Clause 8 - Home condition reports
Homes Bill
4:45 pm
Mr Gareth Thomas (Clwyd West, Labour)
The hon. Member for Eastbourne (Mr. Waterson) has for once, with the greatest respect to him, done us a service by probing the important issue of privity of contract, in which I take an interest. I want to take a few minutes to explore the subject, in the expectation that my hon. Friend the Minister will elucidate matters a little.
As a lawyer, I have had experience of dealing with what we describe as surveyor's negligence cases, and this is an issue that often arises in practice. Who can sue? Following the case of Smith and Bush, the position prior to the coming into force of the Contracts (Rights of Third Parties) Act 1999 was that, while there was no privity of contract between a buyer and the party who had prepared a valuation report for the lender or the building society, very often the buyer was able to sue in negligence—not in contract—where it could be established that he had relied upon the valuation report to his detriment. That has been an established principle, certainly when the transaction concerns what could be described as a low-value or modestly priced property.
However, it seems that we need to look at the Contracts (Rights of Third Parties) Act 1999, and I am sure that the Minister will refer to it in his reply. It has extended rights to third parties to be able to sue upon a contract in their own right. Section 1(1)(a) of the Act says that a third party may enforce a term of the contract—I believe that we are talking about the home condition report—if it
expressly provides that he may.
Section 1(3) goes on to say that the
third party has to be expressly identified
if not in name, he has to be identified as belonging to a particular class. Is it the intention that buyers and lenders should rely upon the home condition report? If it is, there is a strong argument for putting that in the Bill—given that one of the primary objectives of the Bill must be to reduce the cost of house buying. Surely one of the objectives is to avoid the necessity for the buyer to obtain his own valuation report by enabling him to rely upon the home condition report procured by the seller. I should be grateful to hear what the Minister has to say on those issues.
When this matter was raised on Second Reading, my hon. Friend the Minister said that it was the Government's intention that both the buyer and the seller would be able to reply upon the HCR. No specific reference was made to the lender being able to rely upon the report. The lenders have a case, because if they are to do desktop valuations, they have to have before them a fairly robust report upon which they can rely, in law as well as in practice, in order to obviate the necessity for them to go out and get their own valuation report and charge the buyer for it.
However, there is of course no privity of contract between the lender and the seller. Do the Government believe that the law of negligence would apply and that, provided that detrimental reliance could be established, there would be a cause of action for the lender as well as the buyer? I should be grateful if the Minister would address these issues because they concern a number of people, including the Law Society and those in the commercial lending community. Although hon. Members might think that I am making a trade unionist point, I have never conveyed a house during the whole of my professional life. If the Bill is to be enacted, we will need greater clarity. I would like to see something like amendment No. 13 included in the Bill or, if not, further assurances from my hon. Friend the Minister.