warning. I have written to the Minister for Consumer Affairs, Michael O’Brien, expressing my concern about the amendment, and pointing out that the move may expose vendors to litigation and not protect those looking to purchase businesses.

The effect of the legislative amendment is to extend the definition of conveyancing work. Under section 4(2A) of the Act conveyancing work now includes “legal work connected with the Sale of Business including the sale of goodwill, stock in trade and the transfer of any business licence”.

This section allowing conveyancers to act in relation to sale of business shows a total lack of appreciation of the number of complex legal areas and issues that are involved in the sale of business.

What practitioners can do:
Lawyers acting for clients in the sale of business should draw clients’ attention to the many complex areas of law that could be involved. These may include:

general contract law
understanding of business structures including partnerships, companies, discretionary trusts, unit trusts
taxation law
leasing
employment law
restraints of trade
superannuation law
occupational health and safety law
franchising law
securities law, particularly the Personal Properties Securities Act

Sale of business may also include liquor licensing, gaming issues and business licensing issues.

Lawyers acting in these transactions should advise their clients that these are complex areas of law and require specialist knowledge and expertise to execute.

The use of conveyancers may introduce risk
We submit that conveyancers, who undertake a 12-month training period, will not have sufficient competencies. We are also unaware of any move to audit their competencies or continuing professional development.

Lawyers should advise their clients that they risk exposure to litigation when selling their businesses if they do not seek legal advice on their disclosure and ongoing obligations.

There is also the risk that any improperly executed sale will fail to transfer titles.

What the LIV is doing:
The LIV has raised the issue several times with government since the amendment was initially proposed in April 2011. At that time, the LIV rejected the proposal, and the suggestion that it would help reduce costs.

In our submission, we said that unlike conveyancing, which generally required a detailed knowledge of property law and related legislation, sale of business matters encompass a much broader area. We also submitted that a 12-month training period was unlikely to be sufficient and may result in unqualified or under-qualified people performing legal work for which they have little competency.

The government failed to respond to our concerns and introduced the amendments without further consultation.
We are now seeking a meeting with Minister O’Brien.

We will continue to advocate and lobby for the appropriate consumer protection and recognition of legal professionals’ superior training, experience and ongoing CPD requirements.

The profession needs to work together to inform the public of the benefits of using qualified lawyers in business transactions.

What do you think of the change?

Comments

	George Mantzoros
	I entirely concur with the comments made by Mr. Hohtoulas
	11/10/2012 2:06:54 PM

	Simon Nunan
	This is a good initiative on the part of the government to allow practitioners another opportunity to demonstrate their worth. Bring it on.
	19/09/2012 7:08:41 PM

	Michael Holcroft
	An excellent idea. We shall have our Practice Management Section draft a mail out. By the way, our Practice Management Executive is looking for members who are prepared to assist other members in this type of way. If anyone is interested please contact Angela AGidley@liv.asn.au
	17/09/2012 12:24:24 PM

	Jenny Stephenson
	I am constantly bemused by the minimal effort conveyancers expend on understanding their clients' conveyancing transactions. The errors of conveyancers who, for example, have failed to explain the significance of an easement, come back for remediation by lawyers years later. Not only is there a vast difference in understanding of property law between conveyancers and lawyers, but lawyers are highly regulated and conveyancers, as far as I have seen, are barely regulated. I am astounded that the government has seen fit to extend the jurisdiction of conveyancers into the are of business law which, as others have indicated, involves many areas of law which those of us in the profession have studied over many years to gain an understanding of, with many more years of practical experience required to gain expertise.
	17/09/2012 7:23:15 AM

	Miceal Ambrose
	I have always been amazzed why we as a profession allow conveyancers to adverttsie there presence in our diary and journal. It gives our competiation some unfounded credibilty. Thew dfiary is for memberd of the legal profession not conveyancers.
	15/09/2012 11:39:23 AM

	Lynda Slavinskis - LSLC
	Crazy law making by a government that obviously is ill advised as to the complexities of a sale of business transaction! I do agree with Anthony Hohtoulas and Colin Rouch that the LIV should do more to market the profession in a positive light to consumers. We can't do this on our own even though some of us do try very hard to shift often negative perceptions of our profession. We all need to stand firm and start effecting change from within first to provide a united front to the public. Some plain English, non-pompous and inspiring PR guidance in relation to the issue would be great so we can all deliver a consistent message.
	14/09/2012 10:51:56 PM

