Standing Committee D
Thursday 25 January 2001
(Morning)
[Mr. George Stevenson in the Chair]
9.45 am
Mr. Don Foster (Bath): On a point of order, Mr. Stevenson. Among the very exciting events that took place yesterday, there were other events much less publicised by the media. The Committee might like to be updated on what is happening to my hon. Friend the Member for Carshalton and Wallington (Mr. Brake) and his wife. I am sure that hon. Members will be pleased to know that at 1.27 am yesterday, baby Benjamin was born. Mrs. Brake and child are doing very well. My hon. Friend, however, said that he is extremely tired.
Mr. Nigel Waterson (Eastbourne): Further to that point of order, Mr. Stevenson. On behalf of the official Opposition, I ask the hon. Member for Bath (Mr Foster) to pass on our very best wishes to the proud parents and, perhaps, also to express the hope that in due course the hon. Gentleman will have more time to spend with his family.
The Chairman: That is a valid point of order. I am sure that the entire Committee will wish to extend congratulations. That news is probably more exciting than the other news we have had over the past few days.
The Minister for Housing and Planning (Mr. Nick Raynsford): Further to that point of order, Mr. Stevenson. I with to extend congratulations from the Government side of the Committee to Mrs. Brake and the hon. Member for Carshalton and Wallington. We look forward to seeing him back in due course.
I wish to point out that we have made available, and placed in this Room, additional material that I hope will help Committee members in their understanding of some of the issues raised during the debate on part II, which we should reach later this morning. We will also be making available further information this afternoon to help with some of the intricacies involved in the homelessness procedures in part II.
The Chairman: We thank the Minister for the information provided this morning and await with eager anticipation the further information being made available this afternoon.
Mr. Tim Loughton (East Worthing and Shoreham): Further to that point of order, Mr. Stevenson. I was delighted to receive the document as we walked in this morning, but it is 176 pages long. If, as the Minister promises, it will be relevant to our deliberations later today, how are we expected to read 176 pages, let alone make an assessment on them? Is there a more succinct summary of the proposals that could be made available to the Committee?
The Chairman: If there is, I am sure that the Minister will have taken note of that request. It is important that information is provided at the earliest possible opportunity so that hon. Members can digest it. I am sure that the hon. Gentleman's point has been well noted by the Minister.
New Clause 1
Agreement between vendor and purchaser
`.—(1) This section and sections (Proof of ability to pay sale price) and (Withdrawal from contract, etc.) apply to an agreement between a vendor and a purchaser for the sale of a property for a price greater than £2,000.
(2) Such an agreement shall constitute a contract, which shall be binding on both parties.
(3) Where such a contract is made the vendor and purchaser shall each pay to the other party or to the agent of the other party a sum which shall not be less than £2,000.
(4) The vendor and the purchaser shall agree a date for the completion of the contract.
(5) The Secretary of State may make regulations varying the sums in subsections (1) and (3).'.—[Mr. Don Foster.]
Brought up, and read the First time.
Mr. Don Foster: I beg to move, That the clause be read a Second time.
The Chairman: With this it will be convenient to take the following: New clause 2—Proof of ability to pay sale price—
`.—(1) No person shall enter into an agreement to purchase aproperty without proof of his ability to pay the agreed sale price.
(2) A person who contravenes the provisions of subsection (1) shall be guilty of an offence and shall be liable on summary conviction to a fine of £700 in addition to forfeiting any sum paid under section 1(3).
(3) The Secretary of State may make regulations varying the sum in subsection (2).'.
New clause 3—Withdrawal from contract, etc.—
`.—(1) Subject to subsection (2), if one of the parties to a contract—
(a) withdraws from the contract; or
(b) otherwise frustrates or fails to complete the contract by the agreed date he shall forfeit any sum paid under section 1(3) and shall be liable for any costs in excess of that sum incurred by the other party in consequence of the contract.
(2) But subsection (1) does not apply where a purchaser has reasonable grounds for withdrawing from a contract.
