• The 'seller's pack' is the central plank of the Homes Bill which is being pushed through Parliament at some speed.
• The aim is to shorten the period between agreement of times and exchange of contracts.
• The obligation is now on the seller to produce not only documentation but also a survey.
• Trials have shown that the seller's pack has halved the crucial period when gazumping takes place.
• The bill is wide ranging and could take in other elements of the property market without parliamentary scrutiny.
• Leasehold enfranchisement should be easier with the introduction of an ownership rather than a residency test.
  

If your favourite topic of conversation is government legislation affecting the property market, you might find the circle of your friends is rather narrow. As a subject it has further disadvantages in that the news flow hardly necessitates a Reuter's screen; the pace of change seems to have all the speed of a tectonic plate movement. However, every now and then, as with plate tectonics, there is a sudden movement which shakes a lot of houses and it would appear that the Homes Bill, which is careering through Parliament at the moment, has the potential to do some shaking to the whole process of buying and selling houses in England.

The headline grabbing part of the bill has been the introduction of 'Seller's Packs', where the stated aim is to speed up the process of a property transaction and thereby reduce the incidence of gazumping, when sellers exchange with another party at a higher price than previously agreed. The obsession with gazumping has never seemed to us to be particularly logical, as a short conversation with any estate agent would confirm that many more buyers walk away from deals than were ever subjected to the pain of gazumping. The time argument is unarguable; the national average is a dismal sixty-two days. There was considerable research done on alternative methods of conveyancing, particularly the Scottish system. This may appear to contain more certainty as, in some respects only, it does away with the limbo period between agreement of terms and exchange of contracts, during which there are moral, but not legal, obligations and where the devil has traditionally managed to find plenty of work. It was felt, however, that the whole system of property transactions in Scotland; where the solicitor is often acting as the estate agent; meant that the Scottish system would not work. The problem was neatly summarised by researchers looking at the English system who said, 'to put it bluntly, a lot of the actual time between offer and completion is accounted for by someone waiting for someone else to do something.'

The solution proposed is the 'Seller's Pack', which puts the obligation on the seller to do the majority of the work that now normally takes place in the limbo period including, controversially, the survey. The pack will include a draft contract, replies to local searches and preliminary inquiries, title documents, copies of planning consents and any warranties in the case of new-build. The survey requirement has caused many a hand to be thrown in the air, firstly because of liability but also because it was felt; mainly, it has to be said, by surveyors; that buyers would want their own man. The survey should be objective and a statement of fact -if so, then why should it matter who is relying on it; surely it is only a matter of transfer of liability? On the second point, unless you are a serial house-mover, you are hardly going to have a personal relationship with your surveyor which competes with your hairdresser. In our market, the statutory building condition report, designed around a three-bedroomed house in Burnley, is not going to cut the mustard on a Jacobean manor-house; the reality is that buyers will probably get their own surveys done anyway.

As the burden of effort has been shifted to estate agents, not surprisingly there have been squeals of pain from that quarter, with objections that it will discourage sellers and cause a delay in getting the property to the market. Both of these may be true, but what the agents may be failing to appreciate is that it will hopefully put off the so-called sellers who are, in reality, only owners in search of a valuation. Their presence in the market benefits no-one, least of all those agents.

All this seems to be perfectly sensible and, in a test study the Government conducted in Bristol, the time between agreeing terms and exchange of contracts varied between eight and thirty-two days. This would suggest that the route is a good one though in our country market a great deal of preparation is already done before anything is marketed, which has a lot to do with the inherent complexity of a country-house sale. In stark contrast, the London market; particularly the top end; is filled with houses "on the market" where the vendor is almost certainly not a seller unless he gets a lunatic price.

The Government?s intention is to make the non-provision of the 'Seller's Pack' an offence by 2003. As in all law, much turns on definitions. What does marketing mean? Does it mean advertising? If someone wants to slide their house past the eyes of a one-off buyer, will the new Bill apply? The answer is technically probably going to be 'yes', but on a day-to-day basis, particularly at our end of the market, it is likely that it will be business as usual. After all, if the Estate Agents; the courts would be creaking under the strain. Like most legislation of this kind, it is designed to catch the egregious rather than the occasionally incompetent.

The 'Seller's Pack', however, is; like the tip of the iceberg; only the most visible of potential changes. The Government intends to deal with most of the detail by way of secondary legislation and has applied the guillotine with a will that would please the bloodiest of tricoteuse, cutting off debate and consultation in a way that will give it wide powers to range over the whole area of property transactions with minimal parliamentary scrutiny. This might include compulsory registration and training for estate agents (no bad thing, many would say) or a more burdensome and costly 'Seller's Pack'. Governments with huge majorities and taste for diktat rather than consultation have a bad record in this direction.

Less contentiously, there is legislation in the pipeline for the next Parliament aimed at tidying up the loose ends of what is generally referred to as the 1993 Leasehold Reform Act. One of the results of this Act was that it (accidentally) excluded company-owned houses and flats. This was because companies cannot fulfil the residency test, which had the knock-on effect of landlords refusing to assign to anyone other than another company thereby limiting marketability and, ultimately, value. The proposal is to replace the residency test with an ownership test; the individual or company will have to have owned the property for more than two years. The other main proposal is to abolish the arcane concept of marriage value for any lease over eighty years.

Overall, it would appear that the property world is likely to be a better place for the man or woman on the Clapham omnibus. There should be a real increase in the speed of property transactions; which is ultimately good for both seller and buyer. Sellers may moan about the extra cost but it should, in all logic, be seen as a cash flow rather than a cost issue, as the overall transaction shouldn't be any more expensive. The dangers, as in plate tectonics, lie where you can't see them and nowhere is more unseen than the ambitious mind of a junior minister out to make a name for himself with a bit of populist legislation.

Back to Past Market Commentary