Memorandum by SPLINTA (Sellers' Pack Law
is Not the Answer) (DHB 22)
1. FORMATION
OF SPLINTA
1.1 The SPLINTA Campaign was founded in
early 2001 by two working estate agents, Nick Salmon of Lurot
Brand and Penelope Court of Beauchamp Estates. Both are Fellows
of the National Association of Estate Agents.
1.2 The campaign began after first details
emerged from the DETR Pilot of the Sellers' Pack in Bristol and
the shortcomings of the government proposals—which were
contained in the Homes Bill which ran out of time at the calling
of the last election—became evident.
1.3 Initially SPLINTA drew support on the
issues of "Compulsion and Criminality". We believed
that the pack should not be compulsory and also that a criminal
conviction for selling a property without a pack was inappropriate.
SPLINTA acknowledges and welcomes the fact that the ODPM has removed
the criminal sanction from the current proposals.
1.4 The campaign swiftly broadened its criticism
of the sellers' pack proposals. We have carried on robust correspondence
with ODPM, met with then Minister Lord Falconer; and continue
to meet and talk with department officials to discuss the proposals.
On a number of occasions we have shared the platform with ODPM
officials and pro-pack groups when the case for and against the
proposals has been debated. Most observers would have to agree
that we have carried the day on each occasion.
1.5 Our supporters are drawn mainly, but
not exclusively, from the residential property industry. In number
we estimate our supporters to be in excess of 1,000. Accurate
numbers are impossible to state because often a principal has
pledged the support of their entire firm. In the case of a firm
such as Knight Frank this represents a considerable quantity of
people.
1.6 As well as Knight Frank we hold expressions
of support from: IMLA—the Intermediary Mortgage Lenders
Association which represents among others, Bristol & West,
Allied Irish, Mortgage Express, and Royal Bank of Scotland; The
Independent Association of Estate Agents representing in excess
of 900 members; and a former Chair of the Law Society Conveyancing
and Land Law Committee. To these we add several hundred individuals
and firms from all over the country.
1.7 As of April 2003 the National Association
of Estate Agents has formally recognised SPLINTA's position as
the leading body offering constructive criticism of the proposals
for Home Information Packs by working with us in making public
our shared concerns for the interest of the consumer.
1.8 Those who have criticised the proposals
are sometimes portrayed as being against all change. As will be
demonstrated in this document, SPLINTA supporters are not against
beneficial changes to the home buying process nor are they wantonly
seeking to destroy the proposals for the Home Information Pack.
1.9 SPLINTA represents a very wide and very
well informed body of opinion on this subject. We offer our genuine
and well founded concerns to this Committee for their consideration
and will be pleased to respond to any request to supply further
information on the topics raised. We assume that members of the
Committee are broadly familiar with the principles of the proposals
and shall therefore not state them in detail here but instead
immediately begin by assessing some of the background to the present
proposals.
2. LIES, DAMNED
LIES AND
STATISTICS . . .
2.1 Some fundamental statistics are often
quoted by ODPM to support their contention that the home buying
and selling process requires change. ODPM speak of 40% of consumers
being dissatisfied with the process. They say that 28% of sales
fall through between acceptance of offer and exchange of contracts
and as a result the consumer wastes £350 million a year in
abortive costs. These statistics come from the document, "Key
Research on Easier Home Buying and Selling" prepared by the
then DETR and published in 1998.
2.2 Statistics are always open to interpretation.
Key Research could have said that 60% of consumers are neutral
or satisfied and that 72% of sales go through. But that would
not have helped the case for the Pack.
2.3 Further, the £350 million pound
figure is based on the analysis and extrapolation of the costs
incurred in just 30 (thirty) failed transactions and there is
a caveat in Key Research to warn against reliance on the figure.
The statistic is therefore highly questionable. It becomes yet
more questionable given the widespread change in legal practice
since the research was made over six years ago. Today it is common
for conveyancers and lawyers not to charge fees in the event of
an abortive transaction. If the transaction fails the buyer will
normally now only pay for the cost of the Local Search.
2.4 This voluntary change could significantly
alter the purported abortive cost figure and moves the balance
of any cost-benefit analysis still further against the Pack as
proposed.
3. SPREADING
THE RISK?
3.1 Looking at the present system Key Research
made this statement: "There is a need to spread the risks
of the transaction process more evenly between buyers and sellers".