	Belinda Scott
	I am a licensed Conveyancer with over 10 years experience, and I'm also a Trainer for the Advanced Diploma of Conveyancing. I expect to complete my PLT and apply for Admission in around 8 months time. I agree with the LIV's position on the Sale of Business. I was in the meeting with Consumer Affairs and the Business Licensing Authority when the changes to the legislation was tabled in March, and I raised these very same points. Sale of business is much to complex an area for anyone other than a seasoned Practitioner to take on. I'm happy to say that I seem to have deterred most of my students that sat in the bridging course that enables the restriction on their license to be lifted. When the risks were pointed out, and case studies given where things have gone wrong, they seemed happy to not take on Sale of Business files. However the majority of licensed conveyancers that sat in the last course did so only to have the restriction removed, as they felt that by clients seeing a restriction on their license it devalued their service in some way. I was surprised that in the meeting only the AIC, and educators were invited and there was no representation from the LIV. The AIC were keen to have the playing field levelled between Solicitors and Conveyancers on the matter of the Sale of Businesses. The insurance was not mentioned, although our insurance premiums have risen by 40%. I would like to say that there are some very good conveyancers out there, and over the years I've come across some lawyers that obviously should not be doing conveyancing, simply due to the basic mistakes that they have made in both Vendor's Statements and practice and procedure! I pride myself on running a course that goes above and beyond what is required in the National Guidelines, so that at the end, my students come out with knowledge far greater than students undertaking the same course elsewhere. It still does not compare to a full Law degree, however I hope to give my students the best knowledge they can have within the parameters that have been set. I believe in and have put forward a CPD program for Conveyancers, although this has not been made mandatory, which I believe is unfortunate. All professions should have ongoing professional development, especially in an area that changes as frequently as our does. Ideally I would like to see an end to the "us" and "them" mentality. Conveyancers are here to stay, and whilst I do not agree with the Sale of Business restriction being lifted, I do believe that Conveyancers do have their place. It would be nice to see Conveyancers and Solicitors working together rather than against each other. There is good and bad in every profession, maybe we should be concentrating on ways to highlight the practitioners that do the job well, and removing or further educating the ones that continually put their clients and other parties to the transaction in jeopardy. Just my two cents, for what it's worth.
	14/09/2012 10:41:19 PM

	Andrew Gray
	Does this mean that the Conveyancers Association has more political influence than the LIV? If so, apart from the President's letter, what other pro-active steps has the LIV taken to prevent this developing debacle?
	14/09/2012 8:54:18 PM

	Michael Gibney
	My suggestion is that the LIV contact all MPs who were previously members of the legal profession (The Deputy Premier Mr Peter Ryan comes to mind), Because surely those members must have some understanding of how this "latest move" exposes consumers to problems, because a sale of business transaction can include at various times every other area of law.
	14/09/2012 7:02:23 PM

	Periklis Ginis
	I agree with the need to educate clients as to the complexities of buying /selling businesses. The LIV should draft a pro-forma letter to be sent to our clients outlining the dangers. A uniform approach ensures the points are clearly and easily made with little additional cost to the practitioner.and ameliorates the immediate response of clients,namely,'you are protecting your turf' .A comprehensive list of potential problems and repercussions would be a powerful educational tool for our clients! Of course a specialised letter specific to the idiosyncracies of the particular transaction where appropriate should also be sent.. Lets be proactive and EDUCATE AND FOREWARN OUR CLIENTS even before they are involved in a buy/sell situation. Our clients can be the 'canary down the mine'against the noxious gas of the ill informed,ill trained in an area of extreme importance given that small businesses are the backbone of our economy. LIV do your stuff,you have research solicitors to take on this project in the most cost effective way for the profession. It is time for practical action now that we have been out manoeuvored by the government. Periklis Ginis,Principal,Periklis Ginis & Associates
	14/09/2012 3:41:56 PM

	John Macmillan
	Recently I have had three real estate contracts prepared by conveyancers all of which had incorrect or incomplete OC documentation ; the response to raising the issue - here's the amissing/corrected document.! Does conveyancers' present PI insurance to asale of businesses and advice on leases et al?
	14/09/2012 3:31:35 PM

