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MAINTAINING HOUSES - PRESERVING HOMES: A REPORT ON RESPONSES TO THE CONSULTATION
CHAPTER SIX BETTER INFORMATION FOR HOME BUYERS
SINGLE SURVEY
6.1 The consultation paper contains a proposal to legislate to give Scottish Ministers the necessary legal powers to require the use of single surveys. The Executive is currently piloting the use of single surveys in four areas (part of Edinburgh, part of Glasgow, Dundee and the surrounding area and the Inverness housing market area). In these pilot areas individual sellers will be able to commission a single survey on a voluntary basis. The pilot will use a single survey report that will include:
- Information on the type, construction, accommodation, age and neighbourhood of the property.
- Report on the condition of the property, with elements rated on a scale of 1-3 according to the degree of repair necessary.
- Energy efficiency information
- Basic information on how easy the property is to access for disabled people, along with adaptations and other facilities.
- A market valuation.
6.2 It is intended that the pilot will last for a year and will be evaluated including an analysis of the take-up, effectiveness and user satisfaction with the single survey.
6.3 The consultation suggests that the legal powers given to Scottish Ministers would be reserve powers and that it is not envisaged that they would be used until after the appraisal of a pilot of single surveys that is currently being undertaken, along with consideration of the potential for market-led approaches to promote the development of the single survey.
6.4 The proposals would give Ministers the power to specify what information should be given to prospective purchasers. As a minimum this would include a house condition survey and an associated valuation. However, the HITF also proposed that there should be a Purchaser's Information Pack made available to prospective purchasers which would include copies of any planning, listed building or building regulation consents and approvals, any guarantees for work carried out on the property, a copy of the land certificate or a summary of common repair and maintenance obligations for flatted properties and a summary of any property management responsibilities.
6.5 The consultation paper suggests that there should be some exemptions from the duty to provide the survey. While it is proposed that further consultation would be required about particular classes of property to be exempted, the consultation suggests the following categories of property could be exempted:
- Newly built houses
- Houses sold under the Right to Buy
- Houses sold to family members by the owner
Consultation Questions
Should the Executive:
- Take reserve powers to compel sellers to make a single survey available when marketing their properties; or
- Commence such powers along with the rest of the Bill; or
- Should this be left entirely to the market?
(Paragraph 83)
- Should there be exemption from the requirement to provide a single survey and, if so, what classes of property should be exempted? (Paragraph 88)
- Should there be a time limit on the survey and what should these limits be?(Paragraph 89)
- What is an appropriate enforcement mechanism if the survey is not made available as required?(Paragraph 90)
- Should any powers be wide enough to require sellers to provide other information, such as proposed for the Purchaser's Information Pack, or should it be restricted to a single survey?(Paragraph 85)
Legislating for the Single Survey
6.6 Fifty-nine percent of respondents who responded to this section of the consultation paper said they felt that the Executive should take reserve powers to compel sellers to make a single survey available when marketing their property. A further 12% of respondents said that these powers should be commenced with the rest of the Bill. However, a substantial minority (25%) of respondents said that the issue of the single survey should be left entirely to the market.
6.7 The Chartered Institute of Housing supported the principle of the single survey stating that it would:
"focus prospective buyers' attention on property conditions and can also help to address some of the current concerns relating to unrepresentative offers over prices"
6.8 The CIH would, therefore, like to see the single survey introduced nationally as a mandatory obligation without any exceptions.
6.9 Those organisations that said that the issue should be left to the market included a wide range of different types of organisation including some local authorities, a substantial number of community councils and a number of professional organisations e.g. solicitors, property management organisations and surveyors. A minority of respondents are opposed to the concept of the single survey as a matter of principle. For example the National Association of Estate Agents suggested that the issue should be left entirely to the market and argues that:
"The decision to sell a house is a personal decision of a private individual and they must be the person to decide whether or not they require an upfront survey"
6.10 A number of respondents said that they felt no action should be taken in terms of introducing the single survey until after the results of the pilot study had been appraised and the subject of further consultation. In particular, the Royal Institute of Chartered Surveyors in Scotland (RICS) expressed its "disappointment" that the consultation paper appeared to be pre-empting the results of the single survey pilot scheme and argued that any decisions should be taken following a full evaluation of the pilot scheme.
6.11 The Law Society of Scotland (LSS) also argued that any decisions on the single survey should not be taken until the results of the pilot study have been fully evaluated and subjected to further consultation. However, the LSS also states that it believes that the single survey should be left to market forces and that the single survey:
"may be prejudicial to all prospective sellers and of only limited benefit to some prospective buyers"
6.12 The LSS suggested that an alternative to the single survey would be to promote the benefits of a Scheme 2 survey and encourage all buyers and mortgage lenders to obtain such a survey to ensure that full information about a properties condition and likely repair and improvement implications are known in advance of any purchase.
