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Don't make it compulsory

20 June 05

Author's views opposing the compulsory seller's survey in residential property transactions

by Ian Ferguson


The announcement by the Communities Minister, Malcolm Chisholm that the Executive is to introduce a compulsory single survey scheme across Scotland has been met with anger and disbelief by many property professionals and sellers.

Many legal firms including my own took part in the Single Survey Pilot scheme after seminars were held in various cities explaining it. My firm became involved to ensure that our clients were aware of  the possible benefits. A true pilot study would evaluate whether the pilot works in practice and whether there is a genuine demand for it in the market.  Perhaps it was naive of me to think that the results would be properly analysed and then a decision made on those results as to whether or not to introduce it. The decision to impose a compulsory scheme only eight months into the scheme and with only 74 surveys came as a shock. A voluntary scheme is one thing (and for the avoidance of doubt I do think a voluntary scheme is acceptable), but a compulsory one is quite another.

What we have here is a tacit acknowledgment that the pilot has been a failure, but the Executive is going to impose it anyway despite the evidence of lack of enthusiasm for it by the selling public.

The poor will suffer most

If it becomes compulsory, as now proposed, it will mean that for the benefit of the relatively low percentage of transactions involving first time buyers, all sellers will suffer by having imposed on them up-front costs in the region of £600 to £700 to sell their home.

Poorer clients will suffer most. Sellers compelled by money problems to consider selling their house will not now be able to do so, ironically lessening supply and increasing demand. They would have to pay these costs at the outset, leaving some with no alternative but to surrender the keys to their lender, thus boosting repossession figures. Once the selling public in general realise the cost implications the Minister is likely to face significant resistance and opposition.

It is also the case that the market itself has adapted to the problem of multiple surveys. In Edinburgh, where as many as 12 people offered for the one property, a practice developed of solicitors and estate agents allowing offers to be lodged “subject to survey”.  While this is not without its problems, it showed a willingness of the public and professionals to work together to find a solution and avoid expense, and practically meant there was only a single survey.

The cost element has not been properly researched. While many first time buyers have had to pay multiple survey costs this will be insignificant compared to the cost to the selling public in general by adding around £700 to their bills for every single property for sale.

Sellers will pay

A problem for the Minister is that the proposed legislation appears to be anti-competitive.  It is going to give no choice to sellers as to the type of survey they can instruct. At present there is a choice of a Scheme 1 valuation report, a Scheme 2 report, which is a housebuyer’s report (similar to the single survey type report which is effectively a Scheme 2 with a bell and whistle attached), and a structural survey report.  The seller is now to have no choice.

Worse still is the fact that sellers will be bound to provide a survey which purchasers may not wish to accept and rely on because they do not trust the independence of the surveyor who prepared it. That will mean that many offerors will simply put in an offer to buy, stating that their price is inclusive of the cost of the single survey, but in practice it will make no difference to their offer.

A single survey report may also go out of date in a buyers’ market when properties are harder to sell, and presumably a further report will have to be commissioned at additional cost.

I fear that this may be the thin edge of the wedge and purchaser information packs will follow, comprising various reports obtained in advance of sale, available for examination by a purchaser. This may lead to another problem of multiple title examinations. The information has to be up to date as lenders will not accept dated reports. I would urge the Executive to restart the ScotLIS project instead, which would provide a single gateway to information from a wide variety of providers that can be accessed online and so can be provided speedily when required.

It is ironic that the pilot scheme by the Executive, involving positive participation of solicitors and other property professionals in a spirit of partnership and their devoting time to test the pilot, should end with such an arrogant dismissal of the co-operation and views of those property professionals, and views of the sellers who were not attracted to it. This authoritarian “nanny state” approach is not edifying, nor likely to foster co-operation by property professionals and their clients in future pilot schemes.

Ian C Ferguson is a partner in the Commercial and Property Department at Mitchells Roberton, Glasgow, and a Council Member of the Scottish Law Agents Society. The Society’s evidence submitted to the Communities Committee can be viewed at www.slas.co.uk.