Memorandum by Landmark Information Group
Ltd (DHB 17)
INTRODUCTION
1. On 7 April 2003, the Select Committee
on the Office of the Deputy Prime Minister announced that it would
be carrying out a pre-legislative inquiry on the draft Housing
Bill published in March 2003. The Select Committee has invited
written evidence by 15 May 2003.
2. This paper is the submission of the Landmark
Group Ltd. (Landmark). Landmark has been in existence since 1995
as a major supplier of site specific information to Chartered
Surveyors, Conveyancing Solicitors, Environmental Consultants
and Civil Engineers. Landmark produces:
— Environmental Reports, satisfying
the requirements of the Law Society's Warning Card on environmental
risks, for both residential and commercial properties;
— Personal Searches meeting the accepted
requirements of Standard Enquiries of Local Authorities; see APPENDIX
G of the ODPM consultation paper (Contents of the Home Information
Pack);
— Planning searches for both residential
and commercial properties.
Landmark has seen its business in these areas
grow rapidly over the past four years. Landmark is one of the
leading suppliers of environmental searches and its planning searches
are unique in the market at present. Landmark produces over 500,000
reports and 750,000 site-specific maps each year and so is a significant
contributor to the market.
Landmarket is a sponsor of the Association for
Geographical Information and a founder member of the Council of
Property Search Organisations. Landmark would be happy to offer
one of its directors to give oral evidence to the Select Committee.
3. Environmental Searches, Personal Searches
and Planning Searches, drawing together information from a wide
range of sources, offer consumer choice with respect to price,
quality of service and speed of response. Landmark believes its
reports offer customers better value, measured against these attributes,
than Local Authorities or Central Governmental agencies generally
provide. This has led to a rapid growth in Landmark's business
over the past four years.
4. Landmark has a major interest in the
provisions of the draft Bill requiring anyone marketing a home
to assemble a Home Information Pack and in the contents of that
pack. We are well placed to comment on whether the government's
proposals will achieve their intended effect. Landmark's comments
are restricted to this part of the Bill.
SPECIFIC POINTS
5. The Government's proposals for home information
packs are designed to make it easier for people buying and selling
homes. Landmark supports this objective. Indeed, our services
are designed both to make it easier for people to buy and sell
homes, and to build greater security and efficiency into the process.
We believe the competitive marketplace in home information reports,
which has developed over the past four to five years, has benefited
the house-buyer in terms of speed, quality of service and cost.
6. In particular, Landmark welcomes the
recognition in the consultation paper (Contents of the Home Information
Pack) that an environmental search should be an integral part
of the residential conveyancing process. Landmark pioneered such
searches in 1999, and remains one of the leading suppliers of
such reports. Market demand for such a report is indicated by
the fact that around 45% of all home buyers today commission such
a report from a commercial supplier through their solicitor.
7. In view of the high degree of market
acceptance of environmental searches supplied by Landmark and
its competitors, we regret the decision of the ODPM to include
a sample Environment Agency Residential Property Search Report
as APPENDIX J of its consultation paper (Contents of the Home
Information Pack), without any reference to commercial alternatives,
and we believe the ODPM now recognises that this was an error.
However, the Committee would be well placed to discover how this
came about.
8. Landmark welcomes any reform that will
increase the availability of pre-sale information, and it is clear
that the Home Information Pack could assist this process. However,
in themselves they will not be sufficient to achieve the government's
objectives. The main danger is that they will introduce unnecessary
cost and delay before the property can be marketed. To minimise
this risk, the Pack Specification should be as open as possible
and not be too prescriptive on the detail. For example, it might
be possible to ask the Council of Mortgage Lenders, the Law Society,
the Council of Property Search Organisations, and the Royal Institution
of Chartered Surveyors to be responsible for the accreditation
of the suppliers of Home Information Packs. The Consumers' Association
might also have a voice. The important principle is that the contents
of the Home Information Pack should be dictated by the requirements
of house buyers and their professional advisors and not by bureaucratic
or political pressures.
Secondly, if Home Information Packs are to be
produced cost effectively, consistently and quickly, on a quality
controlled basis, their production should be based on national
data sets, organised for the purpose. This approach has enabled
both public sector search providers (eg The Coal Authority) and
commercial providers (eg Landmark) to deliver improved services
and an almost instant response to search requests, without the
burden of major cost increases.