3.2 It is widely believed that the current
proposal for HIP's does nothing more than take most of the onus
off the consumer as buyer and places it squarely upon the consumer
as seller. The seller will be compelled to provide and pay for
the package of legal information and the Home Condition Report—regardless
of the fact that currently, 80% of buyers do not feel the need
for such a survey. There is nothing in the proposals to compel
buyers to do anything in particular (eg have their finances properly
arranged prior to making an offer) nor to be responsible for any
part of the cost of the pack.
3.3 ODPM responds to this criticism by saying
that most sellers are also buyers and that therefore sellers benefit
when they transact their ongoing purchase. However there is no
compulsion in the Bill for the seller to update searches or surveys
that expire by effluxion of time. The onus is on the buyer to
do this if required. In practice a mortgage lender will probably
insist that searches are refreshed and a prudent buyer would want
to refresh the HCR.
3.4 Looking at the statistics from the Bristol
Pilot, if the Beazer Homes sample of new homes is excluded, there
were 159 properties for sale on the open market through estate
agents. Of these 87 failed to sell during the nine months of the
pilot or had been withdrawn during it because of lack of interest.
3.5 At the end of December 2000 the sellers
were contacted again to see what had happened to them. Contact
was made with 62 sellers (it is presumed that most of the non-contacts
had moved because they were not at the address). Of the 62 contacted
22 had withdrawn the property for sale. The remaining 40 had either
sold or were still for sale. This is 12 months after the start
of the pilot and at least six months after the last property joined
the scheme.
3.6 Had the pilot been a live situation
the buyers of the 40 properties would have had to refresh the
searches themselves (average cost then, £120 pounds) and
would probably have had to pay for another survey—at the
very least the lender would want a valuation—again, at the
time, another £120 pounds on average.
3.7 The statistics show that 25% of open
market sales then took 6 or more months to sell.
3.8 If there is no compulsion on the seller
to refresh the pack then in a quarter of cases a buyer who is
also selling their own property will have to prepare a pack for
their own property and refresh an expired pack on a property that
they wish to buy.
3.9 Further, many other types of sales do
not result in an onward purchase. Substantial numbers of probate
sales take place each year when the seller has died. Many people
emigrate.
3.10 These combined figures call into question
the assertion by ODPM that sellers always benefit from the free
provision of the onward purchase pack.
4. NO MARKETING
WITHOUT A
PACK IN
PLACE
4.1 The Bill proposes that no "marketing"
of a property may take place until the Pack is prepared. The inability
to begin marketing a property until the pack is prepared is a
serious erosion of the personal freedom to dispose of one's property
at a time of one's choosing and is likely to cause deep anger
and resentment among consumers. Indeed, after a SPLINTA presentation
in Norwich in April 2003, Norman Lamb MP voiced his concern with
this very issue. In a subsequent letter he characterises the inability
to begin marketing as "an impediment to the property market
which is in no-one's interest."
4.2 Committee members may benefit from putting
themselves in the shoes of the eager seller in this commonly experienced
example scenario:
One Saturday morning whilst walking in their
local High Street, they notice a property for sale in an estate
agent's window. It is a house they have always wished to buy and
it is a price they can afford when they have sold their current
home. They go in and express interest and ask the agent to come
round that very afternoon, take particulars and get their house
on the market.
4.3 Currently the agent can immediately
respond, can telephone potential buyers and tell them the house
is coming up for sale. They may arrange viewings on that very
first weekend of marketing.
4.4 Under the HIP proposals such a scenario
would immediately result in the agent saying to the eager seller:
"We have to get the Pack together before I can so much as
mention your property to any prospective buyer. I cannot advertise
it. I cannot send out details. I cannot tell anyone about it.
If we can't get all the information for the Pack and the Home
Condition Report together in 14 days then I can start marketing—but
by that time you will probably have lost the one you want to buy
because someone who has already sold will beat you to it."
4.5 ODPM say that in such a case the eager
seller would be wiser to wait for the Pack because when a purchaser
is found there will be a better chance of the deal going through.
That is a fallacious argument when one refers back to the "Key
Research" figure showing that 72% of transactions proceed
satisfactorily without a Pack at all.
5. DEFINITION
OF "MARKETING"
5.1 It is clear from the proposed legislation
that no action to market a property will be possible unless the
Pack is in place.
