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Public Bill Committee Debates

Draft Housing (Scotland) Act 2006 (Consequential Provisions) Order 2008

The Committee consisted of the following Members:

Chairman: Mr. Christopher Chope
Benyon, Mr. Richard (Newbury) (Con)
Cairns, David (Minister of State, Scotland Office)
Devine, Mr. Jim (Livingston) (Lab)
Donohoe, Mr. Brian H. (Central Ayrshire) (Lab)
Fallon, Mr. Michael (Sevenoaks) (Con)
Field, Mr. Mark (Cities of London and Westminster) (Con)
Fraser, Christopher (South-West Norfolk) (Con)
Griffiths, Nigel (Edinburgh, South) (Lab)
Joyce, Mr. Eric (Falkirk) (Lab)
Lazarowicz, Mark (Edinburgh, North and Leith) (Lab/Co-op)
McCabe, Steve (Lord Commissioner of Her Majesty's Treasury)
McKechin, Ann (Glasgow, North) (Lab)
Moffat, Anne (East Lothian) (Lab)
Moore, Mr. Michael (Berwickshire, Roxburgh and Selkirk) (LD)
Reid, Mr. Alan (Argyll and Bute) (LD)
Wallace, Mr. Ben (Lancaster and Wyre) (Con)
Hannah Weston, Committee Clerk
† attended the Committee

Fourth Delegated Legislation Committee

Tuesday 8 July 2008

[Mr. Christopher Chope in the Chair]

