House of Lords - Explanatory Note
      
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Session 2000-01
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Homes Bill


 

These notes refer to the Homes Bill
as brought from the House of Commons on 8th February 2001 [HL Bill 19]

Homes Bill


EXPLANATORY NOTES

INTRODUCTION

1.     These explanatory notes relate to the Homes Bill as brought from the House of Commons on 8th February 2001. They have been prepared by the Department of the Environment, Transport and the Regions in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.

2.     The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.

SUMMARY AND BACKGROUND

3.     The Bill proposes two separate reforms to the home buying and selling process and the homelessness and allocations legislation. Both sets of proposals have been the subject of extensive consultation. The Bill extends to England and Wales (except for a small amendment to the Fair Trading Act 1973).

Home Buying and Selling

4.     Part 1 of the Bill is part of a wider package of proposals that aim to improve the home buying and selling process by making it faster, easier and more consumer-friendly. It imposes new legal duties on people marketing residential properties in England and Wales. It requires sellers, or their agents, to have a seller's pack of standard documents and information available for prospective buyers, before marketing a property.

5.     Details of these proposals were published for consultation in "The Key to Easier Home Buying and Selling" (December 1998) and in chapter four of the Housing Green Paper "Quality and Choice: A decent home for all" (April 2000). This policy was confirmed in chapter two of the Housing Policy Statement "The way forward for housing" (December 2000). A pilot scheme in Bristol has examined the practicality of bringing forward in a seller's pack at the start of the transaction process essential information about the legal status and condition of the property. Other research studies have considered the likely impact of seller's packs in low value, low demand areas, and on small businesses. A further research project has monitored industry initiatives aimed at improving the home buying and selling process by making more information available at the start of the process.

Homelessness and Allocation of social housing

6.     Part 2 of the Bill requires local housing authorities to adopt a strategic approach in combating homelessness. It also strengthens the position of people who are homeless through no fault of their own. It achieves this by removing limitations on the obligations of local housing authorities to assist the homeless and by providing such authorities with additional powers to give assistance. The provisions have been framed in recognition of the need for local housing authorities to have integrated policies on homelessness and the allocation of social housing. It, therefore, also makes amendments to the provisions relating to the allocation of social housing accommodation.

7.     These proposals were outlined in chapter nine of the Housing Green Paper, "Quality and Choice: A decent home for all" (April 2000). Public consultation on the Green Paper ran from 4 April until 31 July 2000. This policy was confirmed in chapters six and seven of the Housing Policy Statement "The way forward for housing" (December 2000).

OVERVIEW OF THE BILL

Home Buying and Selling

8.     In England and Wales, an offer to buy a home and acceptance of that offer are made "subject to contract". Such an offer and its acceptance do not constitute a legally binding agreement. This is usually only achieved with an exchange of contracts. Between agreeing terms and exchanging contracts, both the buyer and seller do a number of things.

9.     For the seller, this includes:

  • obtaining the title deeds to the property;

  • establishing title and producing Land Registry office copy entries where the property is registered;

  • replying to pre-contract enquiries;

  • preparing a draft contract.

10.     The buyer will carry out local land charges searches and other enquiries of the local authority and other organisations. If required, the buyer will also arrange a survey. These documents and information are important to the decisions home buyers and sellers need to take and yet, under current practices, they normally become available only after terms have been agreed "subject to contract".

11.     Part 1 of the Bill aims to bring forward the availability of this sort of information to the very start of the process. It requires the person marketing a residential property with vacant possession to compile a seller's pack before marketing the property. The pack is expected to contain documents and information similar to those mentioned above, together with a report on the condition of the property.

12.     It is not intended that the provisions of this Bill should alter the principle of "caveat emptor" ("let the buyer beware") which currently governs the sale of property in England and Wales. The duties imposed would require a person to collate certain documents and make them available at an earlier stage in the transaction than at present. They do not require any greater warranty by the seller as to the contents of those documents than is currently required by the general law.

