Peter Mericka, of Melbourne firm Lawyers Conveyancing, specialises in property law and conveyancing. He often acts for clients who are applying for mortgages, but finds that a well-known national law firm retained by some banks places unreasonable demands on him.
Lawyers Weekly has decided not to disclose the name of the firm yet, as Mr Mericka said the matter is being investigated by the Victorian Legal Services Commissioner. Lawyers Weekly discussed the issue with the firm but it declined to provide an official comment.
Mr Mericka has levelled serious complaints against the firm, alleging that it has been using bullying tactics to force him to perform services that should be its responsibility. He said these services often come in the form of a list of demands on behalf of the firm’s bank client, and the firm threatens to delay the settlement of the loan if he does not comply.
“What happens is a client of mine goes to a bank and wants to borrow for their home loan,” Mr Mericka said.
“The bank, in ordinary circumstances, would process the home loan, would get whatever documents they require from the client, and arrange settlement and pay out the money when the matter settles.
“The banks want to save some money, so they outsource this task to the likes of [the firm]. Now [the firm], I presume, do it for a fixed fee, so they want to save money too. So they ask the poor old client, ‘Do you have a lawyer or conveyancer representing you? If so, can you give us their details?’. They don’t tell them why. The client then gives them my details and [the firm] writes to me with a long list of tasks that I have to perform for them.”
These tasks include the procurement of a range of documents, including insurance papers and contracts of sale, as well as the responsibility to book settlement of the loan. Mr Mericka said these tasks can require a “huge” time commitment from him, for which he receives no additional remuneration. He contends that these tasks should be performed by the firm, and that the bank should communicate with his client directly if it requires documents from the client.
He went so far as to call the practice a “scam”, and said it hinges on the firm’s threat to delay the settlement if he does not comply. Mr Mericka charges a fixed fee for conveyancing work, so is unable to bill the client for the extra time he has to spend performing tasks for the firm.
“The core to the whole thing is their ability to threaten a delayed settlement,” he said.
“What they say is, ‘If we don’t get what we want, settlement will be delayed’. And then they say to the client, ‘Settlement was delayed because your lawyer didn’t cooperate with us’. So that’s where there’s this element of misleading and deceptive conduct.
“They lead the client to believe that the client is obliged to do these things. They also lead the client to believe that they’re entitled to demand that I do these things, but if I try and charge the client for doing them, the client says, ‘Hang on, you’re charging me a fixed fee, why are you charging me extra?’. And it doesn’t cut any ice with them if I say, ‘This is because your bank has loaded me up with all of these tasks’.”
Mr Mericka said he has corresponded with the firm asking that it cease this practice, and that the firm subsequently filed a complaint with the Legal Services Commissioner over Mr Mericka’s allegation that it is engaged in a “scam”.
“What really gets me is that these big law firms run off to the Legal Services Commissioner and use him as muscle to try and maintain the status quo,” Mr Mericka said.
“With the Legal Services Commissioner, the way he deals with things is he looks at who the person is and if they’re a mate or if they’re a big law firm, and it’s easier to find in their favour than the smaller person – that’s the way it goes.”
Mr Mericka said that although the alleged scam has been endemic in the mortgage industry for years, lawyers have come to accept it.
“All lawyers and conveyancers in the same situation as me experience that, but none of them react to it,” he said.
“They just do as they’re told, and they complain about sitting on the phone to the bank for 40 minutes and then being cut off, and all this sort of stuff.”
Lawyers Weekly intends to follow up with Mr Mericka once the LSC has concluded its investigation. The decision could have serious implications for the way big firms deal with smaller players in the legal market.