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Mr. Philip Hammond (Runnymede and Weybridge): The Minister said a few moments ago that one of the purposes of the Bill was to help sellers to set realistic asking prices for their properties. Why is he proposing that no valuation will be included in the condition survey that is to be part of the seller's pack?
Mr. Raynsford: The hon. Gentleman is jumping the gun, because the details of what will be prescribed for the seller's pack will be the subject of regulations. As he will know, having read the Bill assiduously, there is provision for us to make such regulations under the relevant provisions of the Bill. That will be a matter for full discussion with all the interested parties over the next two years. We do not intend to introduce the provisions of the Bill until 2003, and in the intervening period there will be a lengthy process of negotiation to ensure that we produce the best possible pack to meet people's needs and give confidence to all interested parties. I shall return to this matter later.
Mr. Geoffrey Clifton-Brown (Cotswold): Presumably, the regulations will prescribe that a seller's pack is to be time-limited, because surveys and local authority searches can become out of date. It is likely that areas that have low-value houses are precisely the areas in which it will be most difficult to sell a house. It is, therefore, likely that seller's packs will become out of date, and that additional seller's packs will have to be prepared, thereby increasing costs. Will the Minister say something about that?
Mr. Raynsford: I will, with great pleasure. The hon. Gentleman is jumping ahead. There will be no obligation to produce a new seller's pack. The obligation will be to produce a seller's pack at the time the property is put on the market.
Mr. Raynsford: As I was saying, the obligation will be to make the seller's pack available when the property is put on the market. [Interruption.] If the hon. Gentleman will bear with me, I am trying to answer his question. I can see that he is a little over-excited about the issue.
Most of the information contained in the seller's pack will continue to be valid for a very long time. There will be no need for further updating. On certain issues, such as local authority searches, there might be a requirement for updating, and it will be open to the buyer to seek updated information on that point. However, the idea that there will be a need for a new, second seller's pack is
Mr. Raynsford: I hope that the hon. Gentleman will bear with me. I have answered his question twice, and I now want to make some progress. I can tell that hon. Members want to raise many issues, but I shall cover them later in my speech. I ask the House to bear with me.
The Bill requires sellers to arrange for the key information about their homes to be prepared up front to provide information that should ensure that people know, before they make an offer, what they are making an offer for. Under the current system, problems are often uncovered well after a price has been agreed and after buyers have started paying solicitors' fees, mortgage fees and so on.
Last year, we commissioned a pilot scheme in Bristol, which the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) mentioned, run by independent consultants. It was designed to test the mechanics of putting together a seller's pack, to find out how helpful the pack would be to buyers, sellers, agents and conveyancers and to identify whether any parts of the pack caused problems and how items could be improved. The pilot has shown that seller's packs can normally be assembled reasonably quickly--typically, within nine days--but we believe that there is scope to improve on that and we expect that time to reduce.
The pilot scheme showed a much higher satisfaction rate with the pack. Eighty per cent. of buyers were satisfied with the pilot scheme, compared with only 45 per cent. under the present system. The success rate was higher using the pack.
Mr. Raynsford: Once again, we hear entirely bogus figures from Opposition Front Benchers. No, there were not three. There were many more: there were 189 seller's packs. [Interruption.] The hon. Gentleman is showing a little hysteria over this issue. The packs in the survey in Bristol were designed to test the mechanics of putting together a seller's pack. They could not test how the system would work with a compulsory seller's pack, because only people acting voluntarily used them, and they were often part of chains involving many other sellers, which inevitably affected the speed of the process. The survey was not a test of the demand for packs.
Given the advantages of the seller's pack, there will be huge interest when the scheme comes in. [Interruption.] The hon. Member for East Worthing and Shoreham (Mr. Loughton) seems to think that the word "free" is especially interesting. The answer lies in the fact that the information required on every issue except the home condition report is exactly the same as that required under existing procedures. The idea that there is a huge additional cost is bogus and fanciful, as are all the Opposition's figures.
Mr. Raynsford: As a matter of fact, I do, but the hon. Gentleman should recognise that it was talking about the cost, not the additional cost. Very similar costs are incurred under the existing process. I will take him through those, if he would like, but perhaps hon. Members would prefer to go to the Library, where I have placed copies of a table that we have produced showing the comparative costs for sales under the current and the new system. The overall costs are broadly comparable, and all the talk about large additional costs is simply scaremongering and not based on fact.
The pilot showed that 80 per cent. of buyers were satisfied, compared with only 45 per cent. under the present system. The success rate was higher with the pack: 87 per cent. of accepted offers resulted in a completed transaction, compared with only 72 per cent. recorded in our earlier study. The indications on speed of transactions were also encouraging, even though we were not trying to test that, and the pilot could not achieve optimum performance, as many of the sales were part of chains involving transactions without seller's packs.
Mr. Humfrey Malins (Woking): The Minister says that the costs under the old and new systems are comparable, but is not the problem with the new system that so many of the costs are front-loaded--payable in advance--so the old principle of no sale, no fee goes out of the window? That front-loading could put a terrific burden on some sellers.
Mr. Raynsford: There is a partial element of truth in saying that the costs are front-loaded, in the sense that they are the liability of the seller, but the implication that there will always be a requirement for the seller to pay at the outset is not correct. The evidence from Bristol, where several estate agents are using voluntary seller's packs, is that payment is sought only after the sale has been completed, so the individual seller does not incur expenditure at the outset. I hope that the hon. Gentleman will accept that, although he is partially right, he came to an over-pessimistic conclusion about the impact of the process.
Since the results of the Bristol pilot were announced, a number of concerns have been expressed. Some are legitimate and will need to be addressed as we work up our proposals. Some arise from the natural reluctance of professional bodies and others to change things that they have done in a certain way for generations, but change must come, because the current system does not meet the needs of the consumer, who expects to be able to make well-informed decisions and choices quickly and efficiently.
Let me address the main concerns one by one. Most important is trust: how can the buyer rely on a pack prepared on behalf of the seller, and in particular how can the buyer depend on the home condition report? We intend that home condition reports should be prepared by professional inspectors who are certified by an independent body. The Bill makes provision for the Government to fund the development of a certification regime, and we will not bring the new arrangements into force until we are satisfied that there is a sufficient body
We will work with the industry to develop a home condition report format that meets as many needs as possible. For instance, there is no reason why, in most circumstances, lenders should not be able to rely on the report as a key part of the valuation process, and thereby reduce their valuation charge, typically £180, to a fraction of that price.
Secondly, there is cost. A number of rather exaggerated claims have been made about additional costs. Most of the documentation required in a seller's pack needs to be assembled at some point in the transaction in any event. We know that the only additional cost in the transaction, for those who currently do not commission a survey, is the home condition report--a vital part of the information that should be available to people committing themselves to what is probably the biggest financial transaction in their lives. For those who currently commission a survey, overall transaction costs will be about the same--and that takes no account of a reduction in the huge abortive costs produced by the current system.
Thirdly, it has been suggested that the up-front costs of seller's packs would deter people from putting their homes on the market, especially in low-value areas. However, research undertaken last year by the United Kingdom's largest estate agency chain, Countrywide, demonstrated that that suggestion is unfounded, as does the experience of countries such as Denmark, which have introduced mandatory seller's packs--