Memorandum by Sitescope Ltd (DHB 16)
This preliminary response to the Government's
consultation on the Home Information Pack highlights some of the
main issues that we will be covering in our full response. We
thought it would be helpful to prepare a preliminary response
given that the ODPM Select Committee has requested submissions
by 15 May 2003—ahead of the deadline for the Government's
consultation.
1. SUMMARY
The government's objective of ensuring that
homebuyers and lenders have access to relevant environmental information
about property being bought is well founded. However, the current
proposals designed to meet that objective are seriously flawed
and will make matters worse, not better, for property purchasers.
The proposals appear to be based on a serious misunderstanding
of what homebuyers and lenders require, and on the way in which
environmental reports are created in a digital world. This misunderstanding
leads to proposals that could result in an unnecessary monopoly
being given to a public sector body (the Environment Agency) that
will fail to deliver what homebuyers and lenders need, and destroy
an existing commercial, competitive market that is already delivering
innovative services at prices below those proposed by the Environment
Agency. None of this is necessary.
Sitescope has serious concerns about the Environment
Agency becoming the sole provider of environmental search reports
required to meet the requirements of the home information pack,
and on the report standard outlined in the Government's consultation
document. The proposals as they currently stand fail to provide
critical information on factors effecting liability, valuation
and health issues—such serious omissions will increase the
potential risks to, and potentially mislead, homebuyers and undermine
the credibility of the Government's home information pack.
2. BACKGROUND
This response deals primarily with the questions
which relate to environmental reporting and the provision of searches
as raised in paragraphs, 5.33, 5.41 and 5.56 of the consultation
paper setting out draft contents of a home information pack.
Sitescope is the current market leader in the
provision of environmental searches for residential property transactions.
Its experience in actually providing accurate, reliable and appropriate
environmental reports in a digital world gives it expert insights
into both what is required and what is possible.
We fully support the government's objective
in streamlining the home buying and home selling process. Relevant
environmental reports can easily be accommodated in such a streamlined
process.
We agree that "Environmental issues are
of significant interest to consumers, and homebuyers are no exception"
(5.29) and the key considerations include "the need to ensure
that homebuyers are provided with accurate, reliable search information".
However, homebuyers (or their advisers) must also be able to make
use of this "accurate and reliable" information which
should be appropriate or relevant to their needs.
We also agree that there is "the need to
encourage efficiency and competition and to avoid, where possible,
a monopoly supplier situation" (5.42)
It is perfectly possible to achieve all this,
but the current proposals do not do so.
3. THE CONTENT
OF THE
REPORT
We do not believe that the Government's consultation
document adequately explores the issue of what sort of information
should be contained in an environmental report. It does not deal
with the broader issues of what sort of environmental information
would be useful for homebuyers and lenders and instead focuses
on the narrow "technical question" of whether the right
questions are being asked. Particularly we would suggest that
paragraph 5.4.2 should have stated "the need to ensure that
homebuyers and lenders are provided with accurate, reliable and
appropriate search information".
In our view there are three main points that
need to be addressed to ensure that homebuyers' and lenders' interests
are properly protected with respect to any statutory specification
of the content of an environmental report for the home information
pack:
(a) Relevance—what should an environmental
report do?
With the exception of information on flood information,
many of the questions asked and the answers given in the Environment
Agency's report at APPENDIX J have little or no relevance for
most homebuyers or their advisors. It is far from clear what purpose
the proposed report would serve. In our view what is required
is a report that covers a broader range of issues and includes
an easy to understand conclusion. A relevant environmental report
should provide a homebuyer with comprehensive information on factors
effecting liability, value and health issues. The consultation
document acknowledges, in our view correctly, that the report
should be designed so as to provide information on complicated
and technical issues in a way that helps the homebuyer and their
advisors make a decision. The proposed Report from the Agency
manifestly fails to meet this requirement.
(b) Utility—a lawyer's perspective
The Law Society's warning card on Contaminated
Land explicitly identifies past contamination of land as a key
issue that needs to be considered by legal practitioners in every
transaction. The most reliable and accurate method of establishing
that this issue should be "no cause for concern""
in a particular transaction is by referring to comprehensive data
on previous land use. The proposed Environment Agency's report
does not contain such information. This is not a minor oversight.
During the last 10-15 years there have been a number of independent
studies which examine the relative importance of a range of data
sets for evaluating environmental risk from industrial and commercial
activities. The definitive guidance provided by the BSI, DoE,
Environment Agency and Law Society all make it clear that the
key risks stem from certain types of past land use and that large
scale Ordnance Survey maps are the primary reliable and accurate
source of such information. Data extracted from a examination
of every square metre of the country shown on every edition of
appropriate large Ordnance Survey Mapping since the 1840s is by
its nature comprehensive, or as comprehensive as is currently
possible. What is required is that the report contents should
be determined by the use of established reliable and accurate
methodologies and in accordance with good practice, and not limited
to the output of a single organisation that is largely limited
to using only its own data. The Agency's data is, as one would
expect from a regulatory organisation, limited to that which it
has recorded in exercising its functions and powers. Thus it only
records that of which it is aware and does not constitute a comprehensive
review of all relevant available data, unlike the data available
from organisations which have analysed historic mapping on a comprehensive
basis.
(c) Quality—will the Environment
Agency provide a reliable report?
The current quality of much of the data held
by the Environment Agency is, in many instances, poor and little
investment has gone into securing or maintaining high data quality.
