Conveyancing process needs urgent reform

What can be done to make moving home faster and less expensive?  

This is a burning question and one that has yet to be addressed by Government despite the fact we currently face a major housing crisis and a situation where first time buyers are finding it increasing difficult and expensive to find a home.  The problem facing the first time buyer is likely to increase shortly with the withdrawal of the stamp duty concession and the forthcoming changes to how mortgages will operate in the future.

A brave Labour Government sought changes, the first since 1925, with the introduction of the doomed home information pack, but this was shot down in a blaze of glory by the Coalition Government when it came to power in May 2010.  Unfortunately in the rush to score political points no one seemed to care that by removing this attempt of reform it left the door open once again for the return of the problems associated with aborted transactions, increased costs and delay.

In fact, we are still left with an antiquated process and one that cries out for immediate reform.  The question is whether the current Government has the courage and inclination to do anything about it. 

So where do the problems lie?

Disclosure

As the law currently stands it is for the buyer to do most of the running around and to ask the seller questions because the duty to discover any problems with the property rests with the buyer.  There is no duty on the seller to volunteer adverse information about the property unless asked.  This means we have this bizarre process of having to ask the seller a series of questions hoping that all of the right questions are raised.   This is often a long and protracted process and one that could be avoided if the seller was required to bear all about the property to be sold.  This could be through thee completion of forms/questionnaires, documents that could be completed when the property is first placed on the market.  

Why not get the estate agent to ask the seller to complete the form and to make this available to prospective buyers.  At least the buyer could then decide on whether a survey would be needed.  All of this would take place before the lawyer is instructed and would save so much time.

Some may argue this is a ‘HIP”.  No it is not.  There is no added expense for the seller or the buyer. The seller simply completes a form knowing due to a change in the law that the duty to disclose rests with him or her and this forms part of the marketing process.   It would save time, it would save money as the transaction could proceed that much quicker and it would mean both seller and buyer standing far more chance of completing the transaction than they do at present.

Searches

Before the days of the HIP there were often delays in procuring searches.   Due to the shake up of Councils caused by the introduction of the HIP, most Councils have streamlined and improved service levels.   On top of this, personal search companies following the collapse of the HIP have faced a drop in demand for searches and this has led to increased competition and a vast improvement in the time it takes to deliver search results.

Search related delay is therefore uncommon.

However it is a bizarre situation that each time a property is sold a buyer is required when purchasing with a mortgage to order new searches.   This is often costly.  Often the cost of the search package is more than the fee charged by the solicitor!

In a time when the majority of the land in this Country is registered at the Land Registry would it not make sense for information on water and sewage and environmental issues to be noted on the Land Registry Title Document so that future buyers could see that at the outset and decide whether to ask the suppliers of the information whether there has been any change to the data since it was first supplied?   The cost of checking would be far cheaper than having to order a new search each time the property is transacted.

The same could apply to planning and building regulation data requiring this also to be noted on the Register the first time a property is sold and the data is disclosed.  How many times have property lawyers had to run around after planning and building regulation documents. 

On this subject if lenders could make it clear that they are not interested in planning and building documents which relate to matters of over 15 years in age this would also save time and money.  Some simple changes to the law to make it clear that no liability can arise on planning and building regulation breaches after a set period of time would put an end to this ridiculous and unnecessary paper chase.

Title defects

There will always be the occasional problem with title that needs to be addressed through insurance.  Why is it not possible that when the effect is found and insurance is taken out that there is not a requirement on the purchaser to register the insurance details at the Land Registry?  This would in terms of future due diligence save time and money and also avoid a future purchaser who may not have had the original policy passed to him or her, having to take out and pay for a fresh policy.  

Mortgages

Obtaining a mortgage offer once the mortgage is approved is no longer a reason for delay.  Most buyers receive their mortgage offer very early in the process.  The reason for this is that the lenders are issuing far less offers than they were before and therefore the paperwork of those mortgages they take on is coming through much faster.

Client Delay

Clients who sell have quiet a bit of paperwork to complete and it always amazes me that responsibility of over seeing this rests with the lawyer.  I am not sure why the selling agent could not ask the seller to complete these when the agent is engaged. It would save a lot of time and would quicken the process.

Solicitor delay

I always tell my clients that I can only be as fast as the slowest solicitor in the chain.   It is frustrating when you do as much as you can to progress a transaction only to find the solicitor acting for the other party is not responding or taking too much time to respond.

What can be done to improve this?  Very little though in a climate where lender panel membership is of importance to the survival of most conveyancers perhaps lenders will in the future take a closer look at the activity and performance of panel members and be more inclined to remove members where there is evidence of   repeated ineptness.

Conclusion

I accept a change in the law to reverse the maxim of ‘buyer beware’ would involve a radical switch, however by doing this the whole process would be far more transparent, quicker and cheaper.    It would lead to the front loading of information on a sale and if the requirement to register search data at the Land Registry along with title defect insurance was also introduced this would mean a prospective buyer would have to hand before an offer is made all the information he or she would need in making an offer and thereafter engaging a solicitor.