	Anthony Hohtoulas
	LIV - STEP UP & PROMOTE YOUR MEMBERS! Whilst the LIV's advocacy role has a role to play, a proactive approach to promoting its members to the public is also required. I am all for competition -on an even playing field. Self promotion is not an effective tool in trying to convice the public why they should use a solicitor rather than a conveyancer. This is now the perfect opportunity for the LIV - our professional representative body to carry out (on its members behalves) a public educational campaign (dare I say it) advertising the benefits of using a solicitor (LIV members) in preference to using a conveyancer (e.g. CPA, university style advertising) promoting - tertiary education, admissions qualifications, LIV membership & association, ongoing CPD training etc... We need to rise above the pricing issues and promote the quality of the profession. Its not all about costs and price...but the expertise, service and value provided to the public...
	14/09/2012 3:23:31 PM

	Colin Rouch
	Unfortunately the public have no appreciation of the different value proposition of lawyers -v- Conveyancers. I for one would lke to see our trade association do something to collectively market the profession and enlighten the consumer as to why using a solicitor for conveyancing is worth considering beyond just the question of cost. Do you really think there is any likelihood of the govt reversing its position or doing anything at all that could be perceived as pandering to the legal profession? It is up to us.
	14/09/2012 2:48:12 PM

	Robert Cole
	As a practitioner is this field I comment: 1. If this government is genuine in deregulating business dealings it should look immediately to repealing Hull's inequitable restriction on the ability of the profession to charge interest on overdue debts at a rate anywhere near cost of funds. We are lawyers not loss making bankers; 2. The horse has bolted on this issue. We will in many cases have to provide free advice and assistance to conveyancers simply to achieve our clients' outcomes! However, it also presents an opportunity for litigators.
	14/09/2012 2:27:55 PM

	Bruce Pippett
	This is another thin slice of the wedge. In not too many years conveyancers will be able to do everything a lawyer now can. In time the only real lawyers will be barristers, everything else will have gone.
	14/09/2012 1:26:32 PM

	Sera POrto-Drew
	This decision is absolutley short sighted. There are so many aspects of sales and purchases of business that can go wrong. Without proper training and guidance both vendors and purhcasers can be exposed. As for costing less, paying a little more in legal fees is simply like having insurance to safeguard against a loss.
	14/09/2012 1:12:28 PM

	Peter Mericka
	I think it is more important to deal with the fact that clients cannot engage a lawyer to represent them in sale negotiations, as negotiating is not an ordinary function of a legal practitioner, and that a licensed real estate agent (business broker) must be retained for this purpose. Unless licensed conveyancers are provided with an exemption under the Estate Agents Act 1980, they will be in the same position as incorporated legal practices - totally prohibited from negotiating sales on behalf of their clients in the absence of an estate agent.
	14/09/2012 1:00:07 PM

	Peter Russo
	The shortsightedness of the current Victorian Attorney General is breathtaking. It demeans the knowledge, experience and expertise of solicitors. If solicitors complain or the LIV undertakes a media campaign we will be damned if we do. We will also be damned if we don't. What, if any, connections do we have with the Victorian Parliament, and who is keeping watch on issues like these that go to the very heart of our profession? The LIV must help us.
	14/09/2012 12:37:51 PM

	Glenys N Dolphin Solicitor
	In my view allowing conveyancers to handle sale of businesses is outrageous. Conveyancers tend to think that conveying a property is a clerical exercise whereas we all know property law is very complex. I note conveyancers are still issuing Reciscision Notices rather than Notice of Default AND charging legal fees to prepare the document. Sale of Business is much more complicated and the expertise of conveyancing totally inadequate - by way of example how could a conveyancer possibly know of the intellectual property aspects of selling a business.
	14/09/2012 12:17:24 PM

	Andrew Wilson
	I agree with the position being taken by the Law Institute. A sale of business usually involves the transfer of a lot of intangible property and rights and obligations and is far more complex and susceptible to dispute than a conveyance of property. The employee issues alone are a nightmare.
	14/09/2012 12:16:43 PM

	Renee Legg
	It shows a lack of understanding on the part of the government of the complexities which can be involved in relation to a sale of business. Conveyancers lack the training in the various areas of law which are involved.
	14/09/2012 11:57:12 AM