Subordinate Legislation
Housing (Scotland) Act 2006 (Prescribed Documents) Regulations 2008 (Draft)
Item 2 concerns the draft Housing (Scotland) Act 2006 (Prescribed Documents) Regulations 2008. I welcome the Minister for Communities and Sport, Stewart Maxwell, who is attending the meeting to take part in the debate on the regulations, and his officials: Edythe Murie from the Scottish Government solicitors development and local government division; Neil Ferguson, a policy delivery manager at Communities Scotland; and David Rogers, deputy director of housing markets and supply in the Scottish Government.
The Subordinate Legislation Committee drew this committee's attention to the regulations in relation to the sectional diagram in the survey report form and a failure to follow normal drafting practice. It considered that neither of those points was likely to affect the regulations' validity or operation.
The regulations are laid under the affirmative procedure, which means that the Parliament must approve them before their provisions come into force. It is normal practice to give members the opportunity to question the minister and his officials prior to the formal debate, as officials cannot participate in that debate.
I offer the minister the opportunity to make any introductory remarks that he wishes to make. He may want to hold back until the start of the debate.
If I may, I will make some remarks now, convener. I am delighted to have the opportunity to discuss with the committee these regulations, which are laid under part 3 of the Housing (Scotland) Act 2006. They are not only about the much discussed single survey; rather, they introduce a package of three documents to the house buying and selling process. We have decided to give those three documents the collective title of "the home report". It will provide home buyers with more information about the condition and value of a house than they have ever had before. As the 2006 act places the duty to provide the documents on the sellers, first-time buyers will get them for nothing, which will save them time and money.
The regulations mark a major step in the implementation of a significant improvement to the process of house buying and selling in Scotland. As the committee is aware, the proposals that they help to implement stem from recommendations on the single survey that the housing improvement task force made in 2003.
The task force identified three purposes behind the introduction of a single survey: to provide better information about the condition and value of a property than is provided by the mortgage valuation inspection that 90 per cent of home buyers currently rely on; to address the incidence of multiple surveys and valuations; and to address the practice of setting artificially low upset or asking prices, which can draw buyers into spending time and money considering properties that they subsequently discover they were never able to afford from the outset.
In the previous session, members of the Parliament, and of the Communities Committee in particular, spent considerable time discussing the merits of the single survey. After coming to power in May 2007, the Scottish Government took stock of the policy in the light of the consultation on the draft regulations and the developing circumstances in the housing market. Last autumn, I met representatives of the various stakeholder organisations on the purchasers information advisory group, which includes selling agents, conveyancers, surveyors, lenders and consumer groups. It became clear to me that the underlying rationale for the policy, as proposed by the housing improvement task force, was as strong as ever.
It is unarguable that a prospective buyer should have good professional information about the condition and value of a house before deciding to make an offer on it. The Scottish Government has continued to develop the regulations, taking full account of the outcome of the consultation and working closely with members of the purchasers information advisory group.
The Housing (Scotland) Act 2006 requires that the seller, or the seller's agent, must make a copy of the prescribed documents available to prospective buyers on request. The regulations prescribe those documents and make other provisions about how and when they should be provided. The prescribed documents are a single survey and energy report, and a property questionnaire. Together, the documents will comprise what is called a home report. We decided to use that name rather than "purchasers information pack" because the information will benefit the seller as well as the purchaser and the documents will not form the weighty pack that was proposed initially by the housing improvement task force.
Although the date on which the regulations come into force is 1 October, the date from which sellers will have to provide a home report will be different. I intend to make a commencement order for the relevant section of the 2006 act so that the seller will have a duty to provide on request the prescribed documents from 1 December 2008. We have chosen that date on advice from the advisory group as it is traditionally a quiet time in the housing market.
I do not propose to go into all the details of the regulations, but will instead highlight the changes that have been made to the draft regulations that were the subject of the consultation paper in February 2007. Before doing so, I should make it clear that members of the advisory group have said that they are content with the changes that have been made to the regulations and have been fully involved in the development of the prescribed documents that are detailed in the schedules.
The "permitted period" in regulation 3 is the maximum period that may elapse between a prospective purchaser requesting the prescribed documents for a house that is on the market and the seller or the seller's agent providing them. The consultation paper proposed a period of seven days. Responses suggested that there was some doubt about the feasibility of such a period at holiday times; we have therefore substituted the period of nine calendar days.