5.2 We refer to Section 133 of the draft
Bill. Para 3. "A residential property is put on the market
when the fact, that it is or may become available for sale is,
with a view to marketing the property, first made public in England
or Wales by or on behalf of the seller." Para 6. "A
fact is made public when it is advertised or otherwise communicated
(in whatever form and by whatever means) to the public or a section
of the public".
5.3 This presents the absurd situation where,
without the pack in place, the agent would break the law by telling
someone in England and Wales that the eager seller's house was
on the market but would not break the law if he communicated the
fact to someone living in Scotland, Ireland or abroad.
5.4 Estate agents often appraise properties
that do not immediately come to the market. A potential seller
may obtain an idea of the value of their home and then set out
to find a place to move to. When they find it they will put their
own property up for sale. But it is good estate agency practice
to informally mention to potential buyers such properties that
may one day come to the market—especially if the owner has
said: "I don't want to go on the market right now but if
someone paid me the right price I would sell." It happens
frequently though the practice must never be confused with any
sort of fraudulent "under the counter" dealing. It is
completely above board.
5.5 If a ready, able and willing potential
buyer expresses general interest in the type of property previously
appraised it is perfectly proper for the agent to contact the
potential seller and tell them of the possibility of arranging
a sale without going to the open market. Many sellers respond
favourably to such an approach and it is most definitely in the
consumers' best interest.
5.6 Such a process becomes impossible under
the HIP proposals unless a Pack has been prepared before the agent
first makes mention of the property to the potential buyer.
6. COST
6.1 It is acknowledged that some of the
information in the HIP is required in any case when a transaction
proceeds therefore the cost is unavoidable. The additional cost
to the consumer arises from the imposition of the Home Condition
Report. Whereas today less than 20% of buyers commission a structural
survey the proposals require 100% of buyers to have one—paid
for by the seller. The additional cost of the HCR adds up to between
£300 million and, by some estimates, £500 million per
annum.
6.2 ODPM figures estimate the pack will
cost sellers on average £630—whether or not the property
eventually sells. Many sellers will be put off marketing their
home by the cost of the pack resulting in less choice for buyers.
Anecdotal research by Friends Provident Group suggests that up
to 35% of sellers are acting "speculatively". These
include those who will only move if they find and secure their
next property. These "speculative" sellers are erroneously
dismissed by ODPM as "time-wasters". They in fact form
a core element of the supply side of the market.
6.3 ODPM suggest that "The Market"
will come up with solutions to the issue of cost. It is said that
some, mainly corporate, estate agents will absorb the cost of
the Pack as part of their service. Other agents may defer the
cost of the Pack until completion of the sale. Voluntary Pack
schemes already in operation rely upon participating lawyers and
surveyors to defer their fees until completion. The agent thus
offers a "free" pack. But these voluntary schemes have
been operating in a buoyant market with steady turnover. A slower
market with lower sales volumes is unlikely to sustain the deferred
cost arrangement.
7. FEWER PROPERTIES
FOR SALE
= INFLATION
7.1 Fewer properties for sale mean higher
prices—adding to inflationary pressures—as relatively
large numbers of buyers chase relatively few properties for sale.
The situation has existed for some time in the South-East and
figures show that in the foreseeable future the rate of new home
building will fail to keep pace with demand. Demand is mainly
fuelled by employment and the growth in single parent families;
divorced couples etc.
7.2 ODPM dismisses the idea that fewer properties
will be put up for sale. They quote "research" by Countrywide
Assured, the largest corporate estate agency chain in the UK and
also the experience of Denmark when it introduced a pack system
some years ago. Countrywide advised ODPM that there will be very
few less properties for sale post-pack and the Danish experience
is said to bear this out. We question the objectivity of Countrywide
in carrying out this "research" as they are in the forefront
of the commercial enterprises who would benefit from the compulsory
introduction of HIP's. We amplify this statement in section 18.
7.3 In Denmark there are less that 70,000
property transactions each year compared to some 1.3 million in
England and Wales. The Pack in Denmark is markedly different to
ours and it is disingenuous to use the Danish experience as being
comparable to the HIP proposal contained in the Housing Bill.
8. GAZUMPING
AND GAZUNDERING
8.1 The impetus for changing the home buying
process grew out of a desire by government to do something to
end the perceived ill of "gazumping". However when research
was carried out in the 1990's it was found that gazumping was
occurring in "less than 2% of transactions" and was
a manifestion of "hot spots" of demand in local markets.
