|Previous Section||Back to Table of Contents||Lords Hansard Home Page|
Lord Phillips of Sudbury: I am sorry to interrupt the Minister in full flow. He repeatedly makes the point
14 Sept 2004 : Column 1061
that all this upfront information is nothing but benign. However, to take one example, does he not accept that all the information that will now be required on the title of the property, which currently is not required of the vendor's solicitors until after exchange, will lead to a huge amount of wasted time and effort between solicitors in cases where, having agreed in principle to sell and buy, the property transaction then collapses because of a chain problem, a finance problem or a number of other issues; for example, change of circumstances? Does he not at least concede that in many cases those requirements will add considerably to cost?
Lord Rooker: I find that quite interesting from a lawyer; that is, the possibility of things collapsing after the offer has been made because of problems caused by finding out about technical hitches and details. It is true, I accept, that some documents might come in at the very end and that could cause a problem. However, I suspectI shall take advice on thisthat that would be in a minor amount of cases compared with the vast number that fail either because of the condition of the property or other matters relating to the condition which are found in the home condition report and which would make that miniuscule in comparison.
Lord Phillips of Sudbury: I am grateful for what the Minister said. The truth isthis is where the problem of not having a good evidential base for all this is exposedthat survey work has been done and my own survey work among the solicitors of Suffolk and North Essex indicates that the majority of transaction failures are nothing to do with the condition of the property but are to do with valuation and obtaining finance. Valuations are not part of the home information pack. That will come later. So, far from this solving the frustrations and heartache of transactions that collapse, the statistics that we havemy noble friend Lady Hamwee quoted some last nightindicate that around 15 per cent of transactions collapse because of survey issues as compared with all the other issues.
Lord Rooker: We can bandy statistics. I have some better statistics than I had yesterdaythis is not the group of amendments in which to use themwhich will, I hope, rebut some of the points raised. The fact is that you cannot tell the connection, except in individual cases. If there is an argument on valuation, was it caused by someone finding out more about the property than they would have known without having the home condition report? They may say, "Hang on a minute. I'm not paying that much for the property. It's not worth that much because something's been discovered". It is true that that might be ticked off as an argument about valuation. Why did that arise in the first place? Because someone found out something and, if they had found out about it beforehand they would not have made the offer on the basis of false information. So, it can look like an argument about valuation but it may be that the valuation was done in ignorance of the home condition report and not knowing about the property in the first place.
14 Sept 2004 : Column 1062
I was half way through a really good sentence about the time spent compiling the pack. Speed can be illusory and can be followed, as I have said, by protracted negotiations while the legal aspects are sorted out. Each of these issues can reveal problems that add to the delay and the collapse of the sale altogether.
Having this relevant information at the start of the process creates a number of benefits. I was going on to say that it is perhaps novel for the estate agent to set the price of a property based on knowing something about it. That may be novel for some estate agents. Knowing information on the property they can give better advice on marketing strategy and selling price. The pack will help to identify for the seller and the seller's professional advisers problems, for example, with the title. If there are problems with the title, the time to find out about them is before you market the property, not when you are supposed to complete.
Other benefits include transparency. If a buyer makes an offer knowing the true condition, they are less likely to complain later on about valuations and other matters. We think that the cost savings should be evident. As I have saidand I will give further details on thisour modest, conservative estimate is that some £350 million is wasted each year. That is a complete waste; there are no assets gained from that. Streamlined conveyancing will be possible due to the bulk of legal and other preparatory work being carried out in the days before marketing and not the weeks afterwards with the pressures involved.
We consulted on these matters some 18 months ago, including on the issues of the documents that would be needed for the title. So, there are no surprises about what is needed in the pack by professionals.
The benefits in terms of shortening the period from offer acceptance to exchange of contracts and making the process more transparent should more than outweigh any slight delayit can be only a slight delayto marketing while the pack is put together. To allow marketing, even for a limited period, without a pack perpetuates the failings of the current system. Buyers and sellers would be negotiating in the dark. This lack of upfront information, as we mentioned earlier, is the root cause of consumers' dissatisfaction.
Amendments Nos. 183, 183A, 185C and 194 may have been tabled on the assumption that sellers will be unhappy waiting until a pack is compiled before marketing commences, but what sellers really want is a quick sale, not quick marketing. There is a difference between a quick sale and quick marketing. It is a quick sale that they want; the outcome, not the process. We want to speed up the process so that the outcome becomes more certain for everyone concerned.
Amendment No. 183 would delay for 14 days the duty to have a pack. As I have explained, that would perpetuate the current problems and I cannot believe that it is a serious attempt to improve the Bill. As I have said, the same arguments apply to Amendment No. 183A. Amendment No. 185C would allow the Secretary of State to make regulations prescribing a permitted period, beginning when the marketing starts, within which a pack must be provided.
14 Sept 2004 : Column 1063
I understand the concerns, and no one wishes to see unnecessary delays. However, as I have said, the Bill contains a range of mechanisms to enable us to deal with potential problems. With the homework and spadework that is being done with the industry in full co-operation between now and the bringing into force of the legislation, such problems will not, it is to be hoped, arise.
It is important not to underestimate the difficulties for enforcement authoritiessomeone will have to enforce this, as will be clearof allowing marketing for a period without a pack. That would be a difficulty. If that period were allowed, it would be impossible to police the system and I think it would remove the benefits of upfront information to buyers and sellers and leave a high chance of aborted transactions. As I said last night, it would be selling a false prospectus to the public on the basis that they thought we had done something about it.
The Earl of Caithness: As the Minister was in the middle of his most interesting sentence, I did not continue the discussion at that point. However, I should like to take him up on three or four matters. The Minister keeps referring to the current problems the industry faces. We should not forget that over 70 per cent of transactions do not cause problems; they work perfectly well. They can be speeded up, but the market is not in crisis. The market is working. Areas need attention, but to give the general impression that the market is a complete failure and in dire need of improvement is a totally wrong picture of what is happening.
The Minister referred again to the £350 million in abortive costs of transaction failures. Let us remember that that figure of £350 million was based on a survey involving 30 properties and was extrapolated from that. We must also bear in mind that those who did the research gave a caveat on the figures and said, "These figures need further work". The Government have not done that further work.
I was very interested that the Minister then started to disagree with the research that he had carried out by Key Research on the question of failed purchases. It is true that 30 per cent of failed purchases are a result of an adverse valuation survey, but now the Minister wants to look behind that. He has been beating the drum that that 30 per centin fact he is calling it 43 per cent because he is adding in the 13 per cent of unfavourable surveysis the cause of this Bill. If the Minister wanted a more accurate breakdown of why purchases failed, then the Government should have arranged it at a much earlier date rather than proceeding with a Bill, so that we could at least be talking of a sensible research programme that did not have a whole lot of caveats with it.
Finally, the 13 per cent of failed purchases due to an unfavourable survey in fact works out at a net figure of less than 4 per cent of all failed transactions. That does not reflect a market in crisis.
|Next Section||Back to Table of Contents||Lords Hansard Home Page|