Homelessness and Allocation of social housing

13.     Part 2 of the Bill is set out under three main headings or categories. The first contains new provisions imposing an obligation on a local housing authority ("the authority") to produce a strategy to address the problems of homelessness. The provisions under the second and third headings are framed as amendments to, and repeals of, the current provisions on homelessness and allocation of housing accommodation in Parts 6 and 7 of the Housing Act 1996 ("the 1996 Act"). The Bill provisions therefore need to be read together with those Parts of the 1996 Act.

14.     Part 7 of the 1996 Act (Homelessness) defines when a person is homeless and imposes duties on local housing authorities in relation to those who are homeless. Anybody may apply for assistance under Part 7, but assistance is not available to certain classes of persons from abroad who are ineligible. The duty owed by an authority under section 193 is often referred to as "the main homelessness duty". The duty is to secure, for those who are eligible, accommodation where applicants have priority need for it due to their circumstances (as set out in section 189) and have not become homeless as a result of their own conduct. The main homelessness duty is limited to no more than two years. After the period ends, an authority has a power, on reviewing the application, to continue to accommodate the applicant, but it is not obliged to do so and it can only do so for no more than two years at a time. The main homelessness duty can also end before the end of two years in certain circumstances. However, even where there is a duty to secure that accommodation is available for an applicant, the authority's powers to assist are limited if it is satisfied that other suitable accommodation is available in the district. In such circumstances the duty is to provide the applicant with the necessary advice and assistance that the authority considers reasonable in order to enable the applicant to find suitable alternative accommodation.

15.     Part 6 of the 1996 Act (Allocation of Housing Accommodation), provides for the allocation of long term social housing accommodation to those who have been accepted as qualifying and placed on the housing register maintained by the housing authority. It is only once a person has been put on the housing register that an authority may allocate him accommodation in accordance with its allocation scheme. The scheme determines priorities and sets out the procedure to be followed in the allocation of accommodation.

16.     Part 2 of the Bill is intended to:

  • require authorities to take a more strategic, multi-agency approach to the prevention of homelessness and the rehousing of homeless households;

  • ensure that everyone accepted by authorities as unintentionally homeless and in priority need must be provided with suitable accommodation until they obtain a settled housing solution;

  • allow authorities greater flexibility to assist non-priority homeless households, principally through a new power for housing authorities to secure accommodation for such households where they have scope to do so; and

  • facilitate lettings policies which offer more choice to homeless people and others in housing need with the aim of helping to create sustainable communities, tackle social exclusion and make better use of the national housing stock.

17.     Part 2 of the Bill provides for the following:

Homelessness reviews and strategies

18.     The Bill includes a requirement for local housing authorities, with the assistance of social services authorities, and in consultation with other bodies including registered social landlords and voluntary organisations, to:

  • carry out reviews of homelessness within their area;

  • formulate and publish strategies for tackling and preventing homelessness problems based on the results of those reviews;

  • publish the first strategy within 12 months of the coming into operation of these provisions; and

  • publish a new strategy thereafter within five years of the previous strategy having been published.

Other functions relating to homelessness

19.     The Bill provides for:

  • abolition of the current two year period during which a local housing authority is subject to the main homelessness duty;

  • abolition of the current duty on authorities to consider whether other suitable accommodation is available before they can secure accommodation themselves;

  • additional circumstances in which the applicant can bring the main homelessness duty to an end by accepting an assured tenancy; and

  • a new power for authorities to secure accommodation for homeless applicants who are not in priority need.

Allocations of social housing under Part 6 of the Housing Act 1996

20.     The Bill covers:

  • abolition of the requirement for local housing authorities to maintain a housing register;

  • eligibility of applicants (including existing tenants) of an authority to be allocated housing accommodation, subject to certain exceptions;

  • the provision of information and advisory services to applicants for housing accommodation ; and

  • provisions that must or may be reflected in local housing authorities' allocation schemes - including giving reasonable preference to certain categories of applicant.

COMMENTARY ON CLAUSES

Part 1 - Home Buying and Selling

21.     Clause 1 sets out the definitions that specify who is subject to the requirements of the Bill, when and in relation to what properties.

