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Baroness Hanham: This exciting exchange prevented me realising that I had Amendment No. 198 in this group. The Minister has kindly replied to it even though I have not moved it. It is a small amendment and I do not need to move it. However, I also have Amendment No. 201 in this group, and it may be easier if I deal with it in its place if the Minister is happy to reply to it then. So exciting has this exchange been that the amendment now has nothing to do with this issue and it would be more appropriate to deal with it later, but it is down to the Minister to decide. I see that he nods his head in agreement.
Baroness Hamwee: I take issue with my noble friend. I think that the Minister would be wasted on property work. I can see him so disarming other parties to a negotiation over a major commercial transaction that he would just walk all over them. That displays my view of conveyancers.
The Earl of Caithness: And he does not need any qualifications to do that!
Baroness Hamwee: I am grateful for the detailed assurances that the Minister gave on the two amendments we started some time ago. We seem to have wandered slightly. I beg leave to withdraw the amendment.
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Amendment, by leave, withdrawn.
[Amendment No. 198 not moved.]
Baroness Maddock moved Amendment No. 198A:
Page 98, line 41, after "property)" insert ", though the provision of any such information by the seller shall be voluntary and entirely at his discretion, and the Secretary of State cannot require the seller to provide such information in the home information pack through regulation"
The noble Baroness said: I apologise to some Members of the Committee. We said that we would not move the Amendment, but now we are moving it. It deals with the word "voluntary", which we have discussed quite a lot today. It also refers to the home condition report not being a full structural survey, which we have also discussed. That was the reason why we were not going to move it, in the interests of getting a move on with the business. However, as the Minister had a rather good speech in reply, we were begged to move it.
The amendment is fairly simple. Its purpose is to make the home condition report voluntary. We believe that if the whole thing cannot be voluntary, the inclusion of the home condition report in the pack should be voluntary. It is one of the most expensive elements in the pack and therefore likely to add considerably to the cost of moving home. In many cases we believe that buyers and lenders will not feel able to rely on the report. That is an issue we have discussed several times under this part of the Bill.
We understand that it is not a full structural survey and that it does not contain a valuation. Therefore, we know that mortgage lenders may want a different sort of survey, as will many people buying a house. During the recent exchanges on the lifetime of a pack, particularly on the home condition report, I was struck by the fact that if you could not sell a house for three years, you would probably need to paint the woodwork, for example. So, there are many difficulties with this.
Perhaps I may press the Minister on another point in the same section. Clause 144(5) refers to the energy efficiency of the property. It is listed under,
and there follows a long list which includes the energy efficiency of the property. Can the Minister confirm that when the EU regulation kicks in requiring people to have an energy efficiency report on their home, it will be required at the point of sale under the European regulation? Again, that backs up some of the points that we have been discussing about the need for information to be ready on day one of marketing. I look forward to the speech which the Minister wanted to give in reply to our amendment. I beg to move.
Lord Rooker: I am grateful to the noble Baroness for moving the amendment. There are a few points I want to make to clear up some misunderstandings and hares that have been set running. This amendment seemed the most appropriate place in which to do that. I fixed all my notes according to that, but then I was passed a note saying that the amendment would not be moved.
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I could have included all the material I have elsewhere, but this seemed the most appropriate place. I wanted to reiterate the point we made earlier as I take the last point about the energy report.
I am not good on the EU issue. I know that there is a requirement. It is in the consultation document at pages 128 to about—for existing houses—132. The energy report on the new home was set out as part of the consultation. So there is no surprise about that because a model pack was published in March last year. The home condition report runs to about 20 pages. They are obviously blank forms, but it gives the kind of information that would be required.
Clause 144 deals with the contents of the home information pack. It gives the Secretary of State power to prescribe the documents to be included in the pack, the time at which they should be included and the information that may be included in, or excluded from, those documents.
