The speech made by Marco Longhi, the Conservative MP for Dudley North, in the House of Commons on 7 October 2020.
I beg to move,
That leave be given to bring in a Bill to establish minimum standards regarding searches and assessments of risk for solicitors and licensed conveyancers acting on behalf of purchasers of residential properties; and for connected purposes.
The main aim of this Bill is to help protect people who wish to buy a house—sometimes their first home—from being exposed to risks that currently are not sufficiently visible or understood at the point of purchase. The Bill does not propose radical changes to the conveyancing process; nor, indeed, does it propose changes to the development control system, although some may argue that that might be desirable to further de-risk the process for homebuyers.
I will set out two examples to illustrate the types of difficulties faced by homebuyers. Both are real cases of people who have been let down by a system that has not kept pace with an industry that has become increasingly cut-throat. The system does not offer enough consumer protections for people who are about to make possibly the single most important investment of their lives, while the transaction itself is mired in documents and legal complexities that are rarely fully understood.
My first example is of a developer who purchases land and applies for planning permission, which is granted subject to conditions. Those conditions are wide ranging and set out requirements of the developer in order for them to receive final planning certification at the end of the development. One such condition may be that soil sampling is undertaken to establish whether any contamination is present; another may be that properties must not be occupied until planning conditions have been fully satisfied.
That developer set up a limited company for the sole purpose of the development and started marketing the site almost immediately. Some properties were sold off-plan; some were sold when the buildings were largely complete. When the final plot was sold, the developer immediately liquidated the company. That means the legal entity that sold the properties no longer existed.
It became apparent immediately that a significant number of planning conditions had not been met: no soil sampling, no preventing of owners from occupying, and no top coating of road services or pavements to bring them up to council adoptable standards. Drainage was not connected properly, and the new homeowners had a huge list of unfinished works and complaints about poor standards of work.
At that point, the homeowners turned to the council for help, in the expectation that it would have the ability, as a local regulatory body, somehow to fix things. It transpired that any regulatory liabilities relating to the properties transferred to the property owners at point of sale, and that if the council chose to enforce breaches of planning, it would have to pursue the new homeowners.
It is important to note that the current system places no requirements on local planning authorities to pursue developers to evidence compliance with planning conditions. The expectation is that a developer will want final planning certification, but that is all it is: an expectation. What if a developer does not care about obtaining the certification? Their objective is to build, sell and maximise profit. So here we are; we have just purchased a property in good faith following the advice of the conveyancing solicitor—who, by the way, was recommended by the developer—and the property does not have planning permission. Certification costs could be extremely significant, and we have no recourse to the developer because they no longer exist as a legal entity.
My second example is probably more widespread than my first, and I suspect that similar examples may be present in several MPs’ casework folders. Imagine we are very keen to buy a property. At the point of purchase, our solicitor handling the conveyancing might highlight the fact that there is a contract for maintenance of green spaces on the estate—grass cutting, hedge trimming and so on—as well as that those areas do not belong to any of the properties and the cost is about £100 per year. Do we still want to buy the property? Of course we do. That is not a lot of money in the grand scheme of things, and if it means securing the property of our dreams, of course we will pay it.
What is not discussed with sufficient clarity at the point of conveyance, if at all, is that the small print of the maintenance contract will state that contract owners can increase the price as and when they wish, and there is virtually no recourse within the contract for poor workmanship or lack of clarity. The fee of £100 per year may soon become £500 per year, and the grass cutting may be once a year instead of once a month. These areas remain unadopted by local councils—something that I find a little too convenient. How would you feel, Mr Speaker, if you paid an even higher council tax for services you did not receive, compared with a neighbour around the corner who pays less and gets more?
Usually, when a service is not rendered, one may choose not to pay. That cannot happen here, because these contracts state that a charge will be placed against the property, so it cannot be sold without payment. Furthermore, homeowners cannot complain to anybody, because an unresponsive contractor is virtually unaccountable and has plenty of legal cover, while homeowners are usually bounced around from contractor to subcontractor to developer in a never-ending merry-go-round.
Those two scenarios are real. The same thing has happened in Dudley and to other people from the Black Country whom I have met. People find themselves financially exposed. The system is being gamed by unscrupulous developers and contractors, because it is not transparent enough to shine a light on the potential risks to people when they are buying a property. People might feel that the very fact that a solicitor is handling the conveyance means that they are sufficiently protected. They employ a solicitor not just to carry out due diligence for them, but to highlight any potential downsides. That is not happening with enough robustness, and that is why I propose the Bill.