8.2 The conditions leading to gazumping
are a function of supply and demand. If the HIP means fewer properties
for sale it also means more likelihood of gazumping.
8.3 Conversely buyers will be able to hold
sellers to ransom—so—called gazundering—because
they won't have to pay to see the HIP and won't have to make any
financial commitment at the time of making an offer.
9. REPAIRS AND
ASKING PRICES
9.1 ODPM believe that sellers will put right
any faults in the property identified in the HCR before selling
and will price their properties "realistically" when
in possession of the facts about their property's condition. These
are unrealistic assumptions.
9.2 When SPLINTA took ODPM officials on
a field trip to Exeter in 2001 a round table discussion with members
of the public revealed that for many the cost of carrying out
pre-sale repairs would be unfeasible. Even a relatively modest
sum of £500 could be beyond ready reach. Sellers may be willing
to negotiate a price based on works to be done but most will not
put their house in order before coming to the market. Asking prices
will remain just that, asking prices.
10. EXCHANGING
CONTRACTS WITHOUT
A PACK
10.1 Exchanging contracts without a pack
in place will break the proposed law. This is anomalous since
the stated aim of the proposals is to speed up the transaction
process and exchange of contracts is the point at which buyer
and seller are bound to one another. If a seller should be fortunate
enough to find a buyer who will take a view on, for example, needing
a Home Condition Report a sale might be arranged very quickly.
Yet under the proposals it would become an offence.
10.2 SPLINTA has suggested to ODPM that
there should be an opt-out for such circumstances in the short
period between agreeing a price and exchanging the contract or
for use in allowing marketing to commence while the pack is being
prepared. This suggestion has not been incorporated in the measure
proposed.
10.3 The suggested wording is as follows:
"This property is offered for sale without a Home Information
Pack or Home Condition Report being currently available. Intending
purchasers may be exposed to an increased risk of financial loss
if adverse legal or structural matters affecting the property
become evident after negotiations for the purchase have begun."
11. SHELF LIFE
OF THE
PACK AND
HCR
11.1 Although containing date-sensitive
information the Pack will have no statutory shelf life—which
means that if a property is on the market for more than a few
weeks the buyer may be given a HIP that is already out of date.
The buyer may then have to pay to get updated information. This
will double up some costs.
11.2 The Home Condition Report (HCR) will
also have no statutory shelf life, ODPM only saying that it "should
not be more than three months old at the time marketing commences."
No prudent buyer should rely on such a potentially outdated report.
It is unconvincing for ODPM to suggest that a buyer should simply
pay for a fresh report if they feel it necessary.
11.3 SPLINTA has presented its case directly
to many hundreds of people in the past two years. Audiences have
included ODPM officials; estate agents; lawyers; conveyancers;
lenders; members of the public; pro-pack lobbyists; journalists
etc. On each occasion the audience has been asked to show their
hand if they would rely on a three month old Home Condition Report
as a basis for making their purchasing decision. To date not a
single person has put their hand up.
12. NO REPAIR
COST ESTIMATES
12.1 The Home Condition Report will
not estimate repair costs. To flag issues of repair without indicating
their cost may well lead to argument between seller and buyer
(as it does today) and to renegotiation of the sale price. Exactly
the scenario that ODPM seeks to avoid.
13. HCR IS INCOMPLETE
13.1 The Home Condition Report will not
cover in detail unseen and potentially expensive items such as
drainage and electrical systems that can be specified for specialist
testing in current structural surveys. It will be misleading if
the buyer is allowed to believe that the HCR is a full survey.
14. VERIFYING
THE PACK
AND LICENCING
ESTATE AGENTS
14.1 Currently it is part of the conveyancing
function that information provided by the seller is checked and
verified by the buyer's solicitor. This usually leads to a series
of questions and answers that may either assist or prejudice the
transaction. The position will be no different when the HIP is
introduced.
14.2 Presently anyone may set up in the
business of estate agency. SPLINTA calls for licencing and mandatory
minimum qualification standards for all estate agents. The estate
agency industry is receptive to this call yet successive governments
have apparently held no appetite for such measures. The consumer
would undoubtedly benefit from its introduction.
14.3 Most estate agents have no formal training
in law or surveying. They are not qualified to advise a buyer
on the content of the Home Information Pack. It will therefore
be necessary for the buyer to consult with those who are professional
at law and in surveying in order to have the Pack explained and
verified. As there is no obligation in the proposals to compel
such professionals to act with any more speed than at present
there will still be plenty of scope for delays and frustration.
