Real estate transaction fees could nearly double for some clients of legal software provider Dye & Durham Ltd. DND-T as the company is significantly increasing prices for Canadian clients, the latest in a series of fee hikes that have drawn a flood of complaints from its users.
The higher prices are part of a set of new pricing bundles the Toronto company unveiled to customers Monday that will increase the cost of purchasing property in Canada – while, the company claims, providing more value to its customers in the legal field.
D&D customers who use its software to process real estate transactions will have one week to choose one of three packages to continue using its services, two of which lock customers into a three-year contract. In Ontario, the company will charge anywhere from $199 a transaction for high-volume customers who process more than 100 transactions a month, to $249 a transaction for customers who don’t want to enter a contract, or fewer than 50 transactions monthly. Users who do not sign up for a specific package will be slotted into the contract-free $249-a-transaction bundle on Jan. 31. D&D said the prices of bundles will vary by province.
The new prices, which are passed on by lawyers to home buyers as disbursements, are a steep increase from the previous fee of $129 a transaction in Ontario unveiled a year ago.
“We believe strongly in a disbursement model where firms disburse the costs associated with the transaction and charge a reasonable fee for the services and the advice that they give their customers,” D&D chief commercial officer John Robinson told The Globe and Mail.
He said the new bundle model, and higher prices, reflect upgrades D&D has made to its software, and creates more value for customers. “Historically, firms will be paying separate [costs] for various components, and in many cases those fees and those costs will hit their bottom line,” he said. “We think going to a bundled service better meets the needs of our customers and further differentiates us in the market.”
The new model amounts to D&D’s second price hike on the cost of property transactions since its $530-million acquisition of DoProcess, Canada’s largest provider of real estate practice-management software, from Teranet Inc. in late 2020. Last January, it raised prices on Unity, the conveyancing software that law firms use to process transactions, by more than 400 per cent – to $129 a deal in Ontario, from $25.
Real estate lawyers across the country have expressed outrage over D&D’s price hikes, which it has implemented on products outside of Unity. Price hikes by as much as 563 per cent in British Columbia prompted dozens of complaints to the Competition Bureau of Canada, The Globe reported in November.
Some fed-up legal practitioners have shifted to other providers such as Toronto’s LawyerDoneDeal Corp., while others have remained customers, citing high switching costs and the inconvenience of eliminating a software their law practices are built on.
According to BMO Capital Markets analyst Thanos Moschopoulos, Unity handles more than 700,000 transactions a year in Ontario, and 1.4 million in Canada annually. In a research note, he said the price hikes could “translate into $62-73-million of incremental annual revenue” before accounting for churn. Even then, he expects churn to be mitigated by the lack of viable competitors – other than LawyerDoneDeal – high switching costs, and because fees are ultimately passed on to a lawyer’s clients.
“The magnitude of the increase is such that D&D would likely be able to withstand a very large spike in churn while still meeting/beating consensus,” he wrote.
It issued its new pricing model as Britain’s competition regulator reviews D&D’s $156-million purchase in July, 2021, of TM Group (UK) Ltd., which sells software that real estate professionals use to order property-search reports in England and Wales, over concerns it could lead to a reduction in competition. Mr. Robinson said his company is “working co-operatively with the U.K. authorities and making sure that we clearly understand where they’re concerned, where they’re not concerned, and addressing it head on with them.”
Like many tech companies, D&D’s stock has dropped in recent weeks in response to the prospect of imminent interest rate hikes.
The company last month announced its biggest acquisition, a proposal to buy publicly traded Australian technology vendor Link Administration Holdings Ltd., a much larger business, for $3.2-billion in cash. It was its 13th deal since D&D went public on the Toronto Stock Exchange in July, 2020.
The Link deal is set to make D&D a global player and broaden its offerings beyond real estate and legal software into two new areas: providing financial data products to pension and superannuation funds and millions of their members in Australia, New Zealand and Britain; and cloud-based software for corporate issuers, including shareholder management and analytics.
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Jaren Kerr
Sean Silcoff