The property puzzle

Neil Rose looks at hive of activity around improving the home-buying process, and asks whether anything will actually come of it

Norway is the seventh happiest country in the world, according to the World Happiness Report, 12 spots higher than the UK.

There are no doubt many reasons for that but one is surely the system of home buying and selling. While the process is getting ever longer in England and Wales – it is estimated to take an average of 210 days from sale to completion – in Norway it can take just a matter of days.

A launch event in September for the new Digital Property Market Steering Group (DPMSG) – which aims to accelerate the development of e-conveyancing in England and Wales – heard from Hannah Cook, director of cadastre and land registration at the Norwegian Mapping Authority, its equivalent of HM Land Registry (HMLR).

She explained how all public, legal and financial documentation has to be provided upfront, along with a survey and valuation, before a property can go on the market. While this can take up to a month to collate, Norway’s system of binding offers and digital processes means transactions can then take place in a matter of days.

Norway is not directly analogous to England and Wales, as ‘real estate agents’ there handle both estate agency and conveyancing, and buyers do not generally use a lawyer. Further, digital signatures and IDs were already in place when the system came into effect in 2019, and binding offers are a distant dream (for some) over here.

But the presentation gave an insight into how the combination of upfront information and greater digitisation in particular could bring about significant improvements.

Slow progress

The Land Registration Act 2002 explicitly created “a framework in which it will be possible to transfer and create interests in registered land by electronic means”. But 21 years on, are we as far along this road as might be expected?

HMLR’s five-year strategy, published last year, said that “despite advances in digital and online technology, there is evidence that that the average 2021 home sale took 49% longer to complete than in 2007. Research shows that more than a quarter of all property transactions in England and Wales do not complete, at an estimated total financial loss of around £400m for those trying to sell”.

Of course, in some ways the 2002 Act was ahead of its time and has had to wait for technology to catch up with the vision. But in announcing the launch of the DPMSG in the summer, HMLR admitted that the job of modernising the home-buying process has proved “more challenging than envisaged” back in 2002 and it was one that “no single institution can achieve on its own”.

Both CILEX and CILEx Regulation are founding legal members of the group, along with the Law Society, Solicitors Regulation Authority, Society of Licensed Conveyancers, Council for Licensed Conveyancers, and the Conveyancing Association.

“The DPMSG came out of Land Registry frustration at the speed of progress, or lack of it, being made on reform”

The non-legal members are the Royal Institution of Chartered Surveyors, Council of Property Search Organisations, estate agency body Propertymark, Building Societies Association and UK Finance, in addition to HMLR.

The group’s stated vision is to ensure that “everyone involved in buying, leasing and selling land and property experience a secure and modern market that is transparent, customer-friendly and business-friendly at all stages”.

There are working groups focusing on upfront information, a digital identity scheme and data initiatives.

The group can be seen as an offshoot of the Home Buying and Selling Group (HSBG), a wider cross-industry collective of property, legal and finance bodies that advises government on the broader brief of improving the process for home movers.

Yanthe Richardson is current Vice-President of CILEX and managing associate leading South-West law firm Foot Anstey's plot sales and new homes buyer teams. She represents CILEX on the HBSG, HMLR’s advisory council and the DPMSG.

She explains that the DPMSG came out of Land Registry's 2022+ strategy, in which it committed to work in partnership with property sector leaders to positively influence the adoption of digital technology and to dramatically improve the experience of home buyers and sellers. 

Peter Watkin, a highly experienced Chartered Legal Executive and CILEX Conveyancing Practitioner at Taunton law firm Berensons, suggests that much of the dissatisfaction with the conveyancing process is more prosaic – it comes from being stuck in a chain where the client does not have control over the timescales.

“I don’t pick up any great dissatisfaction with first-time buyers because they are in control of the timescale,” he says. “Similarly, if you’re an executor selling your late parents’ house, I don’t hear many complaints.”

There is also the shock of being “suddenly confronted with acres of legal letters” for people not used to a legal process. “It’s a complicated transaction that people come to rarely and it’s inevitable that they’re going to be surprised by the cost and implications.” Indeed, Mr Watkin reckons the conveyancing process is simply “inherently slow”.

Clients sometimes have “unreasonable expectations that they’re very reluctant to let go of”, which he attributes to a lack of transparency and simple inexperience of how the system works. He continues: “We don’t help the situation because of the way in which we operate this adversarial process, where [as a party] I’m encouraged not to tell people things that might be disadvantageous.”

