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The Parliamentary Under-Secretary of State for Justice (Mr Dominic Raab)
It is a great honour to serve under your chairmanship, Mr Percy, for the first time—
Mr Raab
—with glorious sunshine outside and in. I congratulate my hon. Friend the Member for Colchester (Will Quince) on securing a debate on this important topic. It seems like only yesterday that I was responding to him on a different debate that he secured, which shows what an assiduous MP he is on behalf of his constituents.
There were some 1.1 million completed property transactions in England and Wales in 2014-15. About a million of those—the vast majority—were residential sales and the amount of human as well as monetary capital caught up in and reliant on the conveyancing process at any one time is difficult to overestimate. The process, which delivers a secure and marketable titled property, is important to the parties to the transactions and to our underlying competitiveness as an economy.
The broad purpose of the conveyancing process is first to deliver a good and marketable title, free from unexpected encumbrances, to the buyer and to the lender funding the process in order that it can be registered at the Land Registry without difficulty. The investigation of title is only part of that process. Secondly, conveyancers must interrogate the seller and public records for information affecting the property and, once obtained, information must be analysed and any uncertainties clarified. The buyer and lender must, at the end of the day, both be content to proceed. They will both rely on their conveyancer, who is normally the same person, and, in the event of negligence, the conveyancer’s professional indemnity insurers.
Thirdly, conveyancers must know their clients and satisfy the money laundering regulations. Fourthly, conveyancers must co-ordinate their transactions so that they proceed only when their clients both want to proceed and are able to proceed. Finally, conveyancers should support their clients through an emotionally charged process that in most cases they will encounter only a few times in the course of their lives.
As if that was not complicated enough, residential cases can be even more convoluted. The reality is that most individual residential transactions are linked by virtue of chains and without simultaneous transactions sellers and buyers would have to move into temporary accommodation. That carries the additional risk of the market moving before they can re-enter it or having to take out potentially open-ended bridging loans with the risk of unaffordable interest. The conveyancing process as we know it today in England and Wales is a result of those competing pressures and objectives.
The process is not mandated in detail by law. Rather, the law tries to provide a broad framework in which the parties are free to decide how to shape their own transactions, although in practice most of those transactions follow fairly straightforward—or at least common—standard industry protocol. Sales may proceed by auction, tender or private treaty, with several different approaches available in each of those courses, but in practice the vast majority of transactions proceed by private treaty, which in layman’s language is really private contract, and it is that experience that shapes their views.
Opinions on the conveyancing process vary. They are sometimes negative, as we have heard from my hon. Friend. There are complaints about the time taken and the costs involved. Transactions can be prone to delay and all parties can get frustrated about the lack of transparency in the process. Estimates vary, but anecdotal sources suggest that the fall-through rate is roughly between a quarter and a third, which can amount to additional costs to both consumers and the wider economy of about £270 million each year. Millions more may be lost to estate agents and conveyancers operating on a no sale, no fee basis, who incur costs they cannot recoup directly if a transaction falls through.
It is important to say that not every failed transaction is as a result of some form of bad faith, but the practices of gazumping and gazundering, even if relatively rare, do little to improve the reputation of the business. There is no clear cause, or at least no single cause for those problems or the fluidity of the underlying market, which is inherent in a free market system. Many people point to the length of time needed to get from an agreement subject to contract to a binding legal commitment as the key problem. Often the solution proposed is a requirement to enter an early conditional contract along the lines of the traditional Scottish model. However, the truth is that, at least at present, few people in England and Wales seem to be keen to use conditional contracts as a matter of voluntary practice.
In the same way, few people try to protect themselves despite the risk of the transaction failing: they do not seem to make great use of either cost guarantee agreements, where the party that breaks off the deal forfeits a specified sum to the other, or lock-out and lock-in agreements that can secure exclusive negotiating rights. That may be due to lack of costs or awareness or the likelihood of being able to secure those terms—it is true that that is not clear. I think the lack of use or take-up should at least give us some pause for thought before we prescribe a single mandatory remedy as the silver bullet.
Another complaint that we hear is that certain parts of the process—most commonly the local authority search—take too long. Where there is an essential process within an overall conveyancing framework, steps to improve response times will assist in reducing delays. Examples include inquiries of the seller, inquiries of the landlord in leasehold situations, or Land Registry and local authority searches. There may also be wider benefits in making property information more accessible online, and the Land Registry, which holds 24 million titles, has moved from a paper-based system to an electronic approach. That has at least helped to make quicker transaction times possible. The Land Registry has successfully developed certain digital products—most notably the award-winning MapSearch and Property Alert services, which will further modernise and digitise the services that consumers receive. The Land Registry is also taking over the local land charges register from local authorities, so that we deliver a single digital local land charges register in England. That should help to reduce overheads and also eliminate regional variations in practice.
Speed of communication between the principal participants is also sometimes flagged as a problem. Obviously, improved communication between the various parties involved could only be beneficial. However, I have to say that my impression is that the office procedures within the conveyancing process today are generally computerised and likely to become more so in response to consumer expectation and, indeed, competition. Chains of transactions of course present their own communications challenges, almost inherently, but attempts so far to provide an all-embracing, all-encompassing, secure electronic environment, in which members of the chain can communicate seamlessly, have foundered. That happened most recently, as my hon. Friend the Member for Colchester mentioned, with the Law Society’s Veyo project. That is clearly a difficult nut to crack.
Finally, Mr Speaker—
Mr Raab
It is only a matter of time. Finally, Mr Percy, we should not forget, when looking for the causes of procedural problems in the system, that the conveyancing process has to deal with some pretty difficult areas of law, and simplification and modernisation of the substantive, underlying law has a part to play in improving the overall effect of the conveyancing process. Work on the Law Commission’s recommendations to reform the laws relating to easements and covenants, as announced in the context of the Queen’s Speech, shows the Government’s commitment to improving the underlying substantive law in the area, which should have a knock-on effect for consumers, in terms of process.
The Government of course also announced at the time of the autumn statement last year that they would publish a call for evidence on home buying, exploring options to modernise the process and provide consumers with different and potentially quicker, simpler, cheaper and more effective ways to buy and sell a home. My hon. Friend the Member for Colchester made reference to that. The call for evidence will be published by BIS later this year. It will invite evidence and proposals for innovation from all aspects of industry, but also from consumers. I am sure—I certainly hope—that my hon. Friend will be engaged and involved in making sure we get the right evidence in, and that the right conclusions will be drawn from the evidence throughout the process.
I pay tribute once again to my hon. Friend for bringing this topic before the House, and I am sure that I will be back again to respond to him in debate soon. I hope that in the light of my comments he will be reassured that the Government are aware of the multiple concerns he has raised, and that they are endeavouring to take the right action to address them.
Question put and agreed to.