Memorandum by the Council of Property
Search Organisations (CoPSO) (DHB 23)
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-legislation 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 Council
of Property Search Organisations (CoPSO). CoPSO is a newly established
trade association set up to represent the interests of the growing
number of private sector organisations that provide property information
reports. Currently, the Association has six members (Richards
Gray, One Search Direct, STL, Landmark Information Services, PSA
and Sitescope). The Council is currently in the process of expanding
its membership by inviting all relevant organisations to join.
CoPSO also seeks to safeguard the interests of professional users.
It requires its members to have professional indemnity insurance
and will introduce a mandatory code of practice.
3. Property search organisations assist
the house purchase process by providing the results of necessary
searches of information held by local authorities and other public
agencies more efficiently than the authorities and agencies can
themselves provide. The companies are retained mainly by conveyancers
acting on behalf of purchasers. Property search organisations
are now involved in over 40% of all house purchase transactions.
4. It follows that property search organisations
have a major interest in the provisions of the draft Bill requiring
anyone marketing a home to assemble a Home Information Pack (HIP)
and in the contents of that pack. They are also well placed to
comment on whether the government's proposals will achieve their
desired effect. The comments of the Council are restricted to
this part of the Bill.
KEY POINTS
5.
— The provision of more pre-contractual
information should speed up the house purchase process.
— Making HIPs compulsory raises major
issues which need to be fully thought through.
— The draft regulatory impact assessment
overstates the benefits that HIPs will bring about; transactions
fall through for many reasons other than the time taken to complete
them.
— The consumer has benefited from the
activities of property search organisations; it is important that
the introduction of HIPs does not stifle the benefits of competition.
— Both the government's interest in
promoting e-government and e-commerce and the wider interests
of the consumer with respect to property-related information services
are best served by free competition in an open market. This requires
non-exclusive relationships between public sector data providers
and private sector information service providers, and open access
by the latter to data held by the former.
THE BUSINESS
OF PROPERTY
SEARCH ORGANISATIONS
5. Members of CoPSO predominately undertake
two kinds of search associated with conveyancing that are relevant
to the proposed HIP. The first are personal searches that satisfy
the requirements of Form Con 29 Part I. The second are environmental
searches, drawing on information from a wide range of sources
that seek to identify and evaluate environmental risk associated
with a property (eg historical contamination, land fill, radon,
subsidence, flooding etc). Both types of report offer consumer
choice with respect to price, quality of service and speed of
response. CoPSO believes that its members generally offer customers
better value, measured against these attributes, than local authorities
or central government agencies generally provide. This has led
to a rapid increase in market penetration by property search organisations
over the past four years such that they are now involved in over
40% of all house purchase transactions. CoPSO members' customers
are, for the most part, conveyancing solicitors representing home-buyers.
THE CONCEPT
OF HIPS
6. The Government's proposals for HIPs are
designed to make it easier for people buying and selling homes.
The Council naturally supports the objective. Indeed, the members
of the Council exist precisely to make it easier for people to
buy and sell homes. In fact the activities of the property search
organisations have spurred some local authorities to improving
the quality of service as every search conducted by a third party
is lost revenue to them. Unfortunately, other authorities have
responded by limiting the ability of third parties to access records.
7. The Council welcomes any reform that
will increase the availability of pre-sale information, and it
is clear that the HIP could assist this process. However, in themselves
HIPs will not be sufficient to achieve the government's objectives.
The main danger is that they will facilitate the process once
the property is on the market but at the expense of introducing
cost and delay before the property can be marketed. It is essential
that local authorities provide an efficient service in meeting
search requests or allow access to the information that they hold
otherwise the government proposals will fail.
8. Making HIPs compulsory will mark a huge
increase in government regulation of the private housing market
and the implications need to be fully thought through. The housing
market has already changed significantly to the benefit of house
buyers and sellers over the last few years. There is now a thriving
private rental market which reduces the problem of long chains;
housebuilders offering part exchange facilities have the same
effect. Technology is speeding up much of the process, in particular
communication between the various parties. The Government is putting
great weight on the National Land Information Service (NLIS) as
a means of delivering faster local authority searches. However,
it is significant that the rapid growth of the activities of property
search organisations has coincided with the introduction of NLIS.
This indicates that the slowness of local authorities to respond
to search requests is a problem—but that it being dealt
with through the market mechanism by property search organisations.
9. It is far from clear that the ODPM has
conducted an effective cost benefit analysis on the introduction
of HIPs. 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 HIPs 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.
THE IMPORTANCE
OF ACCESS
TO INFORMATION
10. Local authorities are monopoly suppliers
of some information necessary for the house purchase process,
and various government agencies (in particular the Environment
Agency) are monopoly suppliers of other information. The introduction
of HIPs and public policy generally should ensure that this monopoly
power is regulated and that wherever possible a framework should
be developed that will allow organisations to access and supply
this information. The ideal is for home buyers and sellers and
their agents to have access to competing suppliers of the same
basic information and for a duty to be put on the monopoly suppliers
to make their information freely available.
11. Although not in the draft Bill there
are some worrying signs in the related consultation paper on the
content of HIPs. This discusses the merits of including a report
compiled by the Environment Agency, rather than a report covering
environmental information that the housebuyer needs to know. This
would be a backward step that would reinforce a monopoly rather
than encourage competition. CoPSO will be commenting on this in
detail in its response to the consultation paper.
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