It is, he says, “a bit unfair to lay this at the door of conveyancer or estate agent”.

Information gatherers

The HSBG has itself just published a discussion paper, The Case for Change, setting out its roadmap for the future of home moving. Among the key recommendations are to:

The focus on upfront information is a big one at the moment. The HBSG says it should be compulsory for sellers to provide property logbooks, property packs including searches and also possibly a “pre-marketing property survey” including gas and electricity checks.

It recognises the need to get buyers and sellers on board with this, as they might need to agree to pay upfront for legal advice and property information, which has long seen as a big stumbling block.

This is where National Trading Standards’ (NTS) estate and letting agency team comes in, however, with new rules on the information that estate agents and property portals must publish when a property is listed.

The first of a three-part process took effect last year and requires the inclusion on all listings of a property’s council tax band or rate and its price and tenure information. The second covers information which must be established for all properties, such as restrictive covenants, while the third covers additional material information that may or may not need to be established, depending on whether the property is affected by it, such as flood risk reports. These two steps are expected to come into force together imminently.

Emma Cooke, policy and information manager at NTS, told a recent Bold Legal Group podcast that conveyancers as well as estate agents could potentially be jailed for breaking the rules. She explained that NTS took “a variety of enforcement action”, ranging from advisory visits and warning letters to prosecutions, depending on the severity of the detriment suffered by consumers and how many there were.

The HSBG recommends regulating estate agents

In the case of a prosecution, the maximum penalties were an unlimited fine or two years in prison. “Anyone in the chain” who advised consumers could be sanctioned, Ms Cooke said. “It could be an estate agent, it could be a conveyancer, it could be a solicitor.”

James Munro, who heads the team, said the “vast majority of complaints” about lack of material information ended up being dealt with by redress schemes, such as the Property Ombudsman, who could impose fines of up to £25,000 for serious offences.

Mr Munro added that the process of determining what was material information was “dynamic” and in the future could include electrical vehicle charging points. The aim was to include “information which could affect the average consumer’s transactional decisions”.

Ms Richardson argues that upfront information is “within grasp”. She goes on: “There are differing opinions on whether it’s a silver bullet. I think there are lots of silver bullets, but the idea that upfront information will mean fewer transactions fall through is the right one.”

A barrier to adoption is the willingness of parties to engage legal advice at the right point, she says. A first-time buyer looking at the Buying and Selling Property Information (BASPI) form – created by the HBSG – and seeing ‘restrictive covenant’ needs advice rather than running away from the transaction out of fear. Similarly, sellers need advice when filling in their forms.

“If we could get instructed before the property goes on the market, we could get to the point where we wouldn’t need to check title – we would just be looking at what’s happened since it was last checked.”

Some conveyancers worry that this will all diminish the role of the conveyancer. “I’m the opposite,” Ms Richardson says. “I think it’s enhanced – we will show how we can add value to our clients.”

Upfront information also has a cultural barrier to break – getting sellers to pay a conveyancer so they can get their property on the market. “We have a cheap system at the moment – its only redeeming feature perhaps,” says Mr Watkin. “It avoids people paying anything until the moment of truth.”

He expresses a common view that upfront information will only work “if it’s accompanied by responsibility” on the part of those preparing the information.

“If we have an upfront provision of information, then it has to be ‘this is what you’re buying and if it turns out to be wrong, this is who you can sue’. It would have to be backed by legislation. I don’t see any way in which the voluntary provision of information is going to succeed – it will fail the same way as HIPs [home information packs] did.”

This links to another frequent, and often justified, complaint among conveyancers that they are being loaded up with responsibilities to advise on a whole host of non-legal issues (drains, internet speeds and so on) just because they have professional indemnity insurance that means unhappy parties have someone to sue.

Compliance queries

Compliance and enforcement are other big question marks with upfront information and arguably this is one of the areas where proper regulation of estate agents would be of real value (Ms Richardson, for one, is strongly in favour). And as Mr Watkin intimates, many argue that, to institute new ways of working, it will take the government to step in and mandate it.

The DPMSG event heard speakers from both the platform and the floor urge that initiatives such as upfront information and common digital standards be made compulsory across the market. HBSG chair Kate Faulkner said it was no use using these new techniques on two out of three properties in a chain – they all had to be using it and mandation was needed to ensure this.