9. With a few notable exception, Local Authorities
and Central Governmental Agencies have failed to match the services
of private search agencies because they have not taken this approach.
Because of the way in which they are organised as multi-task public
bodies they cannot do so. Experience with NLIS, for example, has
demonstrated a wide range of performance among local authorities
and other government departments. Some are already electronically
enabled, whilst others have not yet begun that process and continue
to delay modernisation.
The Housing Bill should provide for data holders
to make their data available on a wholesale basis to companies,
like Landmark among others, that are in a position to provide
such a service. This would stimulate the development of a truly
competitive market to the benefit of home buyers.
10. Landmark welcomes newcomers (from the
public or private sector) to what is a rapidly expanding market,
provided there is no distortion of the market by anti-competitive
practices. In Landmark's view, any attempt to impose the Environment
Agency's report or any other public sector product on the conveyancing
industry through statutory means, for example, by making it a
mandatory part of the Home Information Pack, would be extremely
regressive. It would not meet the needs of home buyers and sellers
because:
— it does not offer a clear conclusion
that states unambiguously whether the findings of the report will
adversely affect the value of the property, or give rise to a
potential future environmental liability (eg a remediation notice
from the local council). All the principal commercial providers
offer such a conclusion. Where necessary, Landmark offers guidance
on steps that should be taken when a problem has been identified.
Without such a conclusion, it is hard for most solicitors to evaluate
the findings of a report in order to give appropriate advice to
their clients; and so it will be of very limited use and inferior
to the commercial products already on offer.
— All the principal commercial providers
of environmental reports on residential property use old Ordance
Survey maps, dating back to 1855, to identify potential contamination
from past land use (eg hidden landfill, old mining operations,
toxic industrial processes). This data is required to meet the
recommendations of the Law Society's Warning Card, first published
in June 2001, which set out the duty of care owed by conveyancing
solicitors with respect to environmental risks and liabilities.
Considering the past history of a site is regarded by the Law
Society as a key part of the solicitor's due diligence.
Our clear recommendation, with respect to specifying
an appropriate Environmental Search for inclusion in the Home
Information Pack, is that it should meet the requirements of the
Law Society's Warning Card, no more and no less. As currently
specified the Environment Agency's Property Search Report fails
to pass this test.
11. The historical dimension is particularly
significant; the Law Society's Warning Card sets out the duty
of care owed by conveyancing solicitors with respect to environmental
risks and liabilities. There are other omissions from the Environment
Agency report, including the likely presence of radon ( a carcinogenic
gas, typically found in areas over granite rock formations (eg
Devon and Cornwall).
12. At the same time as it launched its
report, the Agency sought to impose greatly increased charges
for its data supplied to the commercial search agencies. These
proposed increases were so large they could not be absorbed by
Landmark and would lead to higher charges for the Reports which
we provide. The Environment Agency should be required to explain
why it is that, as the prospect of a mandatory Home Information
Pack, of which its information will form a part, becomes more
real, it is increasing its charges in this way.
We do not believe that Government intends that
the introduction of the Pack should have the effect of creating
a tax on home sellers for the benefit of any Government Agency.
However, on page 258 of the main Consultation Document (Housing
Bill, Consultation on Draft Legislation) paragraph 40, the cost
of local searches is estimated at £200. We believe that this
is unnecessarily high and has been estimated on the assumption
that some information supply monopolies will be preserved by the
public sector, and that the efficiencies of aggregating data (see
paragraph 6 above) will not be passed on to the home buyer.
There is a danger that other public bodies,
like local authorities, will take advantage of a mandatory Home
Information Pack to increase the charges they make for information.
There is at present no effective mechanism to control charges
levied by local authorities on commercial enterprises wishing
to re-use data. The great majority of authorities are helpful
and supportive, but a small minority place significant obstacles
in the way of such companies. For the proposed system to work,
all local authorities must operate in the same way. It is worthy
of note that Local Authorities fall outside the regulatory remit
of HMSO, which regulates the re-use of Crown Copyright material.
We believe conveyancing solicitors would attest to the value of
an open and competitive market place. It would be a serious mistake
to allow the introduction of Home Information Packs to create
public monopolies or monopolies of any kind.
