The Government has recently ordered an inquiry into the conveyancing system, having noted widespread dissatisfaction with the status quo.
Different systems – different advantages
In England and Wales, an offer to buy a property does not normally create a binding contract. Instead there is a delay while the buyer does a survey, checks the title and obtains a mortgage offer. Once these are sorted, the buyer and seller exchange contracts. This is when a binding contract takes effect. Until then, either side can walk away. This can be infuriating for the other party, especially where the seller "gazumps" the buyer by agreeing to sell to another bidder for a higher price.
In Scotland, and many other countries, a binding contract comes into effect as soon as an offer is accepted. This can be well before survey, title checks and mortgage offer. If the survey throws up defects in the property or title checks reveal a road-widening scheme, there will then be an argument about whether the problem is serious enough to justify the buyer withdrawing. The buyer may have to go ahead with a