Three documents are prescribed in regulation 4: the single survey; the energy report; and the property questionnaire. The first two documents form the survey report, but for clarity, I will refer to them separately as "the single survey" and "the energy report". The single survey is covered in part 1 of schedule 1 and includes detailed information on the property's condition, accessibility information for the property and an open-market valuation. Although a number of stylistic and minor changes have been made to the single survey, the core content of the document has not changed materially from the version included in the draft regulations that were the subject of consultation. The single survey report format in schedule 1 to the regulations is based on a survey product used by Colleys surveyors, a subsidiary of Halifax Bank of Scotland.
The energy report will contain up-to-date information, as listed in part 2 of schedule 1. The list includes all the information required to produce an energy performance certificate under the European energy performance of buildings directive, together with further information that will help prospective buyers to make their purchasing decision and the eventual buyer to manage the environmental impact of the house into the future. By specifying the list of information in that way, we have made sure that the data collected by the surveyor will allow production of both the energy report and the certificate, avoiding the need for two separate inspections.
The concept of the property questionnaire in schedule 2 was suggested initially by a Law Society of Scotland representative on the advisory group. Many solicitors firms already use their own version of such a document. It will give prospective purchasers, surveyors and solicitors useful information about the property. Some of that information might still require to be confirmed formally during the conveyancing process, but identifying it at an early stage will alert all concerned to relevant issues about the house. At present, all too often such issues become apparent at the final stage of concluding missives, leading to delays and knock-on consequences for both buyer and seller.
The next regulation that has changed since the consultation draft is regulation 6. The proposal that the prescribed documents should be no more than 12 weeks old when the property is brought to the market remains unchanged, but we have added a rider to meet a concern raised by a Law Society member of the advisory group. The regulation now effectively disregards any period of less than 28 days when the house is taken off the market. That avoids the risk of the seller having to commission another survey if a sale falls through or if they have taken the house off the market during a holiday period.
Regulations 7 to 14 specify exceptions to the duties to possess and provide prescribed documents. The exceptions include new and recently converted houses, houses that are unsafe or due to be demolished, portfolios of houses that are considered to be commercial transactions, seasonal or holiday homes as defined by planning legislation, mixed sales such as farmhouses and dual-use properties such as bed and breakfasts.
Only one of the exceptions listed in the consultation draft of the regulations has been amended: the exception in regulation 14 for converted properties. The consultation proposed an exception for properties in the process of being converted, with the duties coming into effect once the house was physically complete. The revised exception from the duties in the 2006 act is for the first sale, but not subsequent sales, of a converted house. Essentially, the regulations now treat converted properties in the same way as new-build properties. That position was reached after extensive discussion with the advisory group. The primary reason for the change was the fact that most conversions are, like new houses, marketed and sold at an early stage to give the developer a sufficiently secure basis on which to proceed with the work.
Other than the changes that I have highlighted, the regulations remain as proposed by the previous Administration in the consultation paper on the draft regulations. The complete package has been thoroughly considered and discussed with the key stakeholders. In our view, it provides a workable and valuable improvement to the Scottish system of buying and selling houses.
Thank you for those introductory remarks.
Do members have any technical questions on the regulations for the minister and officials before we move on to the debate?
I will ask the minister about the timescale in relation to a seller deciding to put his property on the market. At what point will the home pack have to be available? Will it have to be available from the first day of marketing?
Edythe Murie (Scottish Government Legal Directorate):
Section 98 of the 2006 act states:
"A person who is responsible for marketing a house … must possess the prescribed documents in relation to the house."
That means that the minute that a person starts marketing a house, they must have those documents. There is a definition of "on the market" in the act.
So there will inevitably be a delay in properties being brought to the marketplace, as the seller will have to factor in the weeks that are required for the survey reports to be commissioned and the various questionnaires and so on to be completed.
I do not accept your interpretation. There is no reason why there would be a delay. The provision of the documents will be part of the normal process of house selling in the future, assuming that the regulations are approved by the Parliament. People will be aware of the process, and when they want to market a property they will ensure that the documents are available. I do not see why there would be a delay in the process.
I can tell you why there will be a delay in the process. Currently, if you or I wanted to sell a house, we would go to an estate agent. They would come round and prepare particulars, and the house could be on the market within a few days. Under your system, not only will we have to go to an estate agent, but we will have to commission a survey, organise a surveyor, get a report, complete your questionnaire and so on. I suggest that that will be a far longer process than the one that is now in place.
If you consider the overall length of the house buying and selling process, the later stages will be speeded up, because all the documentation will be available. Much more information will be available, and there will be certainty because a detailed survey will be available to potential purchasers and to the actual purchaser, so at the end of the process there will be no delay caused by people having to get a survey done.
