What Changed with the Legal Services Act 2007?

What is the Legal Services Act?

The Legal Services Act 2007 is a major piece of legislation which fundamentally changed the legal landscape in England and Wales. It introduced various reforms which were believed to be necessary to improve and enhance the way legal services are provided – putting consumers’ interest at the heart of the regulatory framework.

The Legal Services Act (‘the Act’) regulates the legal services market in England and Wales. The Act covers a wide range of issues, ranging from the requirements solicitor’s firms must comply with before they can operate, and how legal firms are regulated.

Why was reform considered necessary?

Reform of the UK legal services market was considered necessary for a number of fundamental reasons, including:

  • To simplify the complex and inconsistent system, and regulatory oversight in the legal services market
  • To provide common standards for professional practice
  • To increase competition, flexibility, transparency and choice for consumers of legal services

What were the key changes introduced by the Act?

The principle changes that came into force under the Act include:

  • The creation of a single supervisory body, the Legal Services Board (LSB), to oversee all 8 approved regulators in the legal services market, including the Law Society, the Bar Council and the Chartered Institute of Legal Executives
  • Creation of a single body, the Office for Legal Complaints (which established the Legal Ombudsman), to deal with the initial stages of consumer complaints about legal services
  • The creation of alternative business structures (ASBs) allowing solicitors to form partnerships with non-lawyers, accepting outside investment and being able to operate under external ownership
  • A requirement for professional bodies to clearly separate their representative and regulatory functions
  • Creating statutory objectives and duties for all regulatory bodies

Alternative Business Structures

What is meant by an alternative business structure?

An alternative business structure (ABS) is a structure which enables legal professionals and non-lawyers to share the control and management of a legal practice.  This removes the previous requirement that solicitors may only practice in firms wholly owned and managed by other solicitors (or registered European Lawyers).

This has been dubbed the ‘Tesco Law Reforms’ as it enables big companies, such as high street supermarket chains to enter the legal market to provide legal services to consumers. ABS started to become a reality in 2012, but take up of ABS has been reasonably slow so far.

What’s the advantage to the legal industry following these reforms?

The introduction of ABSs has brought a number of benefits, including increased access to finance enabling potential expansion and investment. It also increased efficiency and economies of scale.

As ownership is no longer the preserve of solicitors, staff and employees who work in an ABS firm in a non-legal capacity may be rewarded with, for instance, partnership or share ownership in the same way that solicitors can. This makes recruitment more attractive, and firms are better able to retain non-legal staff.

Now that ABS are becoming a feature of the legal market place, consumers can now obtain various legal services from providers outside of the traditional law firm, and at times to suit them if required (Co-operative Legal Services, for instance, which continues to expand). A major potential benefit to the consumer is ease of use and lower costs.

Are there any disadvantages to ABS?

Whilst there are clear benefits of ABS to consumers, there are a number of disadvantages. Lower costs may mean a substandard level of service, unqualified staff undertaking the work (though supervised), or less experienced lawyers. This is because of the reduction or removal a personalised service that the consumer would otherwise have from solicitors in a traditional law firm.

With ABS, direct face-to-face client/solicitor contact is typically replaced with much more generic, impersonal communications. The contact the client may have is likely to be with different staff, and not necessarily the same lawyer.

There may also be a reduced understanding of the customer’s understanding of the legal issues, with the risk that substandard or incorrect legal advice is given. If a fully qualified solicitor was instructed, they would take all the relevant information from you that is needed, then explain the full legal implications and your rights, and what you should do next to best protect your interests.

The key thing is: consumers have greater choice today. If you want a personalised level of service that may cost more, see a solicitor using the traditional route.