Draft Housing (Scotland) Act 2006 (Consequential Provisions) Order 2008

10.30 am
The Minister of State, Scotland Office (David Cairns): I beg to move,
That the Committee has considered the draft Housing (Scotland) Act 2006 (Consequential Provisions) Order 2008.
I welcome you to the Committee this morning, Mr. Chope. It is a pleasure to serve under your chairmanship.
The draft order, which was laid before the House on 9 June, is made under section 104 of the Scotland Act 1998, which allows for necessary or expedient changes to UK legislation in consequence of an Act of the Scottish Parliament. It is made in consequence of the Housing (Scotland) Act 2006, the purpose of which is to address concerns about the condition and quality of private sector housing in Scotland. The concerns include the need to improve the information available to homebuyers on the condition of properties.
The 2006 Act gives Scottish Ministers the power to require sellers to provide specified information to prospective buyers. Regulations will come into force on 1 October, which will make provisions to specify the documents that a seller or selling agent must possess and provide in response to a request from potential buyers. Together, those documents are called the home report.
Currently, most purchasers in Scotland rely on a scheme 1 mortgage valuation report, which contains relatively little information about the condition of the property. The purpose of the home report is to improve the information available to purchasers, thereby improving the quality of the housing stock. For houses put on the market after 1 December this year, the home report will provide information about the condition, energy efficiency and value of the property at the start of the buying and selling process. For the first time, all sellers will have that information before proceeding with marketing, and all prospective buyers will have it before deciding whether to put in an offer and how much to offer.
At the core of the home report is a survey and valuation prepared by a qualified surveyor who is registered with or authorised to practise by the Royal Institution of Chartered Surveyors. Any other providers approved in the future will have to reach equivalent standards. The survey will be commissioned by the seller and made available to all potential purchasers. It is clearly important that buyers should be able to rely on the survey provided in the home report. That means making provision to ensure that the surveyor has a liability towards the buyer in the same way that a surveyor has a liability towards the seller at present.
The Scottish Executive conducted a lengthy consultation on the home report and the majority of respondents have welcomed its introduction. The Scottish Consumer Council has said that the changes that will be made by the home report
“are in the interests of buyers and sellers, and what consumers want.”
The consumer organisation Which? said:
“The Home Report will have an immediate benefit to first-time buyers who often have to spend hundreds in order to find out whether they can, or indeed should buy a home.”
The home report has also been welcomed by the Energy Savings Trust and Friends of the Earth Scotland.
The Scottish Executive received constructive feedback on the terms of the home report from the Royal Institution of Chartered Surveyors, and I also understand that the Law Society of Scotland has plans to become a provider of a Law Society of Scotland-branded home report.
The order demonstrates that the Government are fully committed to working with the Scottish Executive to make the devolution settlement work in the best interests of the people of Scotland and I commend it to the Committee.
10.34 am
Mr. Ben Wallace (Lancaster and Wyre) (Con): It is a privilege to serve under your chairmanship, Mr. Chope, and to welcome you to the Committee. Of course I welcome any measures that make the buying and selling process more competitive from the stance of both the buyer and the seller. For too long, buyers in the Scottish system have faced an often tight cabal of lawyers and surveyors, who often make them repeat processes and go through an endless, and often needless, cycle of paying for reports and waiting to see if they are the lucky winner of the sealed bid. [Interruption.] The lawyers in the room are clearly not too pleased with that.
I welcome the fact that the order attaches liability that protects the buyer. At the moment I am buying a flat and looking at endless surveyors’ reports, and the order begs the question, “If it is good enough for the Scots, why can it not be good enough for down here?” Some of the get-out clauses in some of the surveys that we see in the south are broad, to say the least. There is one flaw in the policy that was introduced in the Scottish Parliament, and that is that unless one gets the mortgage or the finance buy-in, many of the reports will be additional to but not a substitute for the process. The cost of a buyer’s report from a mortgage company ranges from £500 to nearly £1,000. That is a racket in itself—the report is a single sheet of paper saying what the house is worth. I recently paid £756 for one and got three lines, which said that the house was worth whatever.
David Cairns: How much?
Mr. Wallace: I did not buy the house. If that buy-in by the mortgage companies is not there, I am afraid that the policy will flounder and end up not helping the buyer, who will still have to pay that money. We should put pressure on the lenders to ensure that buyers receive a full report for their money, and/or that the mortgage companies accept a report from a chartered surveyor as an expert witness. We should look into that.
We will certainly not oppose the measure. It is a plank in the policy that went through the Scottish Parliament, and it enables that policy to reach its fulfilment. The Scottish Conservatives opposed the policy in the Scottish Parliament—the wonders of devolution. We here will not prevent the policy being rolled out; we can then see whether our belief in the failing of the policy is correct. We will certainly revisit the measure if the buyer does not get the protection that they deserve—or indeed the seller. If it becomes an extra burden on the buyer or the seller, at a time of a housing downturn perhaps—which we do not want—we will revisit the measure to see if there is a better way of locking in the mortgage companies. However, we will not oppose the order.
10.37 am
Mr. Alan Reid (Argyll and Bute) (LD): Thank you, Mr. Chope. It is a pleasure to serve under your chairmanship. I too welcome the order, and thank the Minister for introducing it. It makes sense that buyers as well as sellers should be able to rely on the survey, and be able to sue the surveyor if they get it wrong.
I have a few questions for the Minister. In article 3(3)(b) the buyer is allowed to sue the seller if the buyer has paid more than the market value of the house. However, market value is—as most of us who have bought and sold houses will understand—an inexact science. I presume that to succeed in any action the buyer would have to produce evidence that the original surveyor had got it wrong. Producing a second surveyor with a different opinion would just be one surveyor’s word against that of another. Will the Minister explain what degree of evidence would be needed to be successful in an action?
I am always concerned when drafters of legislation use a word to define that same word. In article 3(3)(a) “material loss” is defined as when
“the market value...on the date of the...survey report is materially lower”.
Will the Minister give an indication of how much lower the market value would have to be before it could be defined as “materially lower”? Also, what level of thoroughness would the surveyor be expected to meet to avoid being sued? For example, would he have to go behind skirting boards and below floorboards to find evidence of rot?
Article 4(1) says that an action can be taken against a person
“domiciled in a part of the United Kingdom.”
That action seems to be against a person, but I assume that in most cases a surveyor would be working for a partnership or a company. Would that company or partnership therefore be liable? Intriguingly, the Minister referred to Law Society branded reports. That throws up the intriguing possibility of someone trying to sue the Law Society if one of its branded reports was proved to be inaccurate. So, would people be able to sue companies as well as individuals, in particular if the individual who had made the report had left the country? Would that then mean that the seller would be unable to get any compensation? What if there was collusion between a surveyor and a seller? Would that lead to criminal action as well as a civil action? I look forward to the Minister’s answers.
10.40 am
David Cairns: I am grateful for the broad welcome that the measure has received across the Committee. The hon. Member for Lancaster and Wyre launched an unprovoked and savage attack on Scottish lawyers. I want to dissociate myself from that, given there are at least two sitting right behind me. It is those who come to one’s constituency and get bad people off who really annoy me. They know who they are and are hanging their heads in shame at this moment. The hon. Gentleman asked specifically about where the mortgage lenders or financiers sit in the midst of all of this: after all, no money, no house sale, no matter what one gets on the report.
The Royal Institution of Chartered Surveyors has confirmed that the mortgage valuation report itself is covered by the fee for the single survey. It is part of the home report and is valued in the same way. The lenders are happy with that because essentially they are getting the same information as they got before. There is not an additional cost or level of bureaucracy for the lenders in all of this. The lenders will reserve the right in certain circumstances, such as if they are presented with quite an elderly report that was made 10, 11 or 12 months earlier, to request a much more recent and up-to-date report. There may have been bad storms in the intervening period. So they reserve the right to request an additional report, but only in circumstances relating to the age of the original report. I hope that addresses the hon. Gentleman’s concerns.
I am grateful for the broad welcome given by the hon. Member for Argyll and Bute. He asked about the conflict faced by someone who buys a property based on a survey and then finds out that he has been sold a pup. It is open to that individual to get a second survey report giving a separate market value, which would then be a matter for the courts to decide. The issue that the courts would look at is not so much based upon a subjective judgment as to who got the valuation correct, but whether the original surveyor did the survey in the proper way as specified in the original Scottish Parliament order and kicked the skirting boards and did all the necessary things.
The hon. Gentleman asked about the process. These things are set out in regulations of the Scottish Parliament, because this is governed by the bit that is essentially the contract between the seller and the surveyor. That is covered by the law of contract. The surveyor should ensure that the survey itself is an accurate survey as set out by the Scottish Parliament. However, it is about the process, rather than a judge having to decide who got nearest to the right answer. The court will decide the material loss and put a figure on it.
The hon. Gentleman also asked about the degree of thoroughness. I think that I have dealt with that. The report has to be prepared in a fair and unbiased way, as is usually the case with surveys at this level. He asked me a specific question to which I do not have the answer, so I will write to him about whether an individual is liable. [Interruption.] Inspiration may be winging its way to me.
Ann McKechin (Glasgow, North) (Lab) rose—
David Cairns: I defer to my hon. Friend who may provide the inspiration for me.
Ann McKechin: Partnerships in Scotland are separate legal entities. As most firms of surveyors are partnerships of two and more, perhaps my hon. Friend could clarify that the definition will include partnerships under the Scottish law definition.
Question put and agreed to.
That the Committee has considered the draft Housing (Scotland) Act 2006 (Consequential Provisions) Order 2008.
Committee rose at fifteen minutes to Eleven o’clock.

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