I accept your point to an extent. If somebody decided on one day that they wanted to put their house on the market the following day, the new system might prevent them from doing so before they had the documentation in place. However, I do not believe that the overall process would be extended in the way that you suggest, because it would be speeded up later on.
Do you accept that a number of sellers put properties on the market on a speculative basis and that they may be discouraged from doing so by the fact that they will have to pay for such a report before they can market them?
I do not know whether we are straying from technical questions on to issues that should be dealt with in the debate.
I think that some evidence was given about this matter by Friends Provident, which said that the volume of properties on the market might be reduced by as much as 30 per cent—people will be deterred from putting their properties up for sale on a speculative basis because of the additional costs that will be involved. Did you take that into account when framing the regulations and coming forward with your proposals, minister?
Even if you wished to put your property on the market on a speculative basis, you would still have to pay for any advertising or marketing that might be needed.
The points that you are referring to are, effectively, to do with the 2006 act rather than the detail of the regulations. The regulations do not change the intention of the act; they just bring it into effect.
Indeed, the corpus of the regulations brings the whole thing into effect. However, it was open to you to take the sensible decision, which would have been not to proceed with this ridiculous scheme in the first place. My questions, therefore, are perfectly material and relevant.
Even I know that that was not a technical question, Mr McLetchie.
I want to ask the minister two technical questions. On exceptions, can you refresh our memories on the position that was ultimately taken with regard to properties that are purchased under the right to buy? I remember that when the Housing (Scotland) Bill went through Parliament, there was discussion about housing associations having to provide the information that we are talking about, even though the relationship with the buyer in that circumstance is quite different from the relationship that exists in other circumstances.
Secondly, can you clarify whether seasonal accommodation is different from holiday accommodation? Seasonal accommodation is defined as accommodation that is occupied for fewer than 11 months out of 12. That does not seem to be a hard test to meet for someone who is working away from home for some of the time, which means that the system might be open to abuse.
The right to buy is not covered by the regulations. Further regulations are being discussed to deal with the right-to-buy issue. David Rogers can explain some of the background.
David Rogers (Scottish Government Housing and Regeneration Directorate):
The Housing (Scotland) Act 2006 dealt with right-to-buy purchases completely separately, because they are not marketed to the sitting tenant. There is a separate set of provisions under which regulations can be made to provide information to the prospective purchaser in that circumstance. That will be the subject of a separate work stream.
Is the only difference the fact that, in such cases, the property is not marketed? I had understood that the driver behind the home improvement pack was, in part, a desire to empower the purchaser by giving them information. The purchaser is in the same position, no matter who they are buying the property from. However, you are saying that the distinction that emerged in the legislation is attached to the nature of the marketing. What would happen in a private sale, in which agents are not used? Is it the nature of the transaction or the fact that the property is being marketed that means that the information must be provided?
The matter had to be dealt with in two separate sections in the 2006 act. The provisions under which the regulations have been made apply to the marketing of a property. A separate set of provisions in the 2006 act was needed because a right-to-buy property is not marketed, but is sold to the sitting tenant. A separate suite of provisions has been developed under those provisions to ensure that the prospective right-to-buy purchaser is provided with better information on the condition of the house and on the financial liabilities that they may take on.
I have forgotten the second part of your question.
It was to do with the definitions of seasonal accommodation and holiday accommodation.
Perhaps I should deal with that. There is a reference in the regulations to section 41 of the Town and Country Planning (Scotland) Act 1997, which is the provision that allows local authorities to grant planning permission with the condition that the premises may be used only for holiday accommodation or for limited occupation. Our exception will apply only where that condition has been applied by the local authority to the house in question.
Do you have an idea of how many properties will be affected?
I am afraid that I do not know.
My understanding is that the provision is intended to cover such places as holiday parks, with suites of chalets. It is not about somebody's second home, which they might rent out. It is about places that are given planning permission specifically as holiday resorts.
I generally welcome the proposals. This is a big if, but if they bed in well and work out well, the new system will be a great bonus to sellers and buyers.
However, I wish to raise a couple of points of concern with you, minister, to see whether you can give some assurances to the public. First, some members of the public are quite concerned that, given the fact that a single survey is commissioned by the seller, it might be somewhat biased and its validity affected. Of course, professional organisations do surveys, and I hope that their professionalism would come through, but what assurances can you give the public that the survey will hold water in relation to the properties that they seek to purchase?
My second point relates to new-build properties, of which there are a significant number in my constituency and in the constituencies of other members. Being a popular place, Dunfermline is attracting many purchases well before the properties are built—sometimes, properties are purchased when they are just a plan on a piece of paper. What assurances can you give buyers of new-build properties? I am a bit concerned that you are not giving them a chance to take part in the system and give validity to the Government's good proposals.
You are quite right that new-build properties will be excepted. As you have stated, many properties are bought off-plan or before they are completed. A substantial survey cannot be completed on a property that does not exist. In practical terms, it seems perfectly sensible to except new-build properties. However, they will be excepted only for that first sale—all future sales will be covered by the regulations.
Your point about trust and the validity of surveys is quite right. Having met representatives of the Royal Institution of Chartered Surveyors and discussed the matter in some detail, I am confident that the surveying profession will provide objective reports that are based on survey results; there is no question of surveyors being put under pressure to do certain things. A surveyor might feel under pressure today, but that is no different from what could happen after the regulations come in, so I do not think that that is a valid criticism. I am confident that surveyors will provide detailed and objective information. It is in their best interests to do so, and people have the right to challenge information if it is subsequently proved to be incorrect in some way. It is in the best interests of surveyors to carry out their work professionally, and I have no doubt that they will do so.
People will not just get a valuation, as happens now. Effectively, a valuation is a fairly subjective judgment on a property. In future, people will get a detailed survey that will provide the seller and prospective buyers with a lot of information. The survey will be a much more objective analysis of the property. On the issue of trust, we can rely on the professionalism of the RICS and the industry. The information that will be provided will be much more objective than a subjective valuation.
There are no more technical questions, so we move to the debate, which may last no more than 90 minutes. I invite the minister to speak to and move motion S3M-1117, in the name of Nicola Sturgeon.
I have already made all the comments that I wish to make on the draft regulations. We have covered most of the points that I would otherwise have raised at this stage.
I move,
That the Local Government and Communities Committee recommends that the draft Housing (Scotland) Act 2006 (Prescribed Documents) Regulations be approved.
I invite questions from committee members.
There are a number of excepted categories. What provisions are there to ensure that some sellers do not try to have the properties that they are selling categorised under those excepted categories to avoid having to produce a survey?
The fact is that trading standards rules and laws govern the marketing and selling of goods, including property, and ensure that a person cannot attempt to provide an inaccurate description of a property or to sell it as something that it is not.
Moreover, such actions are not in sellers' interests. If the new system is in place, buyers will expect to have full information, including an energy report, a property questionnaire and a full and detailed property survey. For example, I might view something that was clearly a residential property but was being marketed as something else. If I asked for the survey and the other reports, only to be told that they were not available, I would be put off purchasing that house. It will be in sellers' best interests to provide that information because that will be the normal process for selling houses.
I might have misled members, but I should point out that this is the debate, in which they should speak for or against the motion, not the question-and-answer session.
Sure. I will just ask questions, and then decide whether I support the motion—he said, with his nose growing steadily.
I can offer only guidance, but you will not get to ask a series of questions.
The required documents must be prepared within 12 weeks of the property going on sale, but the property can also be taken off the market for a period of 28 days and then put back on. However, some mortgage providers will not grant a mortgage if the survey is not carried out within three months. Why have you not set a limit for the maximum length of time for which a survey is valid? After all, if a property continued to be taken off and put back on the market, those three months could stretch out, and if someone tried to get a mortgage on it, they would still have to get a survey because the lender might not think that the previous survey was up to date enough.
Perhaps I might intervene at this point.
There was much debate about whether the information should have a shelf life. I point out that, even with properties that are on the market for a long time, the information provided will include not only the valuation but other valid documents such as the single survey, the property questionnaire and the energy report. Although in your example another valuation might well be required—which is, of course, entirely a matter for mortgage lenders and the individuals involved in the process—that will form only a small part of the overall package of information that people will get. Even in those circumstances, people will still get more and much better information to allow them to make a better decision about whether they should go ahead with the purchase.
Moreover, if we put a shelf life on the reports, people might inadvertently—and unnecessarily—have to carry them out more than once. Such detailed information does not go out of date so quickly—indeed, it lasts for a long time. Although there is a question about valuation, it is, as I have said, only a small part of the process.
I oppose the approval of these regulations. In fact, I am very disappointed to find that the new Scottish National Party minority Government has picked up this particular regulatory baton from its Labour and Liberal Democrat predecessors, despite all the evidence that emerged in the previous parliamentary session that home information packs and single seller surveys were a complete and utter waste of money and sought to address a problem that the marketplace had already solved. It appears that in its craving for more regulation and interference the new Government is no better than its predecessor. Indeed, this move marks a significant U-turn from the commitment made in the SNP manifesto by the supposedly pro-enterprise Mr Mather and others.
Members will recall that the Communities Committee took evidence during session 2 on single seller surveys. The infamous pilot surveys were undertaken in 2005. There were supposed to be 1,200 pilot surveys to assess the value of the scheme, but there ended up being only 74 surveys in the pilot areas. In the overheated housing market of Edinburgh in 2005, there was only one survey, which, ironically—although, some would say, not surprisingly—led to the seller not selling the house. Those are the facts. On that basis, one would expect any government to accept the fact that sellers would not voluntarily recognise the value of single seller surveys in marketing their homes. Sadly, both the previous Administration and the current one seem to think that they know better than the marketplace when it comes to sellers. People who would not voluntarily commission single seller surveys to assist in the marketing of their homes are now being compelled to do so.
I point out some of the observations that were made by people who are involved in the property market in relation to the survey, following the fiasco of the pilot surveys. The Glasgow Solicitors Property Centre said that buyers did not trust the single survey and arranged their own additional surveys. It said that the single seller survey would slow down the housing market, as the survey needs to be prepared before the property can go on the market. It also said that the single survey system will reduce the volume of properties on the market, as speculative sellers will disappear due to the additional costs—a point that I made earlier in questioning the minister. The GSPC reported that
"the incidence of multiple surveys … affected roughly a third of buyers even when the market was at its busiest and is much less prevalent today"—
a trend that people who are involved in the market say has been continued and accentuated. Further evidence was given by the Scottish Consumer Council, which highlighted the fact that the single seller survey will
"cause difficulties for disadvantaged buyers and sellers, who may be on low incomes and/or be buying or selling low-value properties in areas of low demand."
So, the buyers and sellers in Scotland's property market are the losers. Who are the winners? We have only to turn to the Executive note on the regulations, which was helpfully prepared by the minister, to see who the winners are. The number 1 winners are the surveyors. We are told, in paragraph 18 of the Executive note to the regulations:
"Recent research estimates that the annual spend on surveying fees will rise from between £25m and £40m to between £57.6m and £83.2m."
That is an increase of more than 100 per cent in the fees payable to the surveying profession as a result of the introduction of the regulations. It must be the biggest gravy train for surveyors since they first started staking out the great plains of America. It is remarkable that a scheme that is promoted as ending the cost of people getting so-called multiple surveys done ends up benefiting the surveying profession to such an extraordinary extent—members should remember that that is the net cost.
People will not have to get multiple surveys done, which, you would assume, would reduce the income to the surveying profession; however, the Government's report tells us that that is not the case. Although the Government is getting rid of the need for multiple surveys—a move that I question, as buyers do not trust the single survey—remarkably, the total cost of surveyors' fees is more than doubling according to the Government's own estimate. On the issue of the total costs of preparing the single survey property questionnaire, et cetera—the home pack, as the minister described it—paragraph 19 of the Executive note states:
"It is expected that solicitors and estate agents will be able to pass most, if not all, of any additional costs back to the parties involved in the sale of the house."
In effect, the sellers and the buyers will pick up the bill yet again.
The policy has been flawed ever since the ill-fated pilots were run in 2005. It is unwanted and unnecessary. The marketplace has already resolved many of the issues that gave cause for concern. The incidence of multiple surveys has dropped dramatically and the number of properties for which bids are submitted subject to survey has increased dramatically. Anyone who is involved in the property market knows that.
The number of properties that are sold on a fixed price basis has also increased significantly. That used to be the preserve of new homes, but has gradually extended into the second-hand market and I foresee it extending much further as the property market slows, flatlines or—as I hope it does not, but as many think it will—falls in value in the next year, when selling times will become longer and prices will lapse as a result.
At this time of difficulty for home owners, with a slowing market and falling capital values, it is disgraceful that the Government should try to put a regulatory and cost burden on buyers and sellers of properties. I recommend that the committee does not recommend approval of the regulations.
How to proceed is up to you, minister. You will have an opportunity to respond and sum up at the end.
Perhaps it would help if I dealt with some of the issues now. Are you okay with that?
I am.
I will deal with some of the issues that Mr McLetchie raised. He spent time on the pilot. The pilot proved that a voluntary scheme would not work. When we think about it, the reason for that is obvious. When the market has one system in place for buying and selling houses, it is difficult for individuals to adopt a different system within that market. It was clear that that would create difficulties and would not be welcome, particularly among sellers, because they had to purchase a survey to provide to prospective buyers and buy a survey for any house that they bought, so they were hit twice. That is why the voluntary scheme, in the current marketplace, had the result that it did, although that in itself has no impact on the policy intention behind the single survey. It is clear that a voluntary scheme would not work, which is why it is important to move to a mandatory scheme.
The overall cost of surveyors' fees will rise, not for the reason that Mr McLetchie gave, but because 90 per cent of buyers currently choose a valuation survey, which is the cheapest survey, whereas in future they will receive a detailed survey. That will be roughly equivalent to a scheme 2 survey, which is much more expensive than a valuation survey. In return for that increased cost, buyers will receive detailed information—which nine out of 10 buyers do not have at the moment—with which to make the biggest financial decision of their lives.
The question of who the winners are was asked. The winners are the buyers, who will receive detailed information about their purchase. Particular winners will be first-time buyers. We hear week in, week out about first-time buyers who are struggling to get on to the property ladder. First-time buyers will no longer have to spend anything on surveys, which will be entirely free to them, as they will not be selling a property.
As for the policy's popularity or otherwise—I think that Mr McLetchie said that it was much unwanted—in a recent survey, the Edinburgh Solicitors Property Centre found that two thirds of buyers want a single survey. Another point is that 80 per cent of sellers are also buyers, so almost nine out of 10 people in the marketplace will benefit from the new scheme.
It is clear that offers subject to survey do not operate throughout the country. They also increase the time and uncertainty of the process, because such offers mean that people near the end of the buying process before they get a survey done. They are then under a great deal of pressure for the survey to match the price that they have offered for the property. It is difficult for them to pull out at that stage. However, if the survey does not match the price that they have offered, they may have to pull out of the purchase, which causes a great deal of difficulty not only for the buyer, but the seller. Sale subject to survey creates uncertainty in the marketplace. The single survey is very much a step forward.
Mr McLetchie quoted a number of people. I, too, have quotes. Julia Clark from Which? said:
"This will be the biggest improvement for house buyers and sellers for a generation … It will give Scotland a system far ahead of that in England."
Mr McLetchie also quoted the Scottish Consumer Council, which said:
"We welcome the single survey, which we believe is in the consumer interest … We are convinced that in a few years time, the new system will seem unremarkable, and we will wonder why it took us so long to finally adopt a more common sense approach."
I have several pages of quotes but, in the interests of moving on, I will not go into them at this moment.
Thank you for that consideration, minister.
The single survey has been widely welcomed by a number of individuals and groups across the sector. In particular, the energy report has been welcomed by environment groups such as Friends of the Earth Scotland.
As others have said, the debate is not a new one. Mr McLetchie's position was articulated during the passage of the bill. I think that the Conservative party was the only one to take that position, although some members of other parties may also have done so. However, the general position at the time was one of support for the previous Administration's approach. The minister is right in saying that the measure should be mandatory; we have seen that a voluntary system does not work.
One of the motivations behind the survey is the recognition of the odd way in which the housing market operates. People give less consideration to buying a house than they do to buying a coat. They may have a valuation survey done, but they know nothing about the property that they are buying. Sellers, too, are encouraged to sell without being honest about what they are selling.
In drafting the legislation, the former Administration wanted to achieve balance in the housing system. We wanted people to make wiser and more thoughtful decisions about what they were taking on in buying a property. Certainly, one important issue for us was property maintenance: people should take responsibility for the maintenance of their property. We thought that it would be difficult to develop that culture in circumstances where people take no thought whatever for what they are buying or selling.
At the time, people argued that the market had found its own solution in the form of a sale subject to survey. My direct experience—I have also heard about it anecdotally—was that buying, or selling, subject to survey caused its own complications. A seller can take their property off the market as sold subject to survey, only to find that the purchaser cannot conclude. They then have to start the process all over again.
I remind everyone of the real concern at the time that buyers, particularly first-time buyers, could—and to no real purpose—get caught up in the multiple-survey trap. One consequence was that that encouraged people to go for cheaper, poorer-quality surveys. Also, in setting low offers-over asking prices, the market was encouraging people to engage in buying properties that were outwith their limit.
No matter how perfect a market may seem to some folk, it was entirely reasonable to try to make trading in the market more responsible and fair. The regulations create not only responsible purchasers, but responsible sellers. Over the past number of years, there has been a huge increase in home ownership. We are at the stage when we need to see more responsible selling and purchasing in the housing sector.
Mr McLetchie presented an apocalyptic view of things. My final question for the minister is this: if you receive an indication that the measure is having a distorting effect on the market, or that unexpected things are happening, what will you do? What has the Government put in place to monitor the regulations?
We intend to commission a number of studies to assess the impact of the home report. During 2008, a baseline study will be done to identify the issues and the extent of the problems that buyers and sellers face in the Scottish property market. That will be followed by a technical evaluation, which will be commissioned 18 months after the introduction of the home report to determine whether the regulations require to be amended. Finally, a full evaluation of the home report will be commissioned five years after its introduction to assess the progress of the policy against its objectives. Those measures will ensure that we keep a close watch on the situation in advance of the report's introduction, shortly after it, and in the long term.
I find myself in the odd situation of agreeing with almost every word that Johann Lamont said.
Sometimes it is best to talk from direct experience. Several years ago, I was the first-time buyer of a small, one-bedroom tenemental flat that had been converted. The storage cupboard had become a kitchen, and a bit had been shaved off the bedroom to make a bathroom. When I bought that flat, due to financial considerations I commissioned only a valuation survey. It was not the first property that I had gone for and I had paid for other valuation surveys. I am now in the process of selling that flat, and I seem to have been lucky in that there are no major structural defects. I was buying a pig in a poke and fortunately I seem to have got away with it.
There are lots of tenemental properties throughout Glasgow where people find themselves in a similar situation. First-time buyers need a level of protection so that they know what they are buying. Many cannot afford to get a more detailed physical survey because they are saving every penny for a deposit. Something that we are looking at on a cross-party basis is how to get first-time buyers on to the property market—not just for the sake of it, but in a safe and secure way.
A number of my constituents have not been as lucky as I have, and the local authority has had to move in and—rightly—enforce compulsory repairs for safety reasons. However, because they got a basic valuation survey, those first-time buyers have no right of recompense and now have to pay tens of thousands of pounds to make their property safe. It is right that properties are made safe—and the local authority has played its part under the health and safety legislation—but my constituents have had no protection when they have found themselves in that situation. They may now find themselves off the property ladder and in serious debt. I hope that the regulations will deal with those situations.
I know that Patricia Ferguson is having a detailed look at how we provide protection for property buyers; not just owner occupiers, but those involved in the private rental market. She is also looking at how private rental properties are factored. We must consider everything that is happening in the property sector and any new measures should complement other developments.
I have two more points. First, as I said earlier, I will be looking to sell my flat. That will make me face up to my responsibilities regarding the physical condition of my property. That is a question of not just the state of its repair—I have a responsibility to maintain my housing stock—but energy efficiency. We are all looking to meet the stringent environmental targets that the Parliament is hoping to set.
My second and final point is on those excepted from the regulations—those who will not have to provide the single survey. The regulations refer to someone who has a suite of commercial properties. If a business person had perhaps 15 or 20 houses in multiple occupation in one area of a city and was hoping to sell two or three tenemental closes on the commercial market, would they have to provide seller surveys?
If the properties were being sold as a commercial transaction, they would not be covered. The regulations cover residential properties. Commercial transactions in which a business took over another business that happened to include a number of properties would not be covered, although there would still be a requirement for an energy performance certificate, which will be introduced irrespective of the home report. Commercial transactions would be affected by building standards and other legislation, but they are not covered in these regulations.
Members have mentioned the subject-to-survey system. I perhaps should have said earlier that we do not have subject to survey; we have subject to valuation, which is different. Bob Doris said that he got only a valuation survey. I, too, have done that—because a valuation survey was the cheapest option at an expensive time—and then discovered that I had a swimming pool under my floorboards and various other problems once I moved into the property.
The most important points that Bob Doris makes are those about the physical condition and maintenance of properties—Johann Lamont touched on that, too—and about the energy report and energy efficiency. Those are two important points that we have not discussed much so far. One result of the measures will be that, because people will know that a detailed survey will be done, they will be encouraged and motivated to maintain their property to a higher standard. The standard of properties in the private sector is a big problem—we have billions of pounds-worth of disrepair in the private sector, which we must try to address. The measures will help to motivate people to keep their properties maintained properly.
Bob Doris mentioned alterations to properties. The property questionnaire contains questions on that very issue. Questions 6a and 6b are detailed questions that will require sellers to detail changes that they have made.
I have a couple of questions for the minister. I am interested in the minister's response to Bob Doris's question about commercial transactions. I want to pursue that issue a little to be absolutely clear about it. If someone were to buy an entire tenemental property and refurbish it, would the individual properties be subject to the regulations when they came on to the market? If someone bought a large tenemental property and subdivided it to make it into an HMO and then, when they put it on the market, did not specify whether it was being sold as an HMO but left the option open for it to be sold as a single property, would that be covered by the regulations?
The answer is yes in both cases. If somebody buys a property to refurbish and sell it, they will be marketing a residential property, so they will be caught by the regulations and the Housing (Scotland) Act 2006. In the second case, in which somebody sells a property for residential, HMO or other purposes, if it can be sold as residential and that is the way in which it is marketed, the seller will be caught by the provisions. An exception occurs when the property is marketed as being for a business and as a commercial transaction. The only other exception is dual or mixed use, in which a property that people stay in is part of another property—for example, a shop with a flat above it.
How will you oversee or police the situation? When properties that are HMOs are put on the market, it is often indicated that they are currently used as an HMO or for let, but that they could be reconfigured back into a single dwelling.
On a further issue, how will someone who has commissioned a report, or a buyer, query the survey or other documents that go with it if they think that certain matters are not described appropriately in them?
On your first question, the properties that you mention are residential, so in all those circumstances, the seller will be caught by the regulations. Whether or not the property is an HMO, the seller will be caught, because the property is marketed as residential. It will not matter whether the property can be returned to a single property—the seller will be caught in both cases.
Sorry, what was your second question?
It was about what happens if the person who commissions the report or the person who is interested in buying the property finds that the survey does not tally with their view or understanding of the property.
I should have mentioned that if there is a dispute or a question about a property that is being marketed, a person can report the matter to the trading standards service.
The information that a seller provides must be provided to all potential buyers. A seller can correct factual errors in the survey, which is important, and buyers have a right of redress if mistakes are subsequently found. Sellers will be able to question factual elements in the survey, but they cannot enter into debate about matters such as the valuation. The information would have to be provided to everyone who was in receipt of the survey.
If Mr Doris, who is looking for a new house, goes to see a property that is advertised as having two bedrooms, and finds that it has one bedroom and a cupboard that contains a sofa that can be turned into a bed, with whom should he query the matter?
I am reliably informed that the Property Misdescriptions Act 1991 covers such eventualities.
I welcome the measures. How much consideration has been given to capacity in the surveying profession? You said that the new kind of survey will become the norm rather than the exception.
To what extent are the buying public educated and geared up to cope with the new system?
There is no evidence of a capacity problem in the surveying sector. People currently commission surveys and will do so in future, so there will be no huge difference in activity, other than that the new surveys will be more detailed. I do not expect a great difference in the overall number of surveyors that will be required.
Perhaps your question relates to capacity in certain parts of the country. We cannot regulate for that, but I expect that the market will determine how many surveyors cover an area, as it currently does. If there is demand for surveyors to be available in a certain area, I am sure that surveying companies will be more than happy to meet demand and take the business that is available.
You asked how we would make information more widely available. If the committee agrees to recommend that the regulations be approved, a website will immediately be made available to the public and the sector, which will give details about much of the information that people require and include frequently asked questions. Lots of information will be available for the sector and the general public.
There will also be an information campaign to provide everyone who is involved in the process with detailed information about the change, which will come into effect on 1 December. The campaign will be targeted. There are obvious places where the information should be provided, such as property centres, estate agents' offices and the many supplements on house buying and selling in the press. We will also roll out training through the representative bodies of surveyors and estate agents, to ensure that people are fully trained before the change takes place.
Members who wanted to take part in the debate have done so. Minister, you responded to points as we went along, so I presume that you do not want to wind up the debate.
The question is, that motion S3M-1117, in the name of Nicola Sturgeon, be agreed to. Are we agreed?
No.
There will be a division.
For
Alasdair Allan (Western Isles) (SNP)
Bob Doris (Glasgow) (SNP)
Patricia Ferguson (Glasgow Maryhill) (Lab)
Kenneth Gibson (Cunninghame North) (SNP)
Johann Lamont (Glasgow Pollok) (Lab)
Duncan McNeil (Greenock and Inverclyde) (Lab)
Jim Tolson (Dunfermline West) (LD)
Against
David McLetchie (Edinburgh Pentlands) (Con)
The result of the division is: For 7, Against 1, Abstentions 0.
Motion agreed to.
That the Local Government and Communities Committee recommends that the draft Housing (Scotland) Act 2006 (Prescribed Documents) Regulations 2008 be approved.
I thank the minister and his officials for giving their time.
Housing (Scotland) Act 2006 (Penalty Charge) Regulations 2007 (SSI 2007/575)
We consider an instrument that is subject to the negative procedure, which deals with a matter related to the previous instrument. No member has raised points on the instrument and no motion to annul has been lodged. I take it that the committee has no report to make on the instrument.
Members indicated agreement.
Meeting suspended.
On resuming—