14.4 Setting minimum qualification standards
for estate agents would aid the consumer and also set the stage
for agents to take an active role in the forthcoming change to
e-conveyancing. This is a quote from "E-Conveyancing, A Land
Registry Consultation" published in 2002: "There is
no doubt that estate agents will seek to be more involved (in
the on-line conveyancing process). This will demand very detailed
knowledge of the overall process and will entail the adoption
of new working practices."
15. LENDERS ARE
NOT OBLIGED
TO ACCEPT
THE PACK
15.1 The HIP will not contain a valuation
of the property. Although it is acknowledged that methods of valuation
are changing, lenders will not be obliged to accept the HIP and
many buyers will still have to pay for a separate valuation inspection—particularly
in cases of high loan-to-value and where construction of the property
is unusual. If the ODPM had the courage of its conviction it would
make acceptance of the pack an obligation upon lenders. That it
does not do so is instructive.
16. INSURANCE
ISSUES
16.1 SPLINTA questions the position regarding
the willingness and ability of the insurance industry to provide
Professional Indemnity Insurance to Home Condition Inspectors
and also Hidden Defects Insurance. Professional indemnity insurance
premiums have risen sharply in recent times and in a society that
is increasingly litigious and encourages blame-culture, the P.I.
insurance market can only harden.
16.2 The industry has been very quiet on
the subject and SAVA appears unable or unwilling to make any definitive
statement on the subject. We believe that Her Majesty's Government
may well have to step in as "lender of last resort"
in order to underpin the requirement for such insurances to be
in place if the Pack is introduced. The political ramifications
of such a move are beyond the scope of this submission.
17. CONFLICT
OF INTEREST—1
17.1 SPLINTA has concerns that members of
the public will resist the idea of the Home Condition Inspector
being responsible to seller, buyer and lender. However, that resistance
will increase when it becomes clear to the public that the Inspector
may be the employee of the selling estate agent or a related firm.
Despite the assurances by SAVA that checks will
be in place to prevent inspectors from favouring particular properties
it must be acknowledged that the potential for conflict of interest
is better avoided by not allowing the situation to arise in the
first place.
18. CONFLICT
OF INTEREST—2
18.1 It has become clear over the past two
years that many of those who are most active in promoting the
Pack and in advising ODPM are those who stand to gain the most
from its compulsory introduction.
18.2 We illustrate this contention with
three examples of those who have been directly involved in developing
the Pack proposals with ODPM.
18.3 The Royal Institution of Chartered
Surveyors. The body represents the most substantial group of professional
surveyors. Their members clearly stand to gain financially from
the introduction of the Home Condition Report that provides a
pot of extra money to the tune of at least £300 million each
year.
18.4 Countrywide Assured. This group own
the largest chain of corporate estate agencies in the country.
They are in the business of providing the "one-stop shop"
where estate agency; conveyancing, lending services and surveying
are all under one roof. Whether this is in the best consumer interest
is a subject for separate debate. Countrywide Assured Annual Statement
in 2000 contained the following statement: "We have recently
taken an investment amounting to a 47% equity share in Teramedia
(now T.M.) a company that has been granted a licence to access
and provide land registry and local authority searches electronically.
The company plans to extend its electronic infrastructure to enable
it to become the primary source of land and property information
throughout the UK and to become the UK's leading facilitator of
sellers' packs. The potential for the group from this change is
very significant and consequently we are devoting considerable
resources towards the development of a product to take advantage
of our market position."
18.5 Maria Coleman/Open Book. Maria Coleman
is an estate agency practice in Bristol that took part in the
Bristol Pilot. It has used voluntary sellers packs for some years.
Maria Coleman herself spoke at DETR/DTLR organised meetings and
was invited to tour branches of the National Association of Estate
Agents during 2000-01. Her enthusiasm for the then Sellers' Pack
proposal was clear. However it was only after SPLINTA made the
fact public that it emerged that Ms Coleman is in control of a
company promoting the sale to estate agents of "Open Book"
a voluntary sellers pack scheme. Maria Coleman now presents at
SAVA promotions.
18.6 SPLINTA does not find anything questionable
in these companies and organisations making the most of commercial
opportunity. However their blatant self-interest must call into
question the objectivity of the advice and encouragement they
may have given to ODPM.
