Supplementary Memorandum by NLIS (National
Land Information Service) Searchflow (DHB 27(a))
PROCESS IN ENGLAND AND WALES—CONTENTS
OF THE HIP
EXECUTIVE SUMMARY
There is a substantial danger of creating a
"grey market" in unreliable search information unless
the HIP proposals are carefully constructed.
Insurance is no substitute for buyers for reliable
and comprehensive property information which is readily available.
The National Land Information Service (NLIS)
facilitates the provision of reliable and comprehensive information
for buyers and minimises delays and inefficiencies that existed
in requesting and processing searches.
Central and local government need to fully commit
to the NLIS initiative to deliver the Home Information Pack (HIP).
The way forward is for Government to encourage
private search companies to join NLIS rather than creating alternative
methods of obtaining search information.
NLIS should be the provider of search information
for the Home Information Pack.
BACKGROUND
NLIS Searchflow a trading style of the Conveyancing
Channel Ltd—is a service that facilitates the home buying
and selling process through electronic provision of searches.
It achieves greater efficiency and certainty than traditional
methods by harnessing service-relevant technology.
NLIS Searchflow is a government licensed channel
in the National Land Information Service (NLIS).
NLIS is a government initiative to automate
and integrate the provision of land and property information.
The infrastructure and services have been built and delivered
by private investment and enterprise through the government's
channel implementation policy procurement process. The infrastructure
comprises a hub (facilitator) and three competing channels (retailers).
The first application of NLIS is to serve conveyancing
searches but it was recognised from the start by both government
and the investors that the resultant structure always had the
potential (and the expectation) to deliver wider services within
the house buying and selling process. The first stepping stone
of this is to extend NLIS to facilitate the HIP. NLIS and the
HIP share the same founding principles:—
— greater efficiencies in communication
and information provision, leading to increased speed and certainty
in the home buying and selling transaction; and
— reducing stress for the citizen.
Transparency through NLIS is delivered through
more efficient and earlier provision of information by harnessing
technology.
Given the above, our response to this consultation
on the contents of the HIP covers the issues raised in chapters
4, 5 and 6.
EVIDENCE OF
TITLE
Para 4.10:
We support the proposal that the HIP should
contain evidence of title upon which the seller intends to rely
as set out in the proposal on page 12 of the consultation paper.
It is our view that the HIP should also include
copies of documents referred to in the registers even when the
registers quote the relevant extracts from those documents—on
condition that these documents can be easily provided. The buyer
(no doubt, under advice) usually asks for these documents subsequently.
Hence inclusion in the HIP would mean that this area of potential
delay could be removed.
STANDARD SEARCHES
It is essential to the viability and credibility
of the HIP that reliable and comprehensive search information
should be contained within the Home Information Pack ("HIP").
Para 5.9:
We support the proposal that the information
(including search results) should be not more than three months
old at the date that marketing is commenced.
We appreciate that the seller may be marketing
the property for a considerable period of time and should not
have to repeat the exercise of obtaining search information every
few months. However, it would defeat the purpose of the HIP if
the information was so out of date that it could not reasonably
be relied upon by the buyer.
We would therefore propose that the regulations
introduce a "long stop date". This would provide that
if the property was to be continued to be marketed after that
date then fresh search information should be obtained by the seller.
Without a long stop date a property could be marketed over an
extended period with the result that the search information was
of no practical use but was merely being provided to comply with
the HIP Regulations.
The Paper notes that information which is up
to six months old is reasonably useful to the buyer. This argues
for a long stop date of six months. However, it may be sensible
to give the seller a small margin here, and the government may
feel a long stop date of eight or nine months (with a facility
to update searches—see below) may be more appropriate.
In addition, however, the nature of the search
is such that the information contained within it could be materially
inaccurate immediately after it has been carried out—for
example a financial charge notice on the property could be served
the day afterwards. The HIP process must consider who should become
liable if information contained within a search which is relied
upon by the buyer changes in a way that results in consequential
loss in value not reflected in the sales price.
If liability remains with the buyer then it
is likely that the buyer will invariably undertake further searches
immediately prior to exchange thus defeating the object of up-front
provision of this information. If liability is left with the seller
a similar position and result will pertain.
There appear to be two possible solutions—both
of which are considered in the consultation document:
(a) The search information contained within
the HIP is insured. However, if this option is pursued the seller
may have to repeat the search process immediately before exchange
in order to comply with a condition in the insurance. In our view,
insurance should be viewed as an option of last resort where it
is not possible to provide the search information and thus the
transparency that is the driving principle of this initiative.
