In February 2019 The House of Commons released a briefing paper about Improving the Home buying and selling process across England. The paper identified the main concerns with our current home buying and selling process as:
-Time taken to complete a transaction
-Transactional failures
-Consumer inexperience
-Lack of transparency
-Weak regulation of Estate Agents
-Lack of digitalisation
In October 2019, tmgroup hosted two events in Reading and Liverpool to discuss these challenges and to look at ways the current home buying process can be improved.
Our panel of industry experts looked at creating quality homes, providing modern homes for rent, what the consumer wants from the home purchase process, leasehold reform and how regulation can be aligned across the industry.
Theme 1: CREATING HOMES
How do we provide quality homes for all?
Lord Taylor of Goss Moor walked us through the history of development planning and some of the key decisions that have led to the rise in sequential development and the negative impact this has on not only the local property market but the local infrastructure.
He has been involved in creating a Garden Villages and Towns policy for the government and explained the advantages of creating this type of community. By placing the new development at a distance from existing towns and villages and ensuring it has its own infrastructure, to include transport links, community space, schools, health care and shops, car journeys into nearby towns would not be an excessive burden. This is in contrast to much of the current new build planning, where small estates are tacked onto the outskirts of existing towns and villages, with the assumption that they can use the existing town facilities.
Theme 2: RENTING HOMES
Providing habitable homes in multiple occupation (HMOs) – is this just a pipedream?
Vicki Peers (Inside Liverpool) showed us that some investors are creating modern safe spaces for renters. However, while habitable HMOs are possible it can also be costly, which means there are still investors that are cutting corners. So, what can be done to ensure all HMO owners meet the same basic standards?
We asked Vicki for three suggestions to help improve this area of the industry:
More industry education – the new wave of investors is keen to become educated and many attend seminars around the country. If the latest generation of landlords want to remain in property, there should be more CPD/education events they can attend. The only ones currently available are organised by RLA/NLA and are generally focused only on legislation.
Greater experience needed for HMO ownership – currently mortgage lenders are pretty relaxed about the experience necessary to buy an HMO. Simply being a single-let landlord for 1-2 years is enough for most lenders. But HMOs come with many more challenges, both during the refurbishment/development phase, and in the ongoing management. It could, for example, be made a term of the mortgage that a buyer must employ a reputable HMO specialist letting agent, to avoid the DIY attitude of some buyers to keep their costs down.
Regulation of the rent to rent (R2R) model – some investors who don’t have the cash to buy an HMO use R2R, whereby they take control of the house for a landlord and pay an agreed rent, then let out each room individually, retaining the profits. There appears to be little regulation around this and there is a grey area regarding who the HMO licence is held by, how much experience a renter needs to have and what happens to the tenants when the renter/landlord agreement breaks down.
How do we provide quality rental for all?
At the Reading event, Dr David Smith (Anthony Gold Solicitors) identified the main issues surrounding the rental market as:
-Tenant education
-Landlord knowledge and awareness
-Failure to deal with rogues
-Weak powers to deal with property
-Overly complex structures
-Lack of Local Housing Allowance (LHA) skills and findings
-Too many courts and tribunals
David’s three key suggestions to help improve and tackle some of the key issues are;
Better information to prospective landlords at the point of purchase regarding their obligations. Ideally the government would improve their How to Rent Guide, which would be distributed to potential landlords by estate agents and conveyancers.
More awareness of tenant rights and stronger signposting at all levels to existing sources of information such as Shelter.
Governmental approval of the existing private rented sector (PRS) Code and signup from every part of the sector, with some element of compulsion or the ability to deal with those who are not complying with that code. Some of the power to do this already exists but it is not properly implemented.
Panel Discussions
Theme 3: THE HOME PURCHASE PROCESS
What does the consumer really want from a property transaction?
Clear themes from both panel discussions were that the consumer wants certainty, minimal fuss, transparency, information/guidance, confidence in their purchase and finally trust in their investment.
Our panel of experts discussed how this could be delivered, questioning whether increasing the level of information would mean that the consumers would then need more education to understand it all.
There was a consensus that the value of industry experts and their guidance is undervalued, for example it was noted that many consumers still choose not to have a home survey completed, even though without one a consumer could be around £5k worse off. So why is guidance by the experts sometimes dismissed by the consumer? Is it because the perception is that it isn’t needed? Should we create an MOT/Service check for the Home Purchase Process? Does more need to be done to enlighten the consumer around the value of the expertise they are paying for?
Theme 4: LEASEHOLD REFORM
What really caused the ground rent scandal?
The 2018 report ‘Understanding the consumer experiences of the conveyancing legal services’ by the Solicitors Regulation Authority (SRA) states that 20% of consumers who bought a leasehold property cannot recall being provided with information regarding ground rent, service charges and/or length of lease.