19. THE PACK
IS INCAPABLE
OF SOLVING
THE PROBLEMS
19.1 Referring to the Government's own research
SPLINTA contends that the Home Information Pack is incapable of
dealing with the overwhelming majority of the stated causes of
failed transactions in the home buying process.
19.2 In Key Research it was found that there
are 13 main reasons for sales and purchases failing:
Failed Sales:
Change of financial circumstance—11%
Could not get mortgage—8%
Could not sell own home 8%
Buyer decided new house too large or small—5%
Chains/completion delays—14%
Failed Purchases
Adverse valuation survey—30%
Seller withdrew to sell to someone else—14%
Buyer gazumped or another cash offer accepted—14%
Seller would not negotiate terms or price—10%
Seller withdrew as no longer wanted to sell—6%
19.3 It is the ODPM position that "43%
of abortive transactions are the result of a failed survey".
It can be seen from items 6 and 9 in the table above how that
figure is derived. However it is profoundly misleading because,
as quoted above, the word "survey" is used in both items.
In reality item 6 should have been set out in Key Research as
"Adverse Valuation Inspection". Lenders' inspections
are not the same as any form of structural survey. The lender's
inspection is only required to protect the interest of the lender.
19.4 The ability of the Home Information
Pack to deal with the stated causes of failed transactions is
highly questionable. At best it would deal completely with only
Item 9—an unfavourable survey. It could arguably influence
Items 5 and 10.
19.5 Unfavourable surveys apparently account
for 13% of all failed purchases. However if this figure is set
in its proper context it is not nearly so high as might first
appear.
19.6 If the national fall-through rate is
accepted as being 28% of all transactions, the 13% of failures
due to an unfavourable survey is in reality the cause of under
3.64% of all failed transactions.
19.7 The enormous additional cost,
bureaucracy and disruption that will result from the Home Information
Pack is out of all proportion to its efficacy in dealing with
the real problems of the home buying and selling process.
20. MEASURING
SUCCESS?
20.1 Everyone appears agreed that the introduction
of the Home Information Pack would have a profound effect on the
property market. Some say for good, others for bad. Given its
agreed capacity to affect the market it is surely reasonable and
prudent to expect the effect of the HIP to be measured otherwise
we may be saddled with a very expensive yet ineffective measure.
20.2 SPLINTA has questioned ODPM as to how
the impact of the HIP on the market and the home buying process
is to be monitored and what performance criteria will be used
to assess whether the HIP meets its objectives. In February 2003
ODPM responded that it was not possible (at the time) to provide
details of the likely methodology to monitor the impact. They
further said: "We have no intention of setting specific targets
to assess whether sellers' packs (now Home Information Packs)
have met their objectives."
20.3 In the light of this statement it appears
to border on the foolhardy that ODPM has also rejected SPLINTA's
call for a properly monitored regional trial of the HIP to take
place before it carries out its stated intent of a total, national
roll out of the scheme.
20.4 ODPM say that such a trial would not
be effective because unless everyone is using HIP's the benefits
cannot be demonstrated. SPLINTA contend that if the voluntary
pack schemes currently in use in local areas are as effective
as they are said to be when they are not operating in an environment
where every transaction has a pack, then a regional trial should
be perfectly feasible and would in fact give a very good indication
of the efficacy—or otherwise—of the ODPM proposals.
21. PROFESSIONALS
V OFFICIALS
21.1 SPLINTA recognises that at the last
election the government made a manifesto commitment to improve
the home buying process specifically by the introduction of a
"sellers' pack". It is regrettable that the commitment
was so specific in its wording for many would agree—SPLINTA
included—that the government has already created the climate
for voluntary change.
21.2. If the pack could do what ODPM say
it will—reduce the number of failed sales—then it
would be welcomed with open arms, not least by estate agents who
only derive their income when sales are successful.
21.3 It is a measure of the doubt about
the proposals among property professionals in the residential
sales market when the SPLINTA supporters and firms are added to
the 9,500 members of the National Association of Estate Agents
and the 900+ members of the Independent Association of Estate
Agents. All are profoundly sceptical that the Home Information
Pack will substantially improve the home buying process. With
the greatest respect, surely this combined group of critics has
more first hand knowledge and better experience of the residential
property market than all the ODPM officials combined? It is clear
from the draft Bill, when compared with the original Homes Bill,
that ODPM, with the exception of dropping criminal sanctions,
has failed to react to any of the valid criticisms levelled at
the proposals.