6.13 The Council of Mortgage Lenders in Scotland (CML) argued that the single survey concept has merit and has supported the pilot. However, it believes that any decision to introduce legislative powers should await the results of the pilot and that "legislation should not be used to try and enforce a scheme that has not been successful in the market".
6.14 The RICS also believes that the use of the single survey should be left to the market and that it is not appropriate for the Scottish Executive to legislate on this matter. It has expressed a number of concerns about the single survey process. It was particularly concerned about what it sees as an "inherent conflict of interest" in the single survey concept as surveyors would in effect be acting for and have a duty of care to a number of parties involved in the sale of houses.
6.15 RICS suggested that multiple surveys are only an issue in a relatively small proportion of house sales and that these are particularly concentrated in 'hotspot' areas. It therefore suggested that legislating for a single survey could be perceived as "taking a sledgehammer to crack a nut".
6.16 The CML was also strongly opposed to any suggestion that the legislation on the single survey would place a legal obligation on lenders to accept a particular valuation and suggests that such powers may fall outwith the remit of the Scottish Parliament.
6.17 The RICS raised a number of practical issues that it felt may impact upon any proposal to introduce a single survey. In particular, it raised issues related to the administration of a single survey, and whether there would be a national register of surveys, the costs of administering the scheme and the implications of the single survey for chartered surveyors' Professional Indemnity Insurance.
6.18 The LSS suggested that, if a single survey is to be introduced, the responsibility to obtain this survey should be placed on the seller rather than their agents. It argued this on the basis that there may often be a number of different agents acting for a seller in the marketing of a property and it would otherwise be unclear where the ultimate responsibility for obtaining the survey report would rest.
Exemptions from the Single Survey
6.19 Two thirds of respondents said there should be no exemptions to the requirement; however, just under a third (32%) of respondents said that there should be exemptions to the requirement to produce a single survey. These respondents suggested that a number of different categories of property should be exempt. The most frequently mentioned categories of property were right to buy properties (31%) and properties still under a builders warranty (22%).
6.20 The RICS does not believe that Right to Buy Properties should be excluded from the single survey. It argues that most purchasers of Right to Buy properties will not be experienced in buying and selling property and therefore have more need for accurate information about house conditions and repair implications if they purchase the property.
6.21 The CML also suggested that there is some evidence of tenants in Scotland buying their property from their own resources and then subsequently having difficultly in borrowing money to carry out repairs or improve the property. It suggests that these difficulties would be overcome if Right to Buy properties were subject to the single survey process and prospective purchasers were fully informed of their likely future investment requirements.
6.22 The CIH believes there are good reasons for the single survey to also apply to houses sold under the Right to Buy legislation. It suggests that:
"many people exercising the Right to Buy do not get their own survey carried out but rely on the landlord's survey from the District Valuer that does not pick up on house condition issues. As a matter of equity people exercising the Right to Buy should also have access to the same level of detailed house condition information as people in the private sector."
6.23 To avoid wasted and potentially costly house condition surveys the CIH suggested that this more detailed survey should only be carried out once they have seen a District Valuers' valuation and have been given information on the level of discount available as well as their obligations that accompany buying a home.
6.24 There were, however, some organisations that support the exemption of Right to Buy Properties from the requirements to produce a single survey. The Scottish Federation of Housing Associations (SFHA) argued that Right to Buy Properties should be exempted as "the intention behind the single survey is to tackle the problem of competitive purchases, not sales to sitting tenants". However, the SFHA also stated that the issue of providing sitting tenants with the information they require to make informed decisions about the cost implications of purchasing their homes should be considered in the forthcoming review of the Right to Buy provisions.
6.25 Some respondents e.g. the Property Managers Association Scotland, raised concerns about the implications of conducting a single survey in tenemental or other multi-occupation buildings. It is suggested that the cost of conducting surveys in such buildings is likely to be higher as it would require an inspection of the whole building rather than the single property that is being put on the market.
Time Limits
6.26 Eighty-six percent of respondents said that there should be a time limit on single surveys. Of those who agreed that there should be a time limit on these surveys over 60% proposed that the time limit should be six months or less. A further quarter of respondents to this question said that the maximum time limit on the validity of a single survey should be one year.
