By Yan Hui
Those considering purchasing property in England and Wales will be interested to know that the UK Government recently launched a consultation - a Call for Evidence - to seek views on how the conveyancing process can be made 'cheaper, faster and less stressful'.
The Call for Evidence highlights that the current home buying process lacks efficiency and is not consumer-friendly. Several different groups have been invited to give evidence including solicitors, estate agents and mortgage brokers. Whilst those groups may not be in agreement as to the reasons why the process can sometimes be long and drawn out, there is unanimity that the process should be more efficient, safer and easier.
ENGLAND AND WALES V THE REST OF THE WORLD
The UK Government made a comparison with the procedures currently implemented in other countries and noted that in general, it takes a lot less time to buy a home outside England and Wales and less transactions fall through.
5 days to buy a home
The Call for Evidence found that it normally takes 12 - 14 weeks to move home in England and Wales. This contrasts with the United States where it takes between four to six weeks; Scotland is also given as an example where it can take just five days for a cash buyer.
Property purchasers in mainland China will tell you that no lawyers or solicitors are needed to buy a home in China and that five days to complete a purchase is not unusual. Our clients from mainland China often point out to us how much easier and quicker it is to purchase a property in China. We have even been asked on a few occasions if a credit card can be used to pay for a property!
As a firm based in Mayfair, we often deal with high value properties and are called upon to exchange contracts in ten days or less but this is typically reserved for the top end of the market and experienced sellers and buyers with no mortgage involvement.
Why does it take longer in England and Wales?
The reasons highlighted in the Call for Evidence include:
Delayed local searches: The Consultation suggests a way around this may be to have a 'property passport' where searches which do not change from one transaction to another be tied to the property title
Inefficient or uncommunicative representatives: The Consultation points out the critical role conveyancers and solicitors play in progressing a transaction and also asks for views on how the public will be able to choose a solicitor based on levels of service and customer satisfaction.
It is important for the consumer to know that the firm they are instructing has the capacity to deal with their matter efficiently as needless to say, any hurdles that are faced can be managed with minimum stress to clients with communicative solicitors on both sides of the transaction.
Gazumped and left to pay abortive costs
In addition to the time the conveyancing process takes, the Government points out that there is a lack of trust between sellers and buyers. In England and Wales, there is no legal commitment by either party prior to exchange of contracts.
As a buyer, the concern is often gazumping, ie. the seller accepting a higher offer from another buyer. Sellers too are concerned that the buyer may choose to buy another property. Depending on the stage at which a party decides to walk away, costs may have been incurred and will not be reimbursed by the other party.
In other countries such as Hong Kong and Malaysia, the parties are committed to the transaction at earlier stages (compared to that in England and Wales) with the buyer typically putting down a deposit of at least 3% of the purchase price and a majority of the usual due diligence taking place at a later stage.
Building trust and confidence between parties
The Consultation suggests the following:
Mitigation of gazumping by way of exclusivity or lock-out/lock-in agreements: This is where the buyer puts down a non-refundable 'deposit' (usually between £1,000 to £5,000) as a sign of commitment to the transaction and the seller is precluded from starting the conveyancing process with other potential buyers during a certain period.
Standard contractual agreements to increase the levels of commitment: To promote the effectiveness of exclusivity agreements and to introduce a point of earlier commitment, we are of the opinion that a standardised document which provides sufficient protection to both parties could be utilised.
As a firm which deals with many clients accustomed to the processes in place in the Far East, we have found that exclusivity agreements provide some comfort to the parties. However, care needs to be taken as the amount of time spent by solicitors and the parties in agreeing the terms of this agreement could be used towards the actual conveyancing itself.
STRIKING THE BALANCE - DUE DILIGENCE STILL REQUIRED
Whilst we should strive for a more consumer-friendly process when it comes to buying a property, this should not be done at the expense of the due diligence required to be carried out, ranging from anti-money laundering checks to title investigations.
As pointed out in the final paragraph of the Call for Evidence, "[t]he thoroughness of the current system for buying and selling homes in England and Wales is one of its greatest strengths and there is no desire to completely uproot it and replace it with something else."
It is no simple task to change the conveyancing system which has now embedded itself over time but the Call for Evidence shows the UK Government's acknowledgment of its flaws and an initiative to make improvements. We await the results of the Consultation with hope that this could be the first step towards effective reform of property legislation - possibly the first in just short of a century.
The Call for Evidence closed on 17th December 2017 but can be accessed here.
Yan Hui is a member of the Fletcher Day Residential Property team and a fluent Cantonese and Mandarin speaker. For more information about how Yan can help you with your residential property transaction, please contact her here.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.