The information prescribed is subject to the condition that, in the opinion of the Secretary of State, it is information that is relevant to the property being sold. Amendment No. 198A would add a restriction to the effect that sellers may provide the information voluntarily but cannot be required to do so under regulations made under this part.
In our discussion on Amendments Nos. 183B and 185A in Clause 137 we explained why a voluntary home information pack system would not work. The same arguments apply here. I thought that the noble Baroness accepted that, hence she was not going to move the amendment. We need the home condition report to be a standard part of the pack. Its inclusion is fundamental to achieving the objectives of the reforms, for reasons I shall explain.
Our objective is a home-buying process where people are confident that their transactions will succeed by a reasonably certain timescale and at a reasonably predictable cost. To achieve that we need to make sure that the main factors that cause transactions to slow down or fail are known at the outset, not half way through.
Our research showed that 28 per cent of all transactions fail after an offer has been made. That is a huge number. Problems revealed by either a lender's valuation inspection or an independent survey account for 43 per cent of failed transactions. Condition-related problems also cause delays in transactions which ultimately succeed. Twelve per cent of all sellers reported such problems between the lender's valuation, inspection and exchange of contracts.
These problems are compounded because of chains. About 60 per cent of transactions involve chains. The industry estimates that an average chain has four transactions, so the knock-on effects of condition problems can be felt by over a half of all of transactions.
I have used the figure of 43 per cent again, which has been challenged. Yesterday it was almost alleged—I do not put words into noble Lords' mouths—that in effect by using the 43 per cent I was exaggerating the number of sales that had fallen through because of bad
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surveys. The 43 per cent failure rate is derived from the findings of the 1998 research study, reported in Key research on easier home buying and selling. The research report indicates that in 13 per cent of cases the transaction failed following an unfavourable property survey commissioned by the buyer himself.
The research report also said that a further 30 per cent of buyers withdrew as a consequence of their lender's valuation survey report. Opponents of the reforms have tried to claim that this 30 per cent had nothing to do with property condition.
The research report breaks down the 30 per cent and says that 10 per cent was attributable to the lender's valuation being too low and 20 per cent because of "other matters" revealed in the lender's valuation survey report. So it seems preposterous to claim that the 10 per cent that failed due to the lender's valuation being too low had nothing to do with the condition of the property. How do they know that the down valuation did not reflect the property conditions? As far as the remaining 20 per cent is concerned, what else could those "other matters" be if not condition problems of some shape or form?
I know that the lady I am going to mention was criticised, but, in her evidence to the Commons Select Committee on the Bill, Maria Coleman said that one of the main reasons for starting her voluntary scheme was the discovery that 71 per cent of her transaction failures were due to an adverse survey. We estimate that the home condition report will add about £350 to the £4,000 plus bill that sellers already typically face. This is a small price to pay for a survey that will be of great value to buyer and seller alike.
I have already referred to the 28 per cent of deals that fall after a valuation. We have put a figure on that of £350 million of wasted money, which is £1 million a day wasted in this country. That has been challenged as well, so I want to explain how we got the figure. The tracking surveys in the 1998 research study, Key research on easier home buying and selling, recorded details of the costs incurred by people whose purchase or sale had fallen through. It found that the average cost of a failed transaction was £906: £680 for buyers and £206 for sellers. However, the number of people who provided these details was small, as was said yesterday. It was fewer than 30 cases and the research report advised that the figures should be used with caution, which is what I am seeking to prove that we have done. At £906 per failure, that adds up to around £530 million a year. So our estimate of £350 million takes account of the uncertainty over the small sample size and assumes a cost of only £600 per transaction failure for the total cost to buyer and seller. Despite attempts to talk down the rate of failure—some people claim that it is a lot less, at 15 per cent—our recent discussions with some of the largest estate agency firms in the country, to which I referred yesterday and which is not a scientific survey, show that the failure rate is still about 30 per cent. I give way to the noble Baroness.
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