13. The Select Committee is well placed
to consider this issue and Landmark would be happy to provide
further evidence, either oral or written, should this be required.
14. The Government recognises the impact
of the Home Information Pack on the operation of the market, but
it is far from clear that the ODPM has conducted an effective
cost benefit analysis which would enable these effects to be fully
understood. The cost benefit analysis in the draft Bill is incomplete
and the summary table is difficult to reconcile with the analysis.
It may be the case that the government has an over-optimistic
view of the extent to which Home Information Packs will reduce
the number of aborted sales; sales are aborted for many reasons
other than the process being inefficient. This is a point on which
the Committee may wish to question the ODPM.
15. A further danger associated with the
proposals is that the whole conveyancing process is in a state
of flux at the present time. The Home Information Pack essentially
responds to problems that surfaced during the over-heating of
the housing market in the late 1980s. There is a danger that over-prescription
with respect to the Home Information Pack will simply freeze the
process around a solution that will already be outdated by the
time it is introduced. To guard against this, the Bill should
give greater responsibility for determining the precise content
of the Home Information Packs to the professional and trade bodies
that together have an overwhelming interest in preserving the
integrity of the housing market (see paragraph 6 above).
OPTIONS A, B AND
C
16. In the ODPM consultation paper (Contents
of the Home Information Pack), paragraphs 5.44 to 5.54, the government
offers three Options (A, B and C) as to whom should be able to
provide search information for the Home Information Pack. The
earlier sections of this submission make it clear that Landmark
believes the interests of home buyers and those of their professional
advisors have been well served over the past few years by the
development of a competitive market place for home information
reports. We would therefore regard Option C as being completely
contrary to those same interests. At the same time, we recognise
a clear need to protect home buyers and their agents, both from
unscrupulous operators who might provide inaccurate or misleading
information and from operators, however well-intentioned, who
are inadequately insured against liabilities that might arise
from the provision of an inaccurate or misleading report. This
means that Option A is equally unacceptable. The authors of the
consultation paper would seem to prefer Option B. If these were
the only choices, we would prefer Option B. However, in paragraphs
5.55 and 5.56, we are asked to offer other possible options.
17. Option B works only if the contents
of the Home Information Pack are prescribed in detail in the final
statute. We would prefer to see great flexibility, not so much
in existing circumstances as to allow for easy modification in
the light of future developments. We would prefer to see the objectives
of the Home Information Pack clearly defined, together with the
areas of information that have to be covered, but regulation of
the precise contents should be left to the professional and trade
associations enumerated in paragraph 6 above. It is very possible
that over the next five to 10 years, the development of comprehensive
data clearing houses (in the public, private and voluntary sectors)
and the real-time aggregation of national data sets (again, in
the public, private and voluntary sectors), will change requirements
of home buyers and their professional advisors. We absolutely
support the view that providers of Home Information Packs should
be accredited, preferably by their own Trade Association, possibly
the recently formed Council of Property Search Organisations (CoPSO),
with the proviso that the levels of professional indemnity insurance
and the Code of Practice imposed by CoPSO should be acceptable
to other bodies involved in the conveyancing process (ie Law Society,
Royal Institution of Chartered Surveyors, the National Association
of Estate Agencts etc). The simple purchase of "adequate
insurance" is necessary but not sufficient protection for
the consumer. Failures in the property search process are mercifully
rare, but when they occur they can be catastrophic and the aim
should be to minimise their occurrence by promoting the highest
possible professional standards among search providers.
CONCLUSION
18. We would like to emphasise the five
points made in preceding paragraphs:
— Landmark welcomes the recognition
that an Environmental Search is an essential component of the
Home Information Pack;
— The Environment Agency's property
search report is neither the only nor the most suitable Environmental
Search for residential conveyancing;
— An appropriate Environmental Search
should meet the requirements of the Law Society's Warning Card,
no more and no less;
— Landmark supports Option B, with
the proviso that suppliers of searches should be accredited by
appropriate trade and professional bodies;
— Landmark warns against over prescription
of the detailed contents of the Home Information Pack as this
could inhibit innovation and evolution of information services
that would benefit and protect home buyers.
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