The cost of obtaining the title information, a cost which is already met by the seller may increase due to the extra data recorded and supplied, but this would easily be off set by the saving on not having to order full searches and reduced conveyancing fees due to a more streamlined service.

What are the chances of this happening?  Remote I would say as there is too much vested interest in the process as it presently operates and you also have a Government that says on the one hand it wishes to reduce bureaucracy and save costs, whereas on the other hand it has clearly stated it is not keen on introducing regulation that could hamper an already ailing property market.   It seems to have little appetite to interfere with the process. 

So it looks as if we may be facing another 100 years of operating a slow, costly and totally unfit for purpose  home moving process.   

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

New Survey shows withdrawal of HIPs has led to a return of problems with aborted property transactions

Home Information Packs were introduced by the Labour Government in response to a high volume of feedback from the public about concern over property transactions falling through and consequential losses.

The Coalition Government decided in May 2010 to abolish Home Information packs claiming that this would instantly lead to an increase in property activity and put more money back in the hands of the homeowners.  

The likes of Kirstie Allsopp, Grant Shapps and Eric Pickles lead what became a very personal and high profile campaign to bring Home Information Packs to an end, and were often photographed unwrapping ‘red tape’ wrapped around houses.

Twenty months on the question is what has this decision achieved – are homeowners any better off and has it led to any change in the very situation that led to the introduction of HIPs?

Recent research suggests it has not. A new survey has shown that over 500,000 house sales fell through at the end of 2011, a jump of 33% from the beginning of the year.

The study also showed that property deals in the second half of 2011 were less likely to succeed than they were to collapse.

This led to homeowners incurring unrecoverable costs, running into thousands in most cases and averaging well over £5,000.

So rather than saving money as we were all told it would, this data shows that what most conveyancers knew, that without the financial commitment shown by those selling in purchasing a HIP, together with buyers not knowing anything about the legal aspects of the property before instructing a solicitor, transactions remain at a higher risk of collapsing than they did at the time Home Information Packs were in place. 

The absence of the HIP or a suitable replacement for it ,has also slowed down the sale and purchase process, which in turn has increased scope for sellers and buyers to change their mind and pull out.

HIPs may not have been the ideal answer but at least the reform was one step in the right direction and had at its time of demise begun to make an impact on resolving the problem for which it was designed.

It’s a shame that senseless political football got in the way. Equally it’s a travesty that the main proponents of its withdrawal have just left homeowners far worse off than they have ever been without not even a hint of finding a different solution to what is proving to be a major problem. Grant, Kirstie and Eric we need answers please. 

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Housing Summit - No room for lawyers?

Interesting that the one absent party from the summit meeting on what should be done to help first time buyers, held and chaired by Housing Minister Grant Shapps on 15^th  of this month, was  a representative of the legal profession.   

The meeting was attended by ‘leading industry figures’ representing home builders lenders, councils and consumers.   Perhaps the Housing Minister, who of late has been preoccupied with television and radio appearances in his capacity as Local Government Minister, does not regard housing lawyers as having thoughts and ideas on what can be done to help our first time buyers. Perhaps it was a case of a simple oversight.

Yes, I know it may be more to do with availability of lower cost housing, and more affordable lending schemes, but there is clearly room for improvement in the conveyancing process that could be introduced to simplify and make less expensive the cost of purchasing.  

Lawyers working in the residential sales and purchase market day in day out know that the process of buying a property is broken and full of unnecessary form filling and other bureaucracy.   If as Mr Shapps claims there is need for all of the players in the industry to pull more closely together then clearly it is important to ensure that he has present representatives from all relevant sectors.   

Housing Minister Grant Shapps said:

"I called on key figures from across industry to come together today, because we must do more to help aspiring first time buyers - the average age of the first time buyer with no support from their family is now 37, and there are 1.4 million households who aspire to own a home but are simply unable to do so because of house prices and mortgage availability.

"I wanted to hear a first-hand account of the problems the sector faces, but I also wanted to knock heads together so the needs of young people who want to buy a home are put first. The Government is working with industry to improve the availability of mortgages - but there also needs to be a much more unified effort from across the board to work together, so we can ensure that young people are not locked out of the housing market."

Good rhetoric, and good intentions, but how long does it take a Government to conclude discussions with lenders on increasing the availability of lending, and although I agree there needs to be improved communication between the various ‘players’, the time for action is now and  perhaps less talking and more positive action is the key to this problem.

Another volume conveyancer goes into administration

One of the largest players in the Home Information Pack industry, LMS, is reported  in Inside Reporter to have gone into Administration as well as being the subject of a management ‘buy out’. 

LMS had prior to and during the HIP regime become one of the largest conveyancing panel managers in the country.

Insider Media reported on Friday that:

“About 100 jobs have been secured at Ellesmere Port conveyancer LMS Holdings after the business was bought out of administration.

It is stated that LMS has experienced a “difficult trading environment which led to a financial restructuring”.

LMS Group Holdings, which is based at Cheshire Oaks Business Park, reported sales of £54m in the year to 31 March 2009 and a pre-tax loss of £3m.

Although no one is making a direct connection it seems that the sudden and wholly unnecessary complete withdrawal of  Home Information Packs in May 2010 seem to have had some bearing on the fate of this business.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk