‘Anything can be made to work if you fiddle with it for long enough’
Now, where did we get to in the first part? Oh yes, we looked at some history, looked at the notion of caveat emptor and how it is out of date, and finished on the subject of MOTs.
In this part we will look a little more at the MOT, and at the history of property trading and some of the tinkering that has gone on with the process in recent times. This will set us up nicely for bringing all these facets together in the concluding article.
So let’s pick up where we left off. The nub of making anything tradable is that it is fit for purpose. Indeed, common law requires that goods must be “fit for the particular purpose”. The automotive MOT provides for the car to be roadworthy. Warranties and guarantees on goods give customer reassurance and reduce risks of purchase. On a new property the NHBC certificate, or equivalent, gives protection on the standard of construction.
But a real MOT for a property would provide upfront confirmation to a buyer that a property was good to go, ready to buy — legally. And herein lies the key point about making residential property tradable; the most important part of the process, that of ensuring that a property has good legal title, is in the wrong place and done in the wrong way.
But we’ll come back to that later because we need to look at some of the tinkering that has taken place since 1925 in order to put into context the property MOT, and the possible future for residential property trading.
After 1925 virtually nothing happened with regard to conveyancing until 2002 when the Land Registration Act was passed. There was a Land Charges Act in 1972, which consolidated some previous pieces of legislation and then in 1989 the Law of Property (Miscellaneous Provisions) Act was passed, which fiddled around the edges of deeds and their execution, and contracts for sale or other disposition of interests in land.
The Land Registration Act of 2002 simplified and modernised the law of land registration, made the register reflect a more accurate picture of a title to land and was intended to facilitate the introduction of e-conveyancing, which we will look at in a moment.
But as you can see, none of the legislation subsequent to 1925 was taking a deep look at the flaws of the property trading process, such as all risk resting with the buyer, gazumping and gazundering, delays, chains, poor communication and the ever growing range of enquiries and searches to be made.
The absence of real review was despite there being universal dissatisfaction and frustration with the process from buyers, sellers, estate agents, conveyancers and lenders. It is amazing that all parties did not act to do something about the situation
Fear not, for the government had the answer — Home Information Packs (HIPs).
Oh dear, this really was car crash legislation, and yet more tinkering. The Government identified the issue with the property trading process as being a lack of upfront information for the buyer to read. Brilliant! So everyone selling was to provide a HIP to prospective buyers, effectively at the point of instructing the estate agent to sell the property. Initially, a survey of the property was to be included within the pack that could be relied upon by all parties to the transaction, although lenders were never really convinced.
HIPs included many legal documents but none were decoded for the buyer. For example, a CON29 search result (roads, planning, water and drainage and all that good stuff) was included in full for the prospective buyer to read and try to understand.
Yet, the process of confirming the property had a good legal title was untouched, to happen in the same place as always — after the offer to buy a property had been made and accepted and on the basis that the buyer bought at their own risk. Caveat emptor. So a buyer was no nearer knowing if a property was ready to buy at the moment of offer than he was before the advent of HIPs. The government really thought that the process would eventually work if they fiddled for long enough.
HIPs were abolished on May 21 2010, having been introduced on August 1 2007.
Using some of the provisions in the Land Registration Act 2002 the Land Registry launched Chain Matrix in early 2008. Chain Matrix was an attempt at e-conveyancing with the intention to have the status of all property transactions within an online system, so that everyone could see the stage reached in every related transaction.
However, the Matrix was short-lived and was closed down in 2009. Again, this initiative was treating symptoms of the process rather than looking at root causes. The Matrix offered no fundamental change to where the legal process of checking the title was to take place, and identifying, managing and eliminating the risks of house buying and selling; it was more layers and tinkering with the delivery method for the same basic process. HIPs and the Chain Matrix were both misdirected initiatives.
But within each there were some nods to the future, which we will discuss in the final part.
This article first appeared in Mortgage Finance Gazette