With that in mind, was the ground rent scandal due to lack of information and knowledge? Should the conveyancer have provided more? Or does the consumer have a responsibility to understand what they are purchasing?
Beth Rudolf (Conveyancing Association) and Sebastian O’Kelly (The Leasehold Knowledge Partnership) identified that one way to help improve knowledge about leasehold is to establish a benchmark of information that is provided for any leasehold transaction.
Theme 5: ALIGNED EFFECTIVE REGULATION
How do we align regulation to create a better home process for all?
Regulation is a topic frequently mentioned at industry events. It is a vast and fragmented area, so we asked the panel for their suggestions on aligning it across the property sector with a view to providing the following:
-A better understanding for the consumer
-More transparency
-Consistent data standards
Panellist: Alan Milstein, Chairman – RPSA
1. Snagging surveys for new build – consumers are disadvantaged by being discouraged from obtaining independent advice about the quality of their new home. We need an industry-wide initiative to create a set of snagging survey standards.
2. Surveys for home buyers – industry terminology and culture does not encourage buyers to commission independent condition reports on their proposed purchase. Property professionals need to understand the value surveys can bring to the process and advise clients of their importance.
3. Surveyor standards have been too low and inconsistent – the Residential Property Surveyors Association (RPSA) are launching the Certified Building Surveyor scheme to ensure that all buyers receive a thorough report that delivers high quality and value for money.
Panellist: Ana Bajri, Associate Director, Internal Standard Team – RICS
1.Consumer education – sharing of consumer education content, resources and information. Cross industry collaboration would ensure consistent messaging and well-informed consumers across the transaction timeline
2.Industry education and information – sharing best practice, who does what throughout the transaction process including information on the roles of professionals involved in the transaction process i.e. conveyancing, surveyor etc., economic statistics on property market, cross- sector training etc.
3. Property industry standards – cross- collaboration to ensure consistency and transparency between professionals and solution providers across the home buying & selling process in delivering high level of service to consumers.
Panellist: Beth Rudolf, Director of Delivery – Conveyancing Association
1. Adoption of an agreed data model across the industry which technology providers could map to in order to enable the free flow of data between the stakeholders. This would deliver real time chain progress transparency to manage customer expectation and improve the customer experience.
2. Using the Buying and Selling Property Information to aggregate data much earlier in the process, stimulate the use of digital services, reduce additional enquiries and post valuation queries and provide one source of truth that the stakeholders can rely on. Ensure that the buyer has sufficient information prior to offer to avoid a repeat of the leasehold mis-selling scandal.
3. Establish digital identities which all stakeholders could rely upon and which would confirm that the seller was the genuine owner of the property. Also, verification of the source of the buyer’s funds and wealth, eradicating fraud and improving the consumer experience by removing the need to verify identity to multiple parties in multiple ways.
Panellist: David Pope, Entity Authorisation and Client Protection Manager – CILEx Regulation
1. Continuing to work with other stakeholders on how technology can be used throughout the process.
2. Looking at how information can be shared better to improve standards.
3. Restoring the value in the transaction.
Panellist: Eddie Goldsmith, Founder Member – Conveyancing Association
1. Establish a Rulebook synergy across the Conveyancing regulators instead of having three different sets of rules.
2. Create a Legal Services Authority to ensure consistency of regulation.
3. However, having the same set of rules when it comes to retirement/closing a business creates huge barriers and is unfair, so this needs to be taken into account.
Panellist: Paula Higgins, Partner and Head of Operations – Home Owners Alliance
1. Open and transparent communication amongst all parties during the homebuying process, including a clear timeline to help consumers. Technology can help here.
2. Earlier legal commitment from buyers and sellers. Reservation agreements (money down at point of agreed sale) could help here, as well as more upfront information provided about the property.
3. Streamline paperwork and anti-money laundering (AML) requirements – the principle of the consumer providing the information once and making best use of information held publicly.
Panellist: Sebastian O’Kelly, Founder – Leasehold Knowledge Partnership
1. Surreptitious investment assets in the homes of ordinary families need to cease, whether ground rents (which are not for services) or abused management and permission fees.
2. Blocks of flats should be built with a residents’ management company, so that those with the greatest financial commitment to a site actually control it.
3. The sale of flats (and houses) as leasehold tenancies is unique to England and Wales and is fundamentally flawed. Commonhold exists on the statute book, needs some updating (currently under way with the Law Commission) and needs to be compulsorily enforced owing to the repeated abuses of the leasehold system.
Panellist: Simon Wilkinson, Board Director – Propertymark
1. Encourage lawyers to engage with the Government’s transformation reform agenda.
2. Technology and training are key and estate agents need to move forward or move on.
3. Implementing processes now will help to increase profit.
