Written evidence submitted by LSL Estate Agency Franchise Division [HBS 070]

How efficient or effective is the existing process for buying and selling homes? How could this be improved?

Typically, over a million house sales complete every year in the UK. In addition, the UK market, fairly uniquely, copes with chain transactions allowing consumers to buy and sell on the same day.

Feedback from consumers indicates that the home buying and selling process can be stressful because the conveyancing process is complicated, too protracted and the certainty of an exchange of contracts can take months.

Improvements to property records would help the process. Conveyancers have to obtain all the relevant documentation from the date the property was built every time a property is sold. A central repository for the information such as a Property Log Book or a property passport would be helpful so that a seller only has to provide paperwork relating to their period of ownership and all prior information is already on record. There are questions around who should bear the cost of this and how secure any such system could be. The HM Land Registry is an option to be considered.

Further, if a conveyancer could obtain a low cost compulsory insurance product to protect the buyer and their lender from the cost of any claim that pre-dates the seller’s ownership that would mean that the seller and buyer solicitors only need to undertake checks relating to the seller’s ownership. We believe that this would speed up transactions and reduce the time it takes to get to exchange. This insurance policy could be cheaper the longer the seller has lived at the property as the chance of any claim would diminish. This insurance policy together with a property passport could transform the process.

How could the consumer experience be improved during the process for buying and selling homes?

See above. In addition, management companies and landlords of more than 2 flats in a property should be regulated and their details included in a register. They should have to provide some information no more than once a year at their cost e.g.

-          Confirmation of ground rent(GR)/service charge/sinking fund and additional payments and when these are due

-          Detail significant spend anticipated in the next 2 years and the likely cost to a leaseholder if not covered by a sinking fund

-          When the above are reviewed and on what basis

-          Confirmation that all insurances are in place and for what amount e.g. Buildings/Public Liability

Defective lease clauses such as doubling GR provisions should no longer be enforceable and replacement provision should be introduced by legislation. This would reduce the number of Deeds of Variation which can prolong transactions indefinitely.

A regulator of property management companies could implement turnaround times on providing the management information packs (LPE1) and cap the cost that can be charged as well as requiring response times on correspondence.

Continued efforts should be made to help subsidise leaseholders facing expense due to increased regulation around Building Safety and in particular cladding.

Is the reliance on voluntary initiatives adequate to improve the buying and selling process, or should improvements be made mandatory through legislation?

Relying on voluntary initiatives appears to have been ineffective as adoption is mixed. Good companies take on board recommendations and guidance but weaker performers tend not to and voluntary initiatives don’t appear to change the behaviour of the poor performers.

In addition, voluntary initiatives can be sponsored by parties who have a vested interest and this isn’t always obvious.

The Transaction Process:

What is the impact of issues in the transaction process, such as gazumping or gazundering, and how could they be remedied?

There is little to suggest that this is an issue which affects many transactions but greater use of reservation agreements would help overcome gazundering and gazumping because both parties are tied into an agreed price and timeframe for exchange.

Would greater use of reservation agreements improve the transaction process?

The devil is in the detail on reservation agreements. They can be used to good effect but complexities arise where you have to consider a chain and for example the impact of issues with a chain collapsing due to a mortgage application problem 5 links away in a chain.

Wholesale move to reservations agreement would represent a cultural change and education of both agent and consumer would be required. Lack of training and support, in particular for independent estate agents, can be a hurdle and the lack of case and legal precedents will create a nervousness for practitioners. These will need to be overcome but we would welcome further engagement as to how this can be progressed.

What prevents reservation agreements being more widely used? Why has a short, standardised reservation agreement not been developed, as promised by the then Government in 2018? 

Needing to cater for chains and the complexity of drafting agreements that bind a chain.

Information Provision:

Do buyers have the right information available at the right time during transactions?

A buyer can instruct a surveyor as soon as an offer is accepted. Search results could be improved in some locations. Adopting the approach set out above would mean the buyers solicitor could advise on the contents of the property passport at an earlier stage. This together with management company regulation would give a buyer confidence to instruct a survey and searches at an early point.

What effect would it have on the transaction process if sellers were required to provided set information about a property when it was marketed?

Parts A and B of the current NTSELAT guidance would be sufficient information for a buyer at the point of arranging a viewing.

How much data associated with housing transactions still needs to be digitised and how can the digitisation process be accelerated or prioritised?

This is improving and evolving but there is more to do. The speed of information coming from local authorities digitally including all searches would be helpful.

Continued development of data and digitised documentation and how it is provided to best integrate with case management and other systems would be beneficial.

The Open Property Data Association (OPDA) have a role to play in driving this forward because of the specialist expertise they bring.

What challenges are there to digitisation or providing information at listing?

It is about providing the information at the right time in an efficient way. 1.1 million transactions do complete.

Overwhelming a consumer with technical legal information at listing is not helpful. Nor is a requirement to provide information which has a shelf life such as information in searches. This risks information being out of date when a buyer is relying on it and increases the likelihood of multiple requests for information being required which will increase cost and duplication.

The conveyancer needs to undertake due diligence in order to provide advice to the buyer. The conveyancer is qualified and trained to interpret property information including restrictions and easements etc. This is a skill which a typical buyer simply doesn’t have. A property passport together with regulation of managing agents would speed up conveyancer’s ability to advise a buyer earlier.

The risk of all information being provided at listing is that it isn’t understood and the buyer makes a decision not to proceed based on a misunderstanding, for example they are put off by a covenant which is not, in fact, enforceable.

Conveyancers:

Do consumers have sufficient information to determine which conveyancer to use? How could information provision on conveyancing be improved?

Selecting a conveyancer is a similar process to the selection of any service provider. Consumers rely on recommendations from a trusted party e.g. an estate agent, broker or friend.

As with other services the consumer can make an informed decision taking into account the reviews of other customers which are easily accessed online and all conveyancers have websites which provide a wealth of relevant information.

All conveyancing firms will quote in advance of an instruction and offer the customer the opportunity to engage with a fee earner at no cost should they have queries before they proceed.

What effect would a mandatory professional qualification for estate agents have?

This depends on the objective and the type of qualification being proposed. AML training is already mandated.

It is hard to believe that mandatory qualifications will rule out rogue agents but encouraging expertise is desirable.

NVQs could be an appropriate solution for lettings and residential sales businesses.

Costs of qualification might be passed on to the consumer so voluntary NVQs might allow consumers the ability to choose agents who do support staff training.

Should there be a single, legally enforceable Code of Practice for property agents?

This could be helpful if it harmonised regulation created a level playing field. Mandating processes can create clarity for the consumer and agent.

What impact does the practice of referral fees have, and how would a review, standardisation of practice, or ban affect transactions and consumers?

The effect of a ban on referral fees to consumers could result in an increase in costs to the consumer. Parties involved in a property transaction whether brokers, estate agents or insurers would be unwilling to operate without the commercial model that procurement, referral and commission fees provide. Any change in a charging model would likely be borne by the consumer.

These fees often drive good customer outcomes because the introducer will only continue to introduce if service levels/products are of a good quality. Consumers therefore benefit from these arrangements.

April 2024