22.     Clause 3 imposes requirements on those responsible for marketing residential property and clause 4 imposes requirements on those acting as estate agents in England and Wales. The requirements concern the availability of a seller's pack. In the case of a residential property, the requirements under clause 3 commence when the property's availability, or possible availability, for sale is first advertised or otherwise made known to the public or a section of the public. Clause 4 requires that before a person acting as an estate agent can contact any individual with information about the availability of the property, with a view to marketing that property, there must be a seller's pack available.

23.     The expression 'section of the public' is not defined in the Bill but has been used in many other Acts of Parliament. It would not include an individual, or small group of individuals, or a seller's family or friends. In general, the seller would know these people in a private capacity.

24.     Examples of what would amount to making known the availability of a property for sale include placing an advert in a newspaper or shop window, erecting a "For Sale" sign or placing details of a property on a website indicating that it is for sale.

25.     The seller's pack requirements apply for residential properties intended for occupation as a separate dwelling (together with any land with that dwelling) which are marketed for freehold or long leasehold sale. The requirements also apply for the marketing of an option to acquire such an interest.

26.     The requirement to have a seller's pack is also subject to the exceptions provided by clause 5.

27.     A seller's pack is required for a residential property which is marketed "off-plan". That is to say a property which is not constructed at the date on which the marketing of that property takes place, but where the buyer purchases a fully constructed home.

28.     The effect of these provisions is to exclude from the requirements of this Part of the Bill marketing of:

  • non-residential property;

  • mixed commercial (or industrial) and residential property;

  • property sold with sitting tenants;

  • portfolios of properties in circumstances where no offer for a single dwelling would be accepted; and

  • marketing of leases of less than 21 years.

29.     The seller's pack requirements are thereby targeted on homes being marketed for owner-occupation.

30.     Clause 2 identifies who is "responsible" for carrying out the duties relating to sellers packs which are contained in clause 3. Only a person considered "responsible" has any obligations under clause 3 or could become liable to prosecution for any of the offences created by that clause. Clauses 2 and 3 apply where a property is on the market (as defined in clause 1).

31.     There are two categories of people who can be considered responsible where a property is on the market - the seller of that property or someone acting as an estate agent for the seller. "Acting as an estate agent" is defined in clause 14 as someone acting in the course of business who accepts instructions from a seller to market the property with a view to introducing the seller to a potential buyer. It is not relevant whether they describe themselves as an estate agent, but these notes refer to "an estate agent" for ease of reference.

32.     If a seller instructs an estate agent who has a place of business in England and Wales to put his property on the market, the estate agent (and not the seller) will be considered responsible. If the estate agent is a partner in a firm, the firm itself is considered responsible rather than the individual partner.

33.     A seller will be considered responsible for marketing a property if:

  • he personally takes the action which makes it known that the property is for sale;

  • a person who is not acting as an estate agent (such as a friend or relative) takes the step which puts the property on the market, on the seller's behalf; or

  • he instructs an estate agent who does not have a place of business in England and Wales if the action which puts the property on the market is taken by that agent.

34.     More than one person can be considered "responsible" for the marketing of a property. For instance, if an estate agent accepts instructions from a seller to market a property which is already on the market he becomes responsible (and must therefore comply with the seller's pack duties). Equally, if a seller undertakes marketing of a property independently, that seller will become responsible for marketing and subject to the seller's pack duties even though an estate agent has also been instructed to act. In such a case, the seller will be able to rely on the seller's pack provided by the estate agent.

35.     A "sub-agency" is where one agent acting for a seller employs another agent to assist in the marketing of a property. The sub-agent - although clearly marketing a property during the course of a business - would not be 'responsible' for carrying out the duties relating to seller's packs since he would not be acting on instructions from the seller. No difficulties arise in these circumstances since the "head-agent" would be 'responsible' and would be able to make copies of that pack available to any potential buyer.

36.     There is no limit on the number of persons who can be "responsible" for the marketing of a property and all persons who are responsible must be able to comply with all of the seller's pack duties. Once a person has become responsible for the marketing of a property that person remains responsible until they lose that status in one of the following ways.

37.     A person acting in the course of business can cease to be responsible if:

  • the property is sold;

  • the property is taken off the market; or

  • the contract with the seller is terminated and no further marketing activities are carried out by the person acting in the course of business.

38.     A seller can also cease to be responsible if:

  • the property is sold;

  • the property is taken off the market; or

  • the seller instructs someone acting as an estate agent to carry out the marketing of the property and the seller ceases to carry out any marketing activity personally.

39.     A property is sold when a legally binding contract for the sale is agreed. This is usually when contracts are exchanged.

40.     The Bill does not define "taken off the market" but this is an ordinary expression which should be given its usual meaning. It will include putting up a sign which says "sold subject to contract" or simply "sold" provided marketing activity has ceased. It will also include removing an advert from a window, or taking down a "for sale" sign.

41.     If a person wishes to cease being responsible for the marketing of a property under the third method described in paragraphs 37 and 38, the obligation is an active one, namely to cease marketing. So if there is some marketing activity already under way (for example if a "for sale sign" has been erected or an advert placed in a window), it is necessary to take steps to discontinue that marketing activity (e.g. by taking down the "for sale sign" or removing the advert from the window).

42.     There may be some circumstances where a person has put in train some marketing activity which it is not within that person's power to stop, such as placing an advert in a newspaper which has already gone to print. A person is only required to take such steps as he reasonably can in order to stop marketing.

43.     In certain circumstances it is possible that no person is responsible for the marketing of a property which is on the market. But as soon as any person takes a step which advertises to the public or a section of the public that the property is available for sale, however, that person will be considered responsible and will have an obligation to comply with the seller's pack duties.

44.     Clause 3 sets out obligations to make the seller's pack available to potential buyers.

45.     From the point that a property is put on the market, the person responsible must have a seller's pack which complies with the relevant requirements. Any part of the seller's pack held in electronic form must be capable of being properly viewed and capable of being copied, using readily available equipment.

46.     While a property is on the market, anyone responsible for marketing must provide to a potential buyer who requests it, a copy of the seller's pack (or any part of it) within fourteen days of receiving a request. A reasonable fee may be charged to cover copying costs. Copies can be provided in electronic form where that suits a potential buyer. A potential buyer does not include someone whom the seller reasonably believes either cannot afford, is not genuinely interested, or to whom the seller does not wish to sell the property.

47.     Clause 4 provides that where an estate agent accepts an instruction from the seller to market the property, they must have a copy of the pack before taking any action to communicate to any possible buyer information that the property is, or may become, available.

48.     A person who fails, without reasonable excuse, to comply with the seller's pack duties is liable on conviction to a maximum fine of £5,000. If a person is served with a fixed penalty notice and does not pay the penalty, the maximum fine in any subsequent proceedings for that offence is £500.

49.     Clause 5 limits the requirement to have a seller's pack by excluding properties which will not be available with vacant possession at the time of sale. Clause 5 also allows the Secretary of State to prescribe other circumstances in which the provisions of this Part shall not apply.

50.     Clause 6 sets out four statutory defences available to a person charged with an offence:

  • that they exercised all due diligence to avoid committing the offence;

  • If responsible for marketing a residential property, clause 3(2) requires such a seller to have a seller's pack, but it is a defence to rely on possession of a seller's pack by an estate agent instructed by them;

  • Clause 3(3) requires anyone responsible for marketing a property to provide a copy of a seller's pack to any potential buyer. It is a defence if they reasonably believed that the person requesting the pack cannot afford, was not genuinely interested or was not the sort of person to whom the seller intended or was prepared to sell the property.

  • if they can show reasonable grounds for believing that an estate agent has the pack, and they inform the buyer that requests for copies should be made to the estate agent, this is also a defence.

51.     Clause 7 sets out provisions relating to the contents of a seller's pack.

52.     This gives the Secretary of State the power to prescribe the documents to be included in the seller's pack and what information should be included in those documents. The power extends to prescribing the form and detail of documents in the seller's pack, how they should be provided and by whom, and allowing the contents of the pack to vary according to circumstances. An example of the use of this power could be the exclusion of a home condition report from the seller's pack where a new home was marketed for sale 'off plan' before construction had commenced or been completed. In addition, different documentation will generally be required depending on whether the interest in a property is leasehold or freehold.

53.     The documents and information specified must relate to matters connected with the property, or its sale, which would be of interest to potential buyers.