But Jonathan Clifton, deputy director (housing) at the Department for Levelling Up, Housing & Communities, told the event that mandation was “not the first port of call” for ministers. “Our preference is to work closely with industry on creating standards and what we can do to support them from central government,” he said.

While ministers “reserve the right to legislate”, the civil servant indicated that with little more than a year left before an election and the difficulty of finding space in the parliamentary timetable, this was unlikely to happen.

His comments came after a recorded address to the conference in which housing minister Rachel Maclean argued that “nothing less of a total overhaul of the system will do, harnessing the power of digitisation to make it more transparent and streamlined so that it works for buyers and sellers alike”.

The minister acknowledged the progress made through the work of NTS, as well as HMLR’s local land charges programme, “which will speed up searches”.

“Now we need to go further to accelerate the pace of change,” she said. “Rapid digitalisation isn’t straightforward for everyone across the industry. We know large parts of the sector are yet to adopt new processes.”

Ms Maclean said the department would be outlining its strategy for doing this soon, “from making crucial property details such as tenure, title and lease length accessible at the click of a button to ensuring that data is robust and accurate, reducing the need for constant checks and speeding up transactions”. This would all be built on the “solid foundation of clear data standards”, she added.

Not everyone is in favour of mandation and Yanthe Richardson acknowledges that one challenge is ensuring that smaller law firms are not effectively barred from the system by not having the technical or financial wherewithal to adopt the necessary technology. “You’ll have some that will come along quickly, some trying to get there first, and some that will wait until they’re made to. And some won’t see the benefits on the basis that what they currently do works for them.”

At the same time, she observes, some changes – such as portals where clients can track the progress of their matters – will inevitably come about simply through consumer demand.

Pricing problems

An even longer-running issue among conveyancers has been pricing, with some advertising bargain basement fees to lure clients in – and then often hit them with airline-style escalator pricing where the final, all-in fee is far greater.

Many law firms upped their fees during the stamp duty holiday, such was the volume of work, but the indications are that they now seem to be slipping back. Putting aside the question of referral fees distorting the market – a contentious issue for another day – conveyancers have long feared increasing their prices.

“An even longer-running issue among conveyancers has been pricing, with some advertising bargain basement fees to lure clients in”

Perhaps it is no surprise that new Solicitors Regulation Authority research shows many law firms still do not comply fully with the five-year-old rules on transparency about certain services, including conveyancing. The firms that are not complying can see the prices of the ones that are, and not vice versa.

Ms Richardson says it does take confidence and even a degree of courage to charge what you think you are worth: “We are ultimately running a business and we know what it costs us to keep a really good team and do the job really well and we price accordingly,” she says. “But I appreciate that’s not an easy fix – you fear you’ll lose the work.”

At the same time, perhaps clients motivated solely by fee levels are precisely the ones you don’t want.

Mr Watkin agrees. “I’m about providing good value for money – not necessarily cheaper. It’s the traditional conveyancer who has the most to offer clients who want that level of service. Ultimately, there are plenty of clients out there who are prepared to pay a reasonable fee. I don’t have an automated response saying ‘I’m working on a five day turnaround for emails’. People are prepared to buy into that.”

Moving parts

One of the problems with reforming the home-buying process is that there are so many moving parts (and acronyms). There’s the DPMSG, HBSG, NTS and HMLR – which among various projects is working on electronic signatures – along with possible legislation on digital ID verification, a future digital conveyancing protocol recently published by the Conveyancing Association, and much more besides, including a host of technology companies offering their solutions too.

The Conveyancing Association protocol also pushes upfront information, seeking “to ensure the sellers of the property receive advice (including advice on proactive corrective action) as soon as they begin to market their property, or before”, so that they can realise the full value.

The protocol says it is “in the best interests” of the seller to collate all information “any buyer’s conveyancing lawyer would review as part of their due diligence process”, to prevent additional enquiries. Among this would be a completed version of the BASPI data, evidence of title, lease information, and local authority and other searches, along with confirmation that the seller has been digitally identified.

The vision is tantalising but a distance away yet. Norway’s home buyers will be happier for some time to come.

Asked what success would look like, HBSG chair Kate Faulkner told the DPMSG event that getting back to transaction times being eight to 12 weeks on average and fall-through rates of 10% “would be a result”.

It’s not a grand ambition, compared to others, but it would be a lot better than where we are now.

 

 

 

 

 

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