Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Written Evidence

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.


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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