As a result, any implicit assumption that the closer to the source
that the report is generated, the more accurate the information
in the report must be, is incorrect. In addition, there are two
further points—Competition Law would preclude the Agency's
retail function being any "closer" to source than our
competitive service and we receive data in electronic data base
form from the Agency. This technology permits reliable and accurate
copying—so being closer to source has no intrinsic "quality"
benefit. What is required are appropriate data quality standards
dealing with issues such as precision of grid references.
4. COMPETITION
The current proposals define the legal requirement
for the home information pack as a specific environmental report
provided by the Environment Agency. The effect is to give the
Environment Agency a monopoly on the provision of the environmental
report that a vendor will be required to provide. If the Environment
Agency becomes the sole provider of environmental search reports,
and the report standard proposed by the Agency in the consultation
document is adopted, it will have profoundly negative impact on
homebuyers by destroying a competitive and innovative pre-existing
market for environmental reports—effectively reducing the
amount of relevant information available to homebuyers. We also
wish to bring to the Committee's attention the fact that the Environment
Agency is currently the subject of a formal investigation by the
Office of Fair Trading with respect to the provision of environmental
reports.
The consultation paper correctly recognises
that the Environment Agency is likely to be the only source of
certain data sets that are relevant to an environmental report.
However, because digital data can be copied very quickly and error
free, it does not follow that just because the Agency is the only
source of such data sets that there is any advantage in making
the Agency the only source of an environmental report that utilises
those data sets. Indeed, because homebuyers, lenders and their
advisors will find that environmental reports that utilise data
from multiple sources meet their needs much more effectively,
the requirement to provide an environmental report from one organisation
that only utilises its own data is likely to be extremely counter
productive.
Indeed, this requirement to provide a specific
Environment Agency report in the home information pack is perhaps
the most serious consequence of the apparent misunderstanding
about what buyers and lenders need and the capabilities of what
a digital information infrastructure can provide. The opportunity
exists to ensure that there is a continuing vibrant competitive
market in the supply of innovative and user friendly environmental
reports that utilise all the necessary data required to produce
a report suitable for the home information pack. However, the
current proposals will create a monopoly market for a product
that will not meet the requirements of homebuyers, lenders and
their advisors and are likely to destroy the existing competitive
market in the supply of more comprehensive environmental reports.
A vibrant market exists for environmental reports
for homebuyers. There is substantial innovation which benefits
both consumers and legal practitioners. Ten years ago the lowest
cost meaningful environmental report for property buyers was in
the region of £500—now our Homecheck service costs
just £25.
5. VALUE FOR
MONEY—WILL
THE ENVIRONMENT
AGENCY REPORT
PROVIDE VALUE
FOR MONEY?
We understand from the Environment Agency that
they are planning to charge £25 per report. Our existing
report costs exactly the same but contains much more useful information,
in an understandable and interpreted format, as well as professional
advice from an environmental consultant if it is required.
It should also be noted that the information
contained in the Agency's report is available on the Agency's
In Your Back Yard web service without charge. We do not see why
the homebuyer should have to pay the Environment Agency for a
limited amount of information which is, effectively, available
free of charge elsewhere and is [largely] available to them for
free (or at a nominal charge) under their existing freedom of
information rights or existing government information policy.
What is required is that homebuyers, lenders
and their advisors are provided with value added reports and services
which allow them to make an informed decision about property purchase
or lending with the accurate and reliable knowledge of relevant
or appropriate environmental matters.
If the Environment Agency's report becomes standard,
either homebuyers will have to put up with an inadequate report
or pay about £200 to put together the components of what
they can now buy for £25 from Sitescope. What is required
is that the home information pack should be designed to homebuyers
are provided with accurate, reliable search information while
at the same time encouraging efficiency, innovation and competition
6. FITNESS FOR
PURPOSE
There is a wealth of independent research which
supports our view that the questions asked and answers given in
the Agency's report do not provide the homebuyer with a useful
environmental report. We do not see how granting the Agency a
monopoly to specify the required content, and then be given the
monopoly to provide the required environmental reports, would
benefit the consumer or be consistent with Government competition
policies.
7. ALTERNATIVE
APPROACH
Many of the problems identified in the consultation
paper are real. There is a need to ensure that an environmental
report included in the home information pack contains accurate
reliable and appropriate useful information, and is understood
by homebuyers, lenders and their advisors. However, the solution
proposed does not meet these concerns and, in many ways, is likely
to make homebuyers, lenders and their advisors worse off than
is currently the case. An alternative approach is both necessary
and achievable, to ensure that the government's objectives are
met in the most efficient way possible. This alternative approach
should be based on the following principles:
(a) Relevant information
The specification for environmental reports
for homebuyers should meet the real needs of homebuyers lenders
and their advisors. In practice, in our view, this can be best
determined by relying on published guidance and the relevant experts
working with the providers of established environmental reporting
services.
(b) Excellence and value for money
In line with Government policy, innovation and
efficiency should be encouraged through market mechanisms. Excellence
and value for money can be achieved by ensuring that competition
in the supply of reports is facilitated, based on fair, reasonable
and non-discriminatory access to the required environmental information
where this is held by a single source.
(c) The necessary safeguards
Any appropriate insurances, standards and codes
of conduct that need to be implemented to protect the homebuyer,
the lender, the home seller and their professional advisors are
applied equally to all suppliers of reports.
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