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The Earl of Caithness: All those who have bought and sold their own houses will be aware of the form. However, the simple point I am trying to make is that where there has been change to the property being marketed—as the Minister has said, that does not necessitate a new home information pack—the answers given to the inquiries laid down in regulations would be wrong. However, obviously that does not matter. If neither the vendor nor the agent are to be penalised because the answers are wrong, then I do not see the point of giving them in the first place and the need for this amendment is removed. It means that you can put what you like in the information pack and change the circumstances at will. The home information pack will mean nothing to the potential purchaser: this is caveat emptor and he will have to do his own thing anyway.
This has proved that much of what the Government seek is not binding and will make life more complicated for the potential purchaser. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 200A not moved.]
Baroness Hamwee moved Amendment No. 200B:
Page 99, line 14, leave out from "which" to end of line 16 and insert "acknowledge liability for any error contained in the prescribed document due to his negligence in favour of"
The noble Baroness said: In moving this amendment I shall speak also to Amendment No. 206A which is grouped with it, along with Amendment No. 202, tabled in the name of the noble Baroness, Lady Hanham.
The first of these amendments would remove from subsection (8) the words,
"acknowledge liability for any error contained in the prescribed document due to his negligence in favour of".
This is another amendment suggested by the Law Society and seeks to establish exactly what is intended here.
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Subsections (7) and (8) appear to empower the Secretary of State to make regulations that would entitle the buyer, the lender or other persons to enforce the provisions of the contract under which a prescribed document is to be prepared. I should be grateful if the Minister could assist us on exactly what is intended.
Amendment No. 206A would allow sellers, buyers and lenders to bring proceedings where they have relied on information contained in the home condition report which proves not to be correct. The Minister spoke earlier today on the issue of liability, but if a home condition report is included in the pack, it ought to be correct for anyone who needs to rely on it. The seller could secure compensation if the report is defective, but if the lender and the buyer cannot secure compensation—or, to put it another way, if the person preparing the report knows that he will not be exposed to action from the lender or buyer—then they may well be reluctant to rely on that report. If there is no redress, one's reliance is reduced accordingly.
The amendment deals with the issue of liability, which is probably a more important matter than is indicated by this minor amendment. I beg to move.
Baroness Hanham: Amendment No. 202 is grouped with this amendment. We have not really touched at all on the surveys which are required before a mortgage can be obtained. Practically every person who buys a house has to have a mortgage survey. The Minister has said on a number of occasions that 77 per cent of people do not undertake a survey of their premises. But that is nonsense in terms of those who have mortgages because they have a survey of a sort. It is usually not a survey that stands up sufficiently as a full condition survey
However, if there is to be a survey for a home condition report, is it the intention that it should be acceptable to the mortgage lenders so that they will not have to do another survey in order to justify a mortgage? I do not need to go into the situation any further. That is the nub of the amendment.
Lord Bassam of Brighton: I shall deal with Amendment No. 202 first because I believe that I can satisfy the noble Baroness, Lady Hanham, on that. This amendment would require the Secretary of State to ensure that the home condition report is acceptable to lenders. We accept that it is crucial that the report is acceptable to them, but I am reluctant to single them out in the way the amendment suggests. It could be dangerous to do so as it could give them a right of veto over the format and content of the home condition report.
That said—and I want this understood—we have been developing the home condition report in very close consultation with mortgage lenders and the Council of Mortgage Lenders to ensure that their information requirements are met by the home condition report. I hope that satisfies the noble Baroness because it is intended to. Obviously, we cannot give people a right of veto over the process of consultation, but it is intended to cover the points that need to be covered. I hope that is a helpful response.
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Amendment No. 200B would specify that the terms of documents provided in the pack may include terms that allow claims for negligence to be brought by those who rely on them. Of course we share the sentiment behind the amendment. We all want the packs to be useful to those involved in a transaction. However, I do not think that the amendment is necessary.
The Secretary of State will prescribe the components of the home information pack in regulations under Clause 144, as we have explained. Subsection (7)(b) of that clause enables him to prescribe the terms on which they are prepared. This will provide the means for achieving what I believe the mover of the amendment wants. Clearly, the Secretary of State will want to ensure that sellers, buyers and lenders can rely on these documents.
We intend that the home inspector's liability to sellers, buyers and lenders will be secured by contract. Home inspectors can therefore be bound by the Contracts (Rights of Third Parties) Act 1999. This should ensure that the buyer and lender, as well as the seller who commissions the home condition report, will be able to rely on it and bring proceedings against the inspector should that prove necessary. It is the current intention that regulations made under Clause 145 will specify that home condition reports must contain a statement confirming the rights of buyers, sellers and mortgage lenders to rely on its contents. I believe that is a response to the points raised.
Amendment No. 206A was also in this group. I shall refer to it even though I am not sure that it has been moved. This amendment would require the Secretary of State to be satisfied that appropriate arrangements were in place for buyers, sellers and lenders to be able to bring proceedings against the person who prepared a home condition report upon which they relied before he could approve a certification scheme.
We endorse the sentiment behind the amendment, but we do not believe that it is necessary. We believe that the arrangements we have set out will provide sufficient safeguards to cover all the interests of those who rely on home condition reports. I have tried to give assurances here and I hope that they match the points made in the amendments.
The Earl of Caithness: I listened carefully to what the noble Lord, Lord Bassam, said in reply to this group of amendments. Would he not agree that although the home condition report might satisfy the criteria of the mortgage lenders when first made and there is no valuation in the home information pack, the mortgage lenders have to undertake some kind of valuation in order to make the grant of a mortgage?
Secondly, the older the home condition report—it does not need to be updated—the less any lender will rely on it and the more likely it is that the lender will have to instigate a survey of his own to update the pack because a seller does not have to and the seller will not. Perhaps at day one it may satisfy the criteria, but in the
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five months, six months, nine months, two years it could take to sell a property, no lender will rely on such a report and there is no valuation attached to it. It has huge built-in weaknesses.
Lord Bassam of Brighton: The noble Earl makes a good point. Most transactions will not take the period of time that he has described, although some will. Even the noble Earl will accept that for an overall percentage of transactions to take longer than six months to go through the purchasing process is perhaps exceptional; certainly a year is very exceptional indeed.
I know the noble Earl is a specialist, but the lenders may want to satisfy themselves; they may want to have another look at some points, particularly if the transaction period is extended. We are talking to them about the detail of the home condition report. We shall no doubt have to continue our discussions with them on that because we want that report to be of value to them, so that it obviates the need for independent and separate reports to satisfy the lenders. We recognise the issue and we recognise some of the implications raised in this discussion. But it is our intention to do all that we can to ensure that that report satisfies them so that they can lend money against the property.
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