21.4 The consumer faces at least £300+
million each year in extra costs. They will be disappointed to
find that nothing in the proposals binds the buyer and seller
together any earlier than now; that the sale/purchase is still
not secure until the contract is exchanged and that chains will
still control the progress of most sales. They will be right to
question why this flawed proposal was considered to be the cure
for the ills of the home buying process yet fails to deliver on
its promise.
22. BENEFICIAL
CHANGES ARE
ALREADY UNDER
WAY
22.1 Since the pack was proposed over five
years ago technology has leapt ahead and many beneficial changes
are already well advanced. These include the beginnings of e-conveyancing;
on-line mortgages and 24 hour a day conveyancing. SPLINTA welcomes
and supports these initiatives.
22.2 Dr Michael Wagstaff, who, for the DETR/DTLR
was closely involved in the production of "Key Research"
and the operation and analysis of the Bristol Pilot, is on record
as saying in July 2001: "The new technologies will cause
a bigger bang than the sellers' pack ever would. Together these
changes could do exactly what sellers' packs aimed to do."
22.3 SPLINTA offers the content of this
submission as a warning that for all its research and consultation
the ODPM has so far failed to make the case for the Home Information
Pack. Even before it can be introduced the Pack is becoming an
unnecessary and expensive irrelevance.
22.4 On publication of the draft Housing
Bill the ODPM has decided only to consult on two specific items—the
content of the pack and the application of the Pack in areas of
low value/low demand. It has limited the consultation to these
two issues because it says that consultation on the fundamental
question of whether a Pack is desirable or not was dealt with
by "The Key to Easier Home Buying and Selling" a consultation
issued in 1998.
22.5 At that time very few people were aware
of the detail of the proposals. That critics have come to the
fore in the past two/three years is an indication of how under-informed
the industry and public were in the past.
22.6 SPLINTA suggests that the issues raised
by critics of Home Information Packs are sufficiently serious
that it would be appropriate for a full and fresh consultation
to take place on the whole issue of the desirability of the Home
Information Pack.
22.7 Following SPLINTA's Norwich presentation,
an attendee, Dr Ian Gibson MP wrote of the Home Information Pack
in April 2003: "On balance the debate must go on and the
meeting certainly made me think that full consultation needs to
continue."
22.8 We urge the ODPM to reconsider the
proposals.
23. AN ALTERNATIVE
REGIME
23.1 SPLINTA is not and never has been against
beneficial change to the home buying process. Nor do we suggest
that it is anything other than sensible to provide a prospective
property buyer with information about their intended purchase.
We do contend that this information must be accurate, relevant
and should only be provided at the appropriate time. We therefore
offer the following proposal to ODPM and the Committee.
23.2 Instead of being required to have it
in place on Day One of marketing, when no-one may want or need
it, the seller should only be obliged to prepare the pack when
it is requested by a genuine prospective buyer. The interested
party should be required to put down a modest deposit to show
good faith. The seller will show good faith by commissioning the
pack—most probably via the estate agent. The important and
desirable "binding together" of the parties to a possible
sale would have begun.
23.3 With this simple alteration the core
objections to the pack would evaporate and everyone would get
what they want.
Sellers would only have to pay out when the information
was truly needed and would get their properties on the market
without delay.
Buyers would get free information on which to
make their buying decisions.
Estate agents could market properties immediately
on instruction and not have to carry the cost of providing the
pack from Day One.
Lenders would have current information to assist
lending decisions.
Government would fulfil its manifesto pledge
to bring in the pack and over time receive its audit of the nation's
housing stock and energy efficiency.
23.4 At a stroke an unpopular, defective
proposal would be transformed into a more practical, more cost-effective
and perhaps even welcomed measure.
24. Appendix.
ODPM. The Office of the Deputy Prime Minister.
DTLR. The Department for Transport, Local Government
and The Regions
DETR. Department of Environment, Transport and
The Regions.
SAVA. Surveyors and Valuers Accreditation Ltd.
A commercial organisation funded in part by government. Responsible
for working up the Home Condition Report and the accreditation
and monitoring programme for would-be Home Condition Inspectors.
"Key Research". Published by the DETR
in 1998 "Key Research on Easier Home Buying and Selling"
sets out the information upon which the ODPM bases its proposals
for the sellers' pack now termed the Home Information Pack.
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