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Lord Bowness: My Lords, with respect to the Minister, his survey said that; I did not. I only quoted it.

Lord Whitty: My Lords, that is at least one point on which we are in agreement. But the cheapness element only arises if we do not take into account aborted costs. One of the key aspects of the English market as distinct from other systems is the high level of aborted costs--350 million is the figure that I quoted. I am not claiming that we will save all of those costs, but we can save a significant part of them. The noble Lord, Lord Phillips, said that of course there will be aborted costs--people move; people divorce; people change their minds; situations change; people decide that they want a different property after all. That is true. But that applies in other countries as well. Divorce and pregnancy have even been known to happen in Scotland. What is unique about the English and Welsh market is that the form of institutionalisation causes severe delays which are over and above those which

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seem to apply in other systems. It is that problem that we seek to tackle. And nobody has actually put forward a better solution.

Baroness Byford: My Lords, I thank the noble Lord for giving way. He said that people change their minds abroad just as much as they do here. But in fact home ownership in this country is much higher than it is in other countries. Therefore to compare our figures with those of other countries is not a fair comparison. It does not detract from what the Minister says. But we should remember that home ownership is much higher in this country.

Lord Whitty: My Lords, that is true, and that would affect a comparison with the 350 million figure. But the time issue relates to individual transactions. There is no reason why, because we have a higher level of home ownership, we should have a longer period of transaction. If anything, one would have thought that economies of scale would be involved.

Baroness Maddock: My Lords, one of the other important matters is the chain. Because so many more people are in the housing market, the chain is much more of a problem in this country than anywhere else in Europe.

Lord Whitty: My Lords, that is a non sequitur. Simply because more people own their own homes does not mean that people should be involved in longer chains.

Lord Phillips of Sudbury: My Lords, I am obliged to the Minister for allowing me to intervene. I merely reinforce my noble friend's point. The fact is that if two or three transactions are inter-dependent, then they move like a convoy; that is, at the speed of the slowest transaction. If one of the transactions fails, then because of our prudent policy of not entering into a contract until one has a firm back-up contract, all of those transactions fall together. That is the fact of the matter. The Minister says that we have not come up with a better idea. With respect, I do not think that his Bill addresses the chain problem.

11 p.m.

Lord Whitty: My Lords, by speeding up the process and putting upfront much of the information gathering, the likelihood of particular transactions falling through is reduced. Therefore, the impact on the chain is reduced. I accept that some noble Lords do not think that our proposition achieves that. However, I suggest that it does so better than the present situation. It may not be ideal but it goes some way to meeting the problems of the present market.

Other objections were raised. The noble Earl, Lord Caithness, began his remarks by stating that this changes the whole nature of the relationship between the agent and seller. Perhaps I may say to the noble Earl that it does not. The noble Earl is clearly a meticulous estate agent and surveyor. I may well take him up on his implied offer to help me when next I sell

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my house. The fact of the matter is that he already has a duty under the Property Misdescriptions Act 1991. That Act requires estate agents to take reasonable steps to verify information provided by sellers. Therefore, the question of trust is already loaded on to the estate agent. The Bill does not change that basic situation.

Comment has been made that the Bill does not tackle gazumping. It does not do so head-on in the sense of banning it--there are misapprehensions about the Scottish situation--but it addresses gazumping indirectly by narrowing significantly the window between offer, acceptance and exchange of contracts, during which period gazumping frequently occurs. It is difficult to see how we could deal entirely with the problem of pulling out at the last moment or how we could ban gazumping completely. There will always be situations where it is reasonable that the seller should be able to offer the property to another buyer or to withdraw that property from the market. Nevertheless, if the proposals were accepted and operated across the market, I believe that the incidence of gazumping would be reduced significantly.

The noble Lords, Lord Phillips, Lord Goodhart, Lord Bowness and others all said that the seller's pack would add to rather than reduce the cost of buying and selling. There are a number of points to be made on that. First, the information in the pack is that which needs to be provided at some stage in the transaction in any event. The only additional item is the home conditions report. That is additional only in the sense that, as some noble Lords have said, in some transactions under the present system buyers do not commission their own surveys. Secondly, the overall costs are likely to be neutral between buyer and seller in many, if not most, cases. The seller's pack involves a shift in cost from the buyer to the seller. However, as the vast majority of sellers are also buyers, because of the chain, that balance will shift. Indeed, the only buyers who are not sellers are first-time buyers who face substantial costs. That will be shifted away from them. If we were to keep the whole burden of the cost on the buyers, it would continue to be detrimental to first-time buyers.

Lord Goodhart: My Lords, I am grateful to the Minister for giving way. Have the Government considered what would be a much simpler and cheaper way of achieving results than requiring the home condition survey and the seller's pack, which is to reverse the existing rules of caveat emptor; namely, the buyer is stuck with what he gets? If the buyer could sue the seller for any defects that had not been disclosed to him, that would, first, put the seller on his toes to ensure that he did make disclosure and, secondly, it would do so without this elaborate and bureaucratic system.

Lord Whitty: My Lords, the noble Lord referred to an elaborate and bureaucratic system. That would be replaced with one enforced by considerable litigation. We would have to hesitate before altering the general

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presumption in every market under English law in relation to caveat emptor. I would be hesitant to go down that route.

