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House Prices
The credit crunch and
the massive amount of publicity surrounding the mortgage lenders and the
recent increases in interest rates have caused a dramatic slow down in the
housing market. Whilst there
are always a certain number of people who have to move for various reasons
a significant proportion are individuals or families who are able to
postpone moving house and it appears that they are waiting to see how the
market develops before proceeding.
No one wants to purchase a property which is going to fall in value
unless they have to.
Lack of movement will
inevitably bring about a reduction in prices, but the amount of this
reduction is impossible to predict.
In January of every year the Nationwide and the Halifax
make predictions about the likely movement of house prices and they are
almost invariably wrong.
There is a paradox in
that house prices do not normally fall when the general economy and
employment in particular are both favourable. The current situation seems to have been brought about
largely because of the massive amounts of media coverage of mortgage
problems.
Our opinion is that
the current crisis will only last for a few months until the lenders
realise that they are overreacting and mortgage interest rates will then
start to come down. The
mortgage market is very competitive and the lenders will soon realise that
they can use the current situation to increase their market share.
Home
Information Packs (HIPs)
It is now illegal to sell a property without
arranging for a Home Information Pack to be prepared before the property is
put on the market. This
comprises an Energy Performance Certificate, a copy of the title for the
property, the local authority search and water authority search.
The estate agents or conveyancer will arrange for a HIP and the
seller will be responsible for the cost of this. Some agents are offering a free HIP, but in most cases
the seller will be responsible for the cost which is usually between £300
and £400. The Government
introduced the current legislation with “the object of increasing
certainty, reducing the incidents of gazumping
and to speed up the conveyancing process”. However, the removal of the Home Condition Reports which
was originally a fundamental part of the pack has removed the possibility
of increasing certainty. Since
house prices are currently falling there is no possibility of gazumping and
in our experience HIPs have not speeded up the conveyancing process.
As from 1st June this year it will not be possible to
put a property on the market until a HIP has been prepared. This is likely to delay the
marketing of all properties by approximately 2 or 3 weeks.
If the seller owns a leasehold property then a copy of the lease
must be included in the HIP.
This may be problematic since the lenders no longer keep title deeds,
and recently we have experienced a large number of transactions where the
lease has been lost. The Land
Registry can usually supply a copy, but frequently their copy is inadequate
or even missing.
Leasehold
Reform
An act of Parliament
has been passed designed to improve the situation of all owners of leasehold property mainly
by introducing the system of "Commonhold". Unfortunately it will not make this
compulsory and thus make very little difference in the majority of
situations where many lessees are being exploited by freeholders, managing
agents and their solicitors who are taking advantages of the lessee's lack
of bargaining power.
The object of
Commonhold is to change the current situation where there is a separate
freeholder for the property.
Commonhold will replace freehold and title will be jointly owned by
the owners of the flats. A
“Community Statement” will replace the lease and this will determine the
relationship of each flat owner but all lessees will have a say in the way
maintenance is carried out.
The new law has in fact introduced a system which is already in
force in some buildings where the lessees have a share in the freehold.
The act also gives
the right to manage all leasehold properties regardless of the efficiency
of the freeholder and this should be a real breakthrough. At last a
government has been strong enough to fight off the opposition from the
House of Lords, and others with major freehold investments. Inefficient or corrupt managing
agents can be sacked if the majority of lessees agree to do so. There is no need to prove that the
agent or landlord is useless – it is an automatic right to manage.
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COMMENT
The main problems in
conveyancing relate to the unbelievable inefficiency of all parties
involved:
1. Property
lawyers: lethargy, incompetence, and arrogance are all too common and
even a straightforward transaction can become a battleground for no good
reason.
2. Estate agents:
No qualifications are required, no previous experience is necessary and no
licence is needed. Anyone can
set themselves up as an estate agent; there is no overall regulatory body
and very little control over estate agents' behaviour generally.
3. Lenders:
inefficiency here is the key word, coupled with generous commissions,
ignorance and appalling use of modern information technology, not to
mention the general malaise of high staff turnover and lack of training. In
our experience many mortgage offers are wrong and need to be revised or
they are totally inappropriate for the client's needs. Life insurance policies are sold
which are not necessary and many borrowers are sold mortgages with
redemption penalties that they would be better off without.
4. Clients:
yes - that's you! You ring us up to say you are in a hurry and we send you
forms to fill in the same day which you ignore. A week later you ring us to
say "how is it going?" and you seem very surprised that we
haven’t started the legal work!
Then you say "do not do the searches until we get the mortgage
offer, but don't tell the seller". Several weeks later you tell us to start the legal work
and can you move at the end of the week!
5. Surveyors:
a very strange breed altogether. All survey reports are qualified by
caveats such as "I haven't inspected the drains, the plumbing, the
wiring, the central heating, the foundations, or the roof but I will if you
give me more money! If any
defects are found a specialist report will be recommended to avoid the
surveyor accepting responsibility for his work. A surveyor will often charge as much as a conveyancer
for a few hours work, whereas a conveyancer will spend weeks or even months
on a single transaction.
Their main contribution
to the general chaos is to produce a report which states "the
conveyancer is to confirm that all consents have been obtained for the
conversion" without telling the conveyancer what consents would be
necessary. A game of ping pong then results which the surveyor saying this
is a legal matter and the conveyancer saying "I haven't seen the
property - how do I know what consents are needed?"
6. Managing agents
and freeholders; - best described as aliens - they have no interest in
the sale or purchase but will use the situation to make as much money as
possible. They will ask for money to provide information on service
charges, etc. and more money for variations to the lease, and anything else
they can think of. Leases are
often written to enable freeholders and their friendly solicitors to make
more money from every conveyancing transaction.
Summary: the English conveyancing
system is a shambles with all parties involved endeavouring to make as much
money as possible at the client’s expense. Any attempts by the government to improve the system
will be a complete waste of time without controls on all the parties
involved, but especially estate agents who are usually the first port of
call and therefore the most influential.
Ashfords; in 2001 we took over
Ashfords, a firm which has been practising since 1971 and we also moved
into their premises in Teddington giving us more space and better
facilities. We are privileged
to be associated with David Ashford, the principal, who took on the Law
Society in the Courts to help break solicitors' monopoly in conveyancing,
giving rise to the creation of Licensed Conveyancers. Ashfords has an excellent record
for the care and attention given to all their clients and this matches our
own philosophy perfectly.
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