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Home buying reservation agreements to be tested

In a recent speech by Housing & Homeless Minister Heather Wheeler MP at the Council for Licenced Conveyancers conference the MP outlined challenges in the government’s commitment to reforming the conveyancing process to make buying and selling quicker cheaper and less stressful.

According to government research:

  • Somewhere between 25-33% of transactions fail, costing £270 million to consumers a year,
  • Transactions usually take 19 week from going on the market to completion.

Certainly it is not our experience that such a large number of transactions fail – and clearly how long a property is on the market will vary considerably.

It is certainly true that a good deal of stress that buyers and sellers are subject to is attributable to the worry that any party can pull out at any time prior to exchange, and also the uncertainty as to the completion date.

So what action is the government proposing to take to help improve things?

Information: How to Guides

On the basis that people do not move very often, the government are to publish How to buy and How to sell guides to help consumers ‘navigate every stage of the process’

Whilst more information cannot hurt, the reality is that there is already considerable information available to consumers available online, including on websites such as ours.

Speeding up processes

The MP advised that she had written to all local authorities to require local searches be returned within 10 working days and 80% are hitting this target.

Slowdowns in the housing market (whether due to the government’s changes to stamp duty or economic conditions) have reduced the number of search applications and pressure on this service. We are fortunate in this area where searches are usually returned very quickly.

She did not mention it, but currently HM Land Registry has an ongoing project to transfer local authority data to it, and in the long term this will change how these searches are delivered.

We still have a way to go to speed things up – especially where leaseholds are concerned. Having a leasehold property in the chain can add at least an extra week, due to difficulties getting information from freeholders and managing agents. As it stands, there aren’t any guidelines around the provision of this information, leaving leaseholders at the mercy of freeholders, who can charge whatever they like and take as long as they like.”

She advises that they are setting out a timetable and fees for providing this information. How this will work will remain to be seen, but this should be a positive development as delays in obtaining this information is a major factor in leasehold transactions. It is fair to say however that delay in actually ordering these and paying the fees required are also factors.

Accountability

“Too many people are walking on a tightrope from the moment they put in that offer.”

This is entirely true and contributes to the stress involved. Whilst she says the government does not wish to force anyone to move if they don’t want to, people should not be able to pull out without consequences, therefore it’s appropriate that commitment is increased.

The proposal is to develop a standard reservation agreement and there is to be a field trial later this year. The detail of how much they will be, or how much it may cost for a party to pull out are matters to be determined. An issue has already arisen in this respect of who will hold these deposits.

Consumer Confidence

And with greater accountability should, I believe, come greater confidence. ……. Buyers choose the house, not the estate agent. But this shouldn’t mean that they choose their conveyancer by default.”

The MP advised that they were changing the system to ensure that referral fees paid by conveyancers to estate agents were made more transparent to consumers before they make any decision. The government is to publish guidance setting out when estate agents should disclose referral fees. If behaviours do not change, the MP advised she will pursue a referral fee ban.

Whilst referral fees arrangements are now standard practice for most estate agents, Wards solicitors never pay referral fees to estate agents for them to recommend us to a client needing a conveyancer. The recommendations we receive are based entirely on our experience, reputation for reliability and local knowledge. We believe such recommendations, should not be financially based.

Competition and innovation 

The MP confirmed that the government wished to help the many proptech companies who are developing innovative ways to shake up the process. She advised that the government is therefore looking at whether they can streamline ID verification, and make more use of electronic signatures in the home buying process.

To have a centralised ID verification service is something conveyancers have been asking for. Whilst we have electronic verification as an option, physical identity evidence is more usually required for conveyancing clients, and mortgage lenders will not accept anything else.

If you need any help with any conveyancing issues, please contact Wards Solicitors specialist Conveyancing team or call into one of our 11 local offices.

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