54.     Clause 7(5) and (6) provide an indicative list of contents of a seller's pack. The documents and information listed are currently normally obtained by or on behalf of the seller or buyer during the process of a normal home sale. An item which, under current arrangements, is not normally available but which is intended to be included in the home condition report is information about the energy efficiency of the property.

55.     Clause 7(7) and (8) provides that the regulations can require that a particular document should be prepared by particular people in a particular way and can require the contract by which a document is obtained to be enforceable by people who are not party to that contract. This will permit the regulations to ensure, for example, that buyers and mortgage lenders can rely on the contract by which a home condition report is obtained. A buyer or mortgage lender would then be able to sue a negligent surveyor, even though they had not commissioned and paid for the home condition report.

56.     Clause 8 contains provisions relating to home condition reports. A home condition report is intended to be a report on the physical condition of a property which involves a similar level of inspection to that for the existing Home Buyers' Survey and Valuation. These provisions are intended to give confidence to home buyers, sellers, mortgage lenders and any others who need to rely on the contents of the report. The regulations will ensure that only inspectors who are members of a certification scheme approved by the Secretary of State will be able to carry out inspections and provide home condition reports for inclusion in the seller's pack. Clause 8(5) lists a number of points on which the Secretary of State will need to be satisfied before approving any certification scheme, including that inspectors are appropriately qualified, with adequate insurance and complaints resolution procedures.

57.     Clause 9 and Schedule 1 provide for the enforcement of the seller's pack duties by local weights and measures authorities (who act through Trading Standards Officers employed by local authorities). Schedule 1 gives Trading Standards Officers power to serve a fixed penalty notice, giving an offender the choice to pay a penalty as an alternative to court proceedings. The Secretary of State has power to prescribe the form of a fixed penalty notice, the level of penalty and methods of payment and also circumstances in which fixed penalty notices may not be given. Where, following service of a fixed penalty notice which is not paid, the case is heard by the courts, the maximum fine on conviction is £500.

58.     Service of a fixed penalty notice has the effect of suspending any enforcement action against an offender for at least 28 days. If the person on whom a notice is served pays the fixed penalty within that period, no court proceedings can be brought. A person paying a fixed penalty in these circumstances will not have a criminal conviction.

59.     The Trading Standards Officer will decide what action to take over a suspected offence under this Bill. The officer will have the discretion to:

  • give advice or a warning;

  • offer a formal caution;

  • serve a fixed penalty notice; or

  • commence a prosecution in the Magistrates' Court.

60.     Schedule 1 also sets out the powers of officers of the enforcement authority, provides that it is an offence to obstruct or impersonate those officers and an offence for an officer of the enforcement authority to disclose information to another person except in performance of the enforcement function. It also provides privilege against self-incrimination. These powers, functions, offences and privileges are modelled on those which currently apply to the enforcement of the Property Misdescriptions Act 1991.

61.     Clause 10 provides that any enforcement proceedings must be taken by, or with the consent of, the Director of Public Prosecutions or a local weights and measures authority. Proceedings must be commenced within three years of the offence or one year of its discovery by the prosecutor, whichever is earlier. Where the offence is committed by a person not acting in the course of business (for example by a home owner marketing his own home), proceedings must commence within six months of the offence.

62.     Clause 11 deals with offences committed by employees, companies and partnerships. It provides that an officer of a company, or a partner in a firm, may be prosecuted for an offence committed by the company or partnership, if responsible for the commission of an offence by that company or partnership.

63.     Clause 12 provides power for the Secretary of State to give grant assistance towards the cost of developing a certification scheme for home condition reports (and for other aspects of the seller's pack).

64.     Clause 13 provides that regulations are to be made by negative resolution statutory instrument and that the Secretary of State should consult the National Assembly for Wales about any regulations which are to have application in Wales.

65.     Clause 14 defines the expression "acting as an estate agent". The effect of the definition is explained in these Explanatory Notes with the concept of "responsibility" under clause 2.

66.     Clause 15 gives definitions for expressions used in Part 1 of the Bill. The effect of these definitions has been explained in these Explanatory Notes where those expressions have been used.

 
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