Orders of the Day — Homes Bill

Part of the debate – in the House of Commons at 7:52 pm on 8th January 2001.

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Photo of Philip Hammond Philip Hammond Shadow Spokesperson (Health) 7:52 pm, 8th January 2001

I am sorry to disappoint the hon. Member for Erewash (Liz Blackman), but I intend to speak exclusively about part I. I draw the House's intention to the registered interests that I have and have had for many years in a small company involved in the housebuilding business. That certainly does not make me an expert on the subject, but, on many occasions in two decades or more, it has made me a frustrated bystander to the process of buying and selling property.

I share wholeheartedly the Minister's objective of shortening the time that it takes between the agreement of a sale and the exchange of contracts. I say that not because I think that gazumping is such an important problem—its impact and effect has been much exaggerated—but because many other problems are associated with the long delays between agreement and exchange.

I understand the Government's instinct to legislate to achieve their objective. Legislation is within their power, so it is natural that they should reach for the statute book to deal with a problem. However, legislation has great difficulty in dealing with structural and cultural problems. One factor that has been missing from the debate is recognition of the way in which the structure of owning and transacting houses and the culture in England—if not in Scotland—affect the problem.

The Minister and many others have made comparisons with other countries. Denmark has been much quoted, but it is fair to point out that there is a significant difference between the percentage of owner-occupied properties in the countries that have been quoted and in this country. There is also a difference in the level of available privately rented accommodation, and different patterns of finance are used for house purchase.

The norm in England, but not necessarily in Scotland, is that people still expect to move out and to move in on the same day; they expect to co-ordinate their transactions. Although we can consider the reasons for the delays in the conveyancing process, I suspect that most of them relate to the attempt to co-ordinate the sale and the purchase. That is a major factor that we must examine.

The Government have identified several legs as being part of the solution. One of them is the seller's pack, but they have also suggested that buyers need to be better prepared when they enter into a transaction. Information coming from the Land Registry and local authority searches needs to be speeded up. However, the Bill proposes criminal sanctions in only one area—the responsibilities of the seller. What do the Government propose to do about local authorities that do not play their part in the overall scheme? What do they propose to do about buyers who do not make the necessary preparations before the transaction and thus might upset the legitimate expectations of the seller?

One major legitimate problem that buyers often face is a valuation from their lender that is lower than the offer that they have made for a property. That leaves the buyer and the seller in an awkward predicament. An objective valuation included in the seller's pack could help to unstick that problem. However, from what I have read, my understanding is that the Government's proposals were designed specifically to exclude a valuation from the condition survey to be included in the pack. In response to an earlier intervention, the Minister said that was not necessarily so and that some of the details remained to be worked out. I welcome that comment but, if a valuation is to be included in the seller's pack, he will have to persuade lenders to abandon their time-honoured system of having designated panel valuers and to accept any valuation that is included in a condition report made by an authorised and licensed surveyor or other practitioner. If he can do that, we may make some progress.

The Government now propose a compulsory system of seller's packs that include a survey. However, those who want to speed up the transaction process are already able to do so. Sellers of houses are perfectly free to adopt a binding tender approach to their sale, which will create a binding contract upon acceptance of the offer. Many private buyers—although admittedly still a very small number—use the auction system that also creates a binding contract on the fall of the hammer.

Conveyancing delays are emphatically not the real or the main problem. The problems are chains and the mortgage arrangements that people have to make. Coupled with those arrangements is the very high gearing that people expect to employ when they borrow to buy a home. It means that a very small undervaluation can dramatically upset their plans and cause them to be unable to proceed.

I wish to make two comments about the proposed packs. First, information will have to be provided at some stage in the process by either the buyer or the seller. There can be relatively little harm in providing much of that information up front. My only caveat relates to the shelf life of some of that information. Earlier, we heard an exchange about local authority searches. Although such searches do not expire after three months—three months is not a magic figure—lenders typically will not accept searches that are older than that. Although the Minister may not require a seller to pay for a new search to be done after three months, the buyer will almost certainly have to pay for a new local authority search to satisfy his lender when the property transaction is finally closed. The Minister would make real progress if he tackled the lenders over that practice and their insistence on it.

Secondly, more than 70 per cent. of buyers do not currently ask or pay for certain aspects of the information that will appear in the proposed condition report or survey. In a document that came from his Department, the Minister suggested that all those involved in the process agreed that survey or condition reports should be part of the packs. The Minister addressed a conference of estate agents in November and I hope that he came away from it in no doubt that many of them did not agree that the inclusion of a compulsory survey was a good idea. Lenders do not require surveys for most properties. Most buyers do not commission surveys and many people would not understand them—indeed, they might inappropriately be put off a property.

The inclusion in the pack of a compulsory survey will have a major impact on the costs to the seller. It is disingenuous of the Minister to say that there will be no significant incremental cost because the figures show that no condition report is commissioned in 70 per cent. of cases. If the additional condition reports are commissioned, they must, in aggregate, add a significant extra cost, which will support the living of the 3,000 additional surveyors that the Royal Institution of Chartered Surveyors has estimated will be required.

There is potential for a major reduction in liquidity in the market because sellers will not be able to dip their toe in the market on the principle that if there is no sale, there will be no fee. The Government's assertion that surveys are a valuable contribution is based on an utterly inconclusive pilot, which had a small uptake, in a relatively affluent area.

Many of the points that I wanted to raise have been eloquently made by hon. Members on both sides of the House. I hope that the Government will decide not to include the survey as a compulsory element of the pack. The Minister has made it clear that, because the pack's contents are to be determined by regulations, the Government have that option open to them and I hope that they will be receptive to representations over the coming months.

However, assuming that the Government are not going to change their mind, I have a couple of specific questions. Clause 7 gives the Minister wide powers of discrimination between different classes of property, but I have seen no suggestion that new homes or nearly new homes that are covered by warranties, such as those issued by the National House-Building Council, are to be excluded from the scheme. Is that the Government's intention? The Bill requires that a property that is marketed as a dwelling, whether complete or not, will require a seller's pack. Most new properties begin to be marketed before they are completed or, indeed, started. I take it that the Government do not intend to make it illegal to market a new property until it is complete and a survey has taken place. I should be grateful if the Minister would clarify that.

Will the Minister also clarify, because there is some ambiguity on this matter, whether he intends to extend the duty of care owed by the surveyor, or the professional, so that it will include the lender? It is clear to me that it will include the seller and the buyer, but my understanding from the RICS document is that it most emphatically will not include the lender. Therefore, if the lender requires a survey, the buyer will have to commission another survey. If the Minister can persuade lenders to accept the surveys that he proposes to include in the pack, we would be considering a different proposition.

In conclusion, I support the objective of trying to reduce the time between agreement of a sale and exchange of contracts, but, in so far as we can tell, because regulations have yet to be made, the Bill does not provide a robust mechanism for that. The evidence has not been conclusively presented to suggest that the Government's proposal will achieve that objective.