Lord Goodhart: My Lords, not in the sale of goods.

Lord Whitty: My Lords, subject to statutory restriction, that is true. But where there is no statutory restriction, that is the presumption. Thirdly, in relation to costs--

Lord Bowness: My Lords, I am grateful to the Minister for giving way. I do not want to detain the House but I want to clarify an important point. Can he confirm that as things stand there will be no obligation on a seller in the pack to point out any defect in title and it must therefore be examined carefully by a buyer's solicitor? If a defect is found, the time spent will be the same as it currently is. If the buyer has to pull out, the effect will be precisely the same.

Lord Whitty: My Lords, the noble Lord's premise is right but his conclusion is not. It is right that there is not a requirement that defects in title should be pointed out and that it would be subject to the usual checking by the buyer's solicitor. The point is that the information required to be checked would be provided up front by the buyer before he goes to the market. That is where the time saving occurs.

I believe that I have made sufficient points in relation to the cost, except in relation to a point made by a number of noble Lords that the lenders will in any case require separate valuation surveys and therefore the apparent saving will not arise. Certainly, the lenders will continue to require separate valuation inspections but for the most part lenders are moving to a more simple system of valuation. Many have desktop methods of valuation assessment. The home condition report will assist them in that and will therefore provide cost savings either to the home buyer or to the lending organisation.

Many buyers will not regard the home condition survey, the seller's pack, as sufficient, as my noble friend Lady Gould said, and they will therefore commission their own survey as under the present system. But that is not an argument for not bringing as much of the information as possible to the market right at the beginning of the process instead of both sides having to proceed with the various professional bodies in parallel or in part in series through the lengthy process.

The noble Lords, Lord Phillips and Lord Dixon-Smith, asked how the seller's pack will bring pressure on the buyer to come to the market prepared. That is the other element of speeding up the process and bringing it up front. Because the seller's pack will provide up-front information the buyer can move quickly in relation to his own lender. He can establish an in-principle mortgage and that will rapidly smoke out any prospective buyer who is not serious. Therefore, both sides of the equation will be in a

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position to share information and to move on the basis of that shared information at a much earlier stage than the process currently provides for.

There is the continuing problem in relation to the point made by my noble friend Lady Gould that buyers and lenders will not trust the home condition survey, but nevertheless they will have it at an early stage. If at that stage they consider it to be inadequate, they can take out their own additional survey. I believe that we will be able to rely on the home condition report to a large extent. It will be setting up a certification scheme for home inspectors to ensure consistency and high standards. A level of inspection will be similar to the current home buyer survey and valuation, which is the survey most commonly used by home buyers, and home inspectors will be liable to sellers, buyers and lenders so that they can enable all the key parties to any sale to have full confidence in their reports.

My noble friend Lady Gould asked about lenders. The Council of Mortgage Lenders has been consulted on this matter and is one of the main stakeholders involved in developing both the format of the home condition report and the associated regime which will underpin it. Therefore, the interests of lenders are fully engaged in the process.

The noble Earl, Lord Caithness, said that the home condition report was too simplistic. Like other noble Lords, he went on to query the Bristol pilot. The Government commissioned that pilot and paid for part of it. That pilot shows quite clearly that the seller's pack can be assembled quickly; and that it injects transparency into the process and gives buyers and lenders a clearer understanding of the property. It proves that the seller's pack increases certainty and that problems are resolved more rapidly than elsewhere.

My noble friend Lady Gould asked whether the Government relied entirely on the Bristol experiment. Part of the background to the Bill includes a study of international comparisons, the biggest study ever undertaken of the system of home-buying in England and Wales, a major consultation exercise involving about 1,000 responses, a study of 14 existing sellers' packs and, in particular, research into low value, low demand areas. It also included a litmus test of small businesses. We continue to look at the detailed implementation of the scheme. We have just commissioned a study to look at the role of insurance products. We shall consider other matters in the run-up to implementation and the final regulations as regards the form of the seller's pack.

Two other main issues were raised: sanctions and how the scheme would operate in low value markets. It is claimed that criminal sanctions are completely inappropriate in this area. In order to be effective, the seller's pack must be backed by appropriate sanctions; otherwise, the temptation for people to attempt to market their houses without sellers' packs will be too great. In this context we have looked at whether we can use civil sanctions but have concluded that they cannot provide an effective deterrent. Civil sanctions can be

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based only on the buyer taking action through the courts. The buyer will need to demonstrate that he has suffered financial loss in the process, which may not be easy.

Therefore, we have concluded that the long stop should be criminal sanctions. That is consistent with similar sanctions, for example, under the Property Misdescriptions Act 1991 and various obligations under the Landlord and Tenant Act. That does not mean that we have moved directly to criminal sanctions. Local trading standards officers will have discretion to take appropriate action where they find a person marketing a home without a seller's pack. That discretion will be vital in ensuring that action is proportionate, especially in cases where private sellers are ignorant of the law and make an honest mistake. There is a range of possibilities, from offering help and advice to a warning right through to the imposition of criminal sanctions.


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