Memorandum by the Consumers' Association
(DHB 38)
Consumers' Association is an independent, not-for-profit
consumer organisation with around 700,000 members. It is the largest
consumer organisation in Europe. Entirely independent, we are
funded through the sale of our Which? range of consumer magazines
and books.
Consumers' Association has campaigned for many
years for a better system of house buying and selling in this
country. Consumers' Association was, for example, virtually alone
in calling for an end to the monopoly by solicitors on conveyancing.
Consumers' Association gave evidence to the Benson Royal Commission
and supported the House Buyers Bill, introduced to the House of
Commons by Austin Mitchell MP as a Private Members' Bill. The
Bill proposed that the monopoly of solicitors for conveyancing
should end and was subsequently achieved through the Administration
of Justice Act 1985.
Consumers' Association fully supports the package
of measures set out in Part 5 of the draft Housing Bill, pertaining
to Home Information Packs. We believe that they will, if implemented,
go a long way towards ending the stress associated with buying
and selling a home. It should not be forgotten that, from the
consumer perspective, the current home buying system is hopeless.
It is uncertain, slow and confusing. Consumers' interests often
seem to be left to one side. The draft Bill, particularly the
idea of a Home Information Pack containing vital information on
homes such as a "sellers' survey" report, should take
most of the heartache out of the process.
We believe that the key problem faced by buyers
and sellers in the current system is that neither party is legally
bound to go through with the transaction until unconditional binding
contracts have been exchanged. Therefore, in the period between
an offer being accepted and contracts being exchanged, there is
no certainty for either buyer or seller that the transaction will
be completed. This is not the only problem, of course, as many
buyers and sellers find their plans collapsing, as they are part
of a chain. It is common that if one part of a chain breaks, then
problems are caused for buyers and sellers all the way down the
rest of the chain.
SPECIFIC COMMENTS
Cost of home information packs
The cost of a Home Information Pack (HIP) has
caused considerable consternation in some areas. Consumers' Association
has always argued that HIPs will help consumers make the right
choices based on rational criteria. While we can appreciate that
some people are concerned about the cost of HIPs it should be
noted that most vendors (approximately 75%) will be buyers as
well and therefore will benefit from a HIP being in place for
the properties they are looking to buy. First time buyers, for
whom it is often a struggle to find the money for a deposit and
fees, will benefit from the transferral of these costs to the
vendor.
Concerns have been expressed that some house
sellers on lower incomes or those with low valued property may
find it difficult to find the money for the HIP up front. Consumers'
Association proposes that to overcome this problem, the commercial
parties involved in the selling process, for example estate agents,
mortgage providers etc should be encouraged to meet the cost of
the pack and then recover these at the end of the process when
the property has been sold. Some commentators have taken a very
purist view that HIPs could not and must not be provided by any
commercial party with a vested interest. This is not the view
of Consumers" Association. We feel that rigorous enforcement
of regulations by the statutory body should prevent this from
being an issue.
Shelf life of packs
Consumers' Association believes that HIPs should
be honest, timely and relevant. This is an area of concern in
a slow moving market; it is conceivable that the pack could be
more than 6 months old. However, the HIP will be clearly dated
so potential buyers know when the inspection was carried out and
consumers have the right to pay for their own survey, if they
feel it is out of date. The implications of using a report that
is several months old will need particularly careful communication
to consumers.
However this does not mean that a shelf life
needs to be imposed, rather if, say, a house is struck by lightning,
there should be an onus on the vendor and estate agent to indicate
to potential buyers that this has happened. We also believe that
the Government should consider indicating to consumers that they
are still able to get their own survey done (at their own cost)
if they are unhappy with the HIP.
We also advocate the inclusion of a statement
signed by vendors and agents that, to the best of their knowledge,
they know of no new defects since the report was written.
We believe that only in the minority of cases will
something unexpected happen to raise concerns about the validity
of the HIP.
Information on repair costs
Some stakeholders have argued that in order
to make the HIP more relevant, information on repair costs must
be included. Consumers' Association does not believe it will be
helpful to consumers to have guidance on repair costs as part
of the HIP. Any guidance will only be an approximation of costs
and therefore potentially misleading. Again, we believe that the
government should embark on an information campaign once the Bill
is enacted to indicate to consumers changes to the law and during
this process suggest that if repairs are needed consumers should
contact specialist builders to get a quotation for work.
There is a huge variation in charges from trades-people,
such as plumbers and electricians, and therefore any indication
of repair costs could be misleading. Pointing out the faults is
sufficient, as this will allow buyers to either investigate repairs
further or reject the property.
Home inspectors
Some commentators have been very critical of
the new home inspectors' regime, stating inspectors need rigorous
training and doubting whether adequate training will have been
undertaken by the time HIPs become law. The government believes
that 7,000 inspectors are needed to do the job and are in the
process of setting up an occupational qualification to train people.
It's envisaged that there will be a two-year course with practical
elements for graduates and others. If someone is already a surveyor
they will be asked to do a bridging course for consistency reasons.
Consumers' Association welcomes the sensible approach the government
has taken to training.
Indemnity insurance for home inspectors
We have been informed that there is an issue
of insurance cover, but mainly due to there being a "hard
market" currently. However, Consumers' Association believes
that the Government must take action to ensure that Home Inspectors
are insured to ensure that consumers will be able to seek redress
if required. While it is envisaged that most claims against home
inspectors will be in the region of £5k and the inspectors
will pay such claims out themselves, the system will fail if there
is not adequate protection offered to consumers.
Access to redress
It is essential that there is a free and independent
system of redress so that consumers, both vendors and buyers,
can pursue compensation for any losses resulting from inaccurate
information in the pack. This would also help to reassure consumers
that they can rely on the home information pack.
Governance of the home inspector scheme
Consumers' Association has some concerns about
how the new measures will be enforced effectively. We would like
to see mystery shopping of the new system a year after it is established
and periodically there after to ensure that the scheme is being
abided by.
Penalties and sanctions for non-compliance
Consumers' Association is concerned that sanctions
need to be put in place to ensure that Estate Agents only market
properties when a HIP is in place. We are under the impression
that fixed penalties will be put in place but these have to be
significant enough to act as a deterrent. If, for example, an
estate agents is marketing a property at £1 million (which
is not uncommon in some parts of the country) a £500 fine
will be no deterrent.
We also strongly believe that it is vital that
vendors are aware of the penalties, and purchasers are aware of
their right to a HIP. We also recognise that Trading Standards
departments are sufficiently well resourced, vigilant and willing
to act against those who break the law if they are to take action
against agents breaking the law.
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