(b) The better alternative would be for
search information providers to offer an "update search option"
to the buyer—effectively an exceptions report comparing
search information contained in the HIP with their current records—quickly
and cheaply—within a short period before exchange. This
could be done with the present largely postal system but in order
to be undertaken efficiently and speedily, in practice, this should
lead to all local authorities providing electronic access and
electronic search facilities in a format (eg XML) capable of rapid
automated interrogation of their records. To date only 43 local
authorities provide a capable facility (level 3 connection) via
NLIS. If this option is to be developed, it is essential that
local authorities accelerate their plans to develop their NLIS
Level 3 connections in order that the up-front searches contained
in the HIP can be updated quickly. It is also important that local
authorities provide this update facility for a reasonable fee,
which should be significantly less than the fee charged for the
original search. It may be possible that there would be several
update requests form several buyers of particular property during
the process of its sale at a particular time.
Para 5.23:
We support the proposals that a search of the
local land charges register and responses to the additional enquiries
set out in form CON29 Part I should form part of the standard
search information provided in the HIP.
It is our view that the optional enquiries set
out in form CON29 Part II should also form part of the standard
information to be included in the HIP—unless the seller
gives the buyer a legally enforceable warranty that none of these
enquiries are relevant to the property. Given the ease with which
replies to these enquiries can be provided by authorities using
computerised systems and offering electronic access facilities
we would recommend that all local authorities are encouraged to
acquire this capability. The HIP is, after all, about reducing
uncertainty and risk as far as possible. Warranties and insurance
should only be used where information is not available. It is
simply a question of encouraging local authorities to acquire
and harness the appropriate technology.
Para 5.28:
We support the proposal that replies to the
drainage enquiries set out in the form at APPENDIX I are appropriate
for inclusion in the standard local searches to be included in
the HIP.
Para 5.33:
We support the proposal that there should be
Environmental Searches as a standard part of the HIP. However,
our experience to date is that the Environment Agency may not
hold all the environmental information required by conveyancers.
In addition, it is not yet commercially established that the form
at APPENDIX J provides the information required. In recent years,
conveyancers have purchased environmental search reports in large
numbers from private search organisations and these companies
have developed service led proven forms of reporting.
Para 5.37:
We do not support the proposals here.
In April 2003, conveyancers ordered "non-standard
searches" (ie in addition to local authority, drainage and
water and environmental searches) in 28.69% of the property transactions
where NLIS Searchflow was used. The absence of these searches
from the Home Information Pack will result in the very delays
the pack was set up to avoid in a significant number of cases.
Existing technology through NLIS can be engaged
to identify the relevant searches to be undertaken—and the
ones that are not necessary.
Paras 5.38 and 5.39:
These paragraphs show the important contribution
that NLIS can make to delivering high quality and timely search
information to buyers and sellers.
The most significant barrier to delivery of
"a speedy, efficient service" has been the slow rate
at which a significant proportion of local authorities have computerised
their data and linked into NLIS. The potential is demonstrated
by the fact that one local authority is able to provide a search
report within 15 minutes of a conveyancer instructing NLIS Searchflow.
We would suggest that, as part of the roll out
of the HIP programme, central and local government should commit
itself to combining to improve the computerisation of local property
data held by local authorities and its connectivity to NLIS.
A key part of this is to increase the level
of differential pricing which is a catalyst to the use of the
electronic channel. This is the most effective way to improve
the service given by local authorities to both buyers and sellers,
as the Consultation Paper rightly notes.
The moves towards differential pricing have
been slowed by:
— the conflicts inherent within the
local government community;
— concerns about limiting the potential
use of search fees for cross subsidy on other council services;
and
— concerns that the short term returns
made by local authorities in their investment in upgrading to
level 3 connectivity may be thwarted by differential pricing.
There is an urgent need for a strong lead (which
unfortunately is so far lacking) by central government to overcome
these conflicts by committing itself to NLIS and to the long term
benefits of differential pricing as the way to move activity patterns
away from postal and towards electronic searches.
While criticism of the time taken by some local
authorities to respond to search requests is valid it is not the
whole story—a point we made at length in our response to
the original consultation ("The Key to Easier Home Buying
& Selling") in March 1999.
A further significant source of delay occurs
within the search requesting process undertaken by the conveyancer.
The search request requires:
— an unambiguous identification of
the property description (address and/or plan); and
— identification of the correct information
source and fee.
Without an acceptable property description accompanied
by the correct fee (sent to the correct search information provider)
the search request will be rejected resulting in significant delay.
Pre-NLIS Searchflow, the search request process
was notoriously time consuming and fraught with error. In fact,
approximately 15% of postal local authority search requests are
still rejected for the above reasons.
Even worse than rejection, the conveyancer and
local authority may not have been aware that the description provided
is ambiguous; this may lead to incorrect search replies rather
than a returned search request.
By making gazetteers, the national Ordnance
Survey data-set and search information provider databases available
to the conveyancer via a web site, the NLIS channels have significantly
reduced instances of search request rejection for these reasons.
Through NLIS a much smaller percentage of search requests are
rejected (currently around 4% and falling).
The conveyancer simply types the address onto
an electronic form on their desktop computer; NLIS validates the
property address, provides a property location plan, identifies
the correct fees, and automatically sends the search to the correct
search information provider. If the address information is unclear
then the conveyancer is unable to process the search and thus
the ambiguity is corrected at source.