6.27 The RICS expressed strong opposition to any uniform time limit being placed on single surveys. It argued that surveys are a "snapshot" of the property at the time of the inspection and have no "shelf life". It also argued that the consultation paper implies that a seller would only be required to make a single survey available when a property is initially marketed and have no requirement to update this regardless of how long it takes to sell the property. RICS believes this is a dangerous suggestion on the premise that "out of date information is as bad as no information".
6.28 The CML also argued that it would be difficult to be prescriptive about the time limit to be placed on a single survey. It stated that:
"In areas where there is a buoyant market, e.g. Edinburgh the valuation might change significantly over a three month period. However, in less active areas a valuation might not change significantly over a six or even a nine month period".
6.29 The LSS also suggested that there could be difficulties in placing statutory time limits on a survey as it may have a "negative impact on sellers, particularly in less active markets, if they were required to renew the survey on a regular basis".
6.30 Some respondents, for example the National Association of Estate Agents, suggested that placing a compulsory time limit on single surveys would place financial pressures on sellers particularly in areas where the market is less active. In such circumstances sellers may be required to commission a second survey or accept an offer for their property which is less than they think is reasonable due to the financial costs involved in commissioning a second survey.
Enforcement Mechanisms
6.31 Less than half of the total respondents to the survey responded to the question about appropriate enforcement mechanisms should a single survey not be made available by sellers. Of those who did respond nearly a third (32%) suggested that the most appropriate enforcement mechanism would be to prohibit a sale. A further 27% of respondents said that a fine would be the most appropriate enforcement mechanism but a significant minority (13%) also said that enforcement should be either voluntary or left to market forces.
6.32 The RICS expressed concern that the Scottish Executive may view non compliance with the single survey proposals as a criminal offence. It also raised issues over the responsibility and resource implications of enforcing the provisions if they are made a statutory requirement.
6.33 The LSS has strong concerns about any statutory enforcement process in its submission. It argued that:
"It should be acknowledged that any purchase or sale is a contract entered into on a voluntary basis between both parties and in the absence of any perceived loss, either delictual or contractual, to a proposed purchaser due to failure to produce a single survey, it would be regretted if any civil or criminal sanctions were introduced where none exists at present."
6.34 The CIH is also of the view that the single survey will in general be enforced by the market itself; however, it also supports making it a civil offence not to provide a survey as a safeguard against market failure.
Purchasers Information Packs and Other Information
6.35 Nearly two thirds of those who responded to the question about whether or not powers should be taken to require sellers to provide other information, such as that proposed for the Purchasers Information Pack, agreed that these powers should be taken. However, almost a third of respondents said that statutory powers should be restricted to the requirement to make available a single survey.
6.36 RICS Scotland supported the idea of a Purchasers Information Pack and expressed its disappointment that this was not being piloted alongside the single survey. However, it also stated that it believes that the provision of this information should be part of the legal process of buying and selling a house.
Energy performance certificates
6.37 The consultation paper contained proposals to implement the legislative requirements of the European Union Directive 2002/91EC regarding energy performance certificates for residential properties in order to promote energy efficiency in Scottish Housing. This Directive contains a range of measures designed to improve the energy efficiency of buildings, including a requirement that, when buildings are constructed, sold or rented out, an energy performance certificate is made available to the owner by the developer or by the owner to the prospective buyer or tenant.
6.38 It is proposed that the energy performance certificate would contain an assessment of the relative energy performance of the building. It would also give information to assist in the interpretation of the assessment as well as recommendations for the cost effective improvement of the energy performance of the building.
Consultation Questions:
- There is the potential for sanctions to be applied where the EU Directive requirement on energy performance certificates is not complied with. What do you think would be appropriate sanctions?(Paragraphs 94 -97)
- Should the energy performance certificate incorporate an A-G coloured banding energy rating, similar to the energy labels displayed when household appliances are retailed? (Paragraphs 93)
6.39 Less than 40% of respondents to the consultation responded to this question. Of those who did respond to the question there was mixed opinion as to whether or not there should be sanctions applied or whether it should be a voluntary system controlled by market forces. Almost two thirds of those respondents who commented upon this question said they thought there should be some form of sanction (the most commonly mentioned sanction was a fine (29% of those responding) followed by the ability to recover the cost of obtaining a certificate from the seller (17%) and prohibiting a sale where no certificate was made available by the seller (17%). However, a substantial proportion of respondents said that there should be no sanctions and that compliance with the EU Directive should be voluntary and determined by market forces.
6.40 The RICS Scotland suggested that any new system for assessing or certifying the energy performance of houses at the time of survey or sale should be linked to the Standard Assessment Procedure (SAP) that is required under the new building regulations.