(3) ``Reasonable grounds'' shall include but shall not be limited to—
(a) the discovery of a structural or other defect in the property which was not known to the purchaser at the time of the agreement;
(b) the discovery of a development proposal or other factor having a direct effect on the value of the property which was not known to the purchaser at the time of the agreement.'.
Mr. Foster: I thank the Committee for ensuring that the previous sitting's deliberations finished before the debate on these new clauses. As hon. Members will be aware, both I and the hon. Member for Eastbourne (Mr. Waterson) were unable to be present at the end of our deliberations on Tuesday because of the business on the floor of the House. Consequently, it is only right to seek to move these new clauses as quickly as I can so that the Committee can move on to part II.
The three new clauses are based almost entirely on the work of the hon. Member for Hertford and Stortford (Mr. Wells) in his Property Transactions Bill 1999. That Bill had all-party support including, among many others, my hon. Friend the Member for Cheltenham (Mr. Jones) and the hon. Member for Workington (Mr. Campbell-Savours).
The purpose of the amendments is to address one of the two ghosts at the feast. When we come to part II, we shall discuss the other ghost, namely registered social landlords, but now we are discussing the ghost that is the issue of gazumping and gazundering, which was repeatedly mentioned on Second Reading and has already been raised in this Committee. The point has been made that, notwithstanding some of the good measures contained within the Bill, there is little that will address one of the key concerns of those involved in the stressful business of buying and selling houses. I acknowledge that the introduction of the seller's pack might ease the problem to a small extent, but I suspect that we need tougher measures than only the seller's pack if we are to tackle it successfully. That is what the three new clauses are designed to provide.
New clause 1 stipulates that a deposit must be paid by both vendor and purchaser and that an agreement for the sale of the property constitutes a binding contract; it also requires the vendor and purchaser to agree a completion date. New clause 2 requires that a purchaser entering into such a binding contract must be able to offer proof of his or her ability to pay the agreed sale price. New clause 3 stipulates, subject to various exclusions, the forfeiture of the deposit plus the other party's costs in the event failure to complete the contract by the agreed date.
New clause 1 recognises that when an offer has been made and accepted, both parties have already entered into a very costly process and both stand to lose money if the contract is not completed. Under the new clauses, if one of the parties to the contract withdrew, or frustrated or failed to complete the contract by the agreed date, he or she would forfeit the deposit made when the contract between vendor and purchaser was entered into. The 1999 Bill introduced by the hon. Member for Hertford and Stortford included the figure of £2,000. We think that that is probably appropriate but, for the avoidance of doubt, we have provided in subsection (5) for the Secretary of State to vary that figure by regulation. We think that it is important that both sides enter into such an agreement, but that the defaulting party should bear the costs of the frustrated party, as happens in many commercial transactions.
We believe that new clause 2 will help to speed up sales and remove a cause of contract failure. It will become an offence for buyers to enter into a binding contract—the sort set out in new clause 1—unless the proposed purchaser can demonstrate that he has the funds to meet the agreed sales price. For most buyers, that would mean having a mortgage offer in place. Subject to its being accepted by the lender, which takes us back to issues we have debated previously, the seller's pack could provide great assistance and ease that process to a considerable extent.
New clause 3 enforces a binding contract by stipulating that if the contract fails, the defaulting party becomes liable to forfeit his or her deposit and is liable for the costs of the frustrated party. As members of the Committee will understand, there will clearly be a number of exceptions to the rule—after all, during the process of the buying and selling houses, things can go wrong that are not the fault of either of the two parties, for example, the discovery of structural or other defects in the property that were not known to the purchaser at the time of the agreement.
Mr. Geoffrey Clifton-Brown (Cotswold): The hon. Gentleman has making some fundamental points very quickly; obviously a great deal more thought would be needed before they could be put into law. Nevertheless, a similar system to the one that he advocates exists in Scotland. Can he tell the Committee about the similarities and differences between the two systems? What are the pitfalls in the Scottish system that mean that it could not immediately be incorporated into the English system and thereby obviate the need for his amendment?
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