In addition, Local Land Charge Departments at
local authorities constantly have to deal with enquiries concerning
whether a property is in their area, what the correct fees are,
how long the search will take etc. This diverts human resources
from the task of processing searches. This is also significantly
reduced when searches are sent through NLIS.
Through NLIS, potential delays in requesting
and processing searches are minimised and human resources at local
authorities are used more efficiently.
PARAS 5.40 TO
5.56:
These are arguments about the reliability of
the information set out in the HIP.
We would invite the government to reject the
option that anyone should be entitled to provide the required
property information. That would not give the buyer any confidence
that the information provided by the seller was either accurate
or comprehensive. It would create a "grey market" in
unreliable property information which was available to satisfy
the strict legal requirements of the HIP but where both buyer
and seller knew that the search exercise would have to be repeated.
Such an approach would negate the whole purpose of the HIP and
would bring the HIP process into disrepute.
We can understand the reluctance of the government
to prescribe that the information must come from local authorities
and statutory bodies. However it is the statutory duty of these
public authorities and statutory bodies to hold information concerning
property. It therefore follows that virtually all reliable information
concerning property must have come from these statutory bodies
originally. All that other organisations do is to collect this
information and add value to it.
The middle option proposed is for information
plus insurance. This is superficially attractive but one must
start from the proposition that buyers and sellers need and are
entitled to have information which is comprehensive and reliable,
not just a combination of partial information plus the right to
sue an insurance company if the information proves incomplete
and/or inaccurate. Buyers want the home they agreed to buy, not
just an insurance claim!
Leaving a member of the public to sue an insurance
company for the provision of inaccurate information may be a wholly
illusory right. Insurers may come back with a host of technical
defences and, in practice, most buyers just want accurate information
up front rather than being embroiled in litigation, particularly
when that information is readily available.
Whilst it is correct that search information
could be collated by organisations other than local authorities,
the buyer needs a dependable assurance that the information is
both comprehensive and accurate. If it is collected by a local
authority or other statutory body, the buyer has that comfort.
If it is collated by an independent source then it can only give
that comfort if the seller (or possibly his insurer) can warrant
that the relevant information is materially identical to the information
held by the relevant local authority or other statutory body,
even if other information is also provided.
If the above conditions are complied with then
insurance should become relevant only in a tiny minority of cases.
However the buyer also needs to know that the insurance provided
is comprehensive and will provide cover for the duration of the
buyer's ownership. An insurance policy which is tied down by many
conditions and qualifications, and is subject to a low financial
limit, would be a policy that was not worth the paper it was written
on.
If this option is pursued insurance is essential,
but it is not sufficient. We would suggest that the following
minimum additional conditions must be complied with if this option
is taken and the HIP is to do its job in providing reliable and
comprehensive search information:
— the information must be provided
by a local authority or relevant statutory regulated body or be
substantially identical to the information held by them
— the policy of insurance backing it
is in a form that has:
— been approved by the Secretary of
State in advance; and
— contains specified features so as
to ensure that both the buyer and the seller can claim without
any reasonable difficulty under in the event of any reasonably
foreseeable loss.
The most favourable option in terms of accuracy
and reliability is Option C. It is not correct to conclude that
this would amount to a state monopoly. There are three competing
service providers within NLIS and others (including private search
companies) will have the chance to join the system once the period
of exclusivity ends in 2004.
Our view is that by adopting Option C, NLIS
will be expanded and private search companies would thereby be
encouraged by government to invest in the government's own initiative
to provide search information more efficiently.
By joining NLIS:
— private search companies would become
regulated by government (as would be essential in one form or
another if they were to provide information for an HIP)
— the accuracy and reliability of property
information would be assured
— local authority resources could be
solely focused on realising the full potential of NLIS rather
than diverted into facilitating and financing separate and several
forms of access for private search companies
— the existing choice of three providers
would be extended to others providing the necessary competitive
spur to all
— customer choice would be assured
whilst those customers would be protected by the provision of
reliable information
— there would be a level playing field
on price, provision and access—thereby ensuring that choice
would be based on service quality and value for money
— government would not be putting private
search companies out of business
PLANNING CONSENTS,
AGREEMENTS AND
DIRECTIONS, AND
BUILDING CONTROL
CERTIFICATES
We support the proposal that the HIP should
contain any documents as described on page 22 of the consultation
paper on the basis that they may be required by the buyer—thus
removing the possibility of subsequent delay if they are.
PARA 6.15
In addition to the above:
— We do not believe that approved plans
and drawing should also be included in the HIP. This information
would be required only where a detailed inspection of the property
is unable to establish that physical development matches the application
— We agree that only consents less
than 10 years old should be included
— We agree that section 106 agreements,
Article 4 directions and building control certificates should
be included
— Tree preservation orders should also
be included.
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