6.41 The RICS also raised concerns that any costs incurred by landlords or letting agents in complying with the proposals would be passed onto tenants through increased rents or other charges. This is a view that is supported by the Scottish Association of Landlords (SAL).
6.42 The principle of introducing a requirement to produce energy performance certificates was welcomed by the majority of local authorities. Glasgow City Council stated in its submission that it believes energy performance certificates would:
"help encourage house builders to improve energy specifications and reward householders for investments they make in energy conservation measures"
6.43 Comhairle Nan Eilean Siar also welcomed the proposal to introduce energy performance standards but argued that this needed to be supported by appropriate financial assistance. It stated in its submission that:
"Significant problems exist in the private sector housing stock due to the method of construction of many houses e.g. poured concrete houses, where it is prohibitively expensive to improve insulation. If no financial assistance is offered then it is unlikely that the necessary works would be carried out, even with the threat of sanctions"
6.44 A significant number of respondents suggested that there appeared to be some confusion in the consultation paper about whether SAP scores or NHER would be employed in the energy performance standards. Many of these respondents suggested that there needed to be standardisation between the methods adopted for the Energy Performance Certificates and the new Tolerable Standards to make it simpler to understand and easier to advise people on the energy efficiency of their home.
6.45 Glasgow City Council argued that the proposed use of SAP rating is not appropriate in Scotland because it only covers heating and hot water and not the thermal performance of the house itself. It argued strongly that it is essential that a way is found of including the additional elements included in the NHER in the proposed energy performance certificates.
6.46 Only a minority of respondents to the consultation responded to the question about whether or not energy performance certificates should incorporate a coloured banding energy rating, similar to those displayed on household appliances. Those who did respond where overwhelmingly in support of adopting such a system, with over 80% agreeing with this suggestion.
6.47 The CML argued that there was a need for consistency throughout the UK and that if the colour banding system is to be adopted in England and Wales then it should also be incorporated into the proposals for Scotland.
6.48 A number of other respondents suggested strongly that the most important criterion in adopting any system of energy performance certificates is that they need to be easily understood by householders and others who rely on them. This suggests that there is a need to ensure that certificates are written in plain English and that the language used is not too technical.
SUMMARY OF KEY FINDINGS
6.49 Over 70% of respondents to this section of the consultation paper agreed that the Executive should take powers to introduce a single survey with the vast majority of these respondents saying that these should be reserve powers.
6.50 A substantial minority of respondents (about a quarter in total) said that the issue of a single survey should be left to the market and many of these argued strongly that no action should be taken at least until the results of the current pilot exercise are fully evaluated.
6.51 Two thirds of respondents said there should be no exemptions to the requirement; however, just under a third (32%) of respondents said that there should be exemptions to the requirement to produce a single survey. These respondents suggested that a number of different categories of property should be exempt. The most frequently mentioned categories of property were right to buy properties (31%) and properties still under a builders warranty (22%).
6.52 A number of key organisations argued strongly against exempting Right to Buy properties from any legislative provision for a single survey.
6.53 Eighty-six percent of respondents said that there should be a time limit on single surveys. Of those who agreed that there should be a time limit on these surveys over 60% proposed that the time limit should be six months or less. A further quarter of respondents to this question said that the maximum time limit on the validity of a single survey should be one year.
6.54 A number of key organisations argued against any statutory time limit being placed on single surveys as the circumstances in which these surveys would be conducted would be extremely diverse and as a result a 'one size fits all' approach to setting time limits would be inappropriate.
6.55 Nearly a third (32%) of those who responded to the question about enforcement of the single survey proposals suggested that the most appropriate enforcement mechanism was to prohibit a sale. A further 27% of respondents said that a fine would be the most appropriate enforcement mechanism but a significant minority (13%) also said that enforcement should be either voluntary or left to market forces.
6.56 Nearly two thirds of those who responded to the question about whether or not powers should be taken to require sellers to provide other information, such as that proposed for the Purchasers Information Pack, agreed that these powers should be taken.
6.57 There was mixed opinion as to whether or not there should be sanctions applied to the proposed Energy Performance Certificate. Almost two thirds of those respondents who commented upon this question said they thought there should be some form of sanction. The most commonly mentioned sanction was a fine (29% of those responding) followed by the ability to recover the cost of obtaining a certificate from the seller (17%) and prohibiting a sale where no certificate was made available by the seller (17%).
6.58 While only a minority of respondents to the consultation responded to the question about whether or not energy performance certificates should incorporate a coloured banding energy rating, those who did respond were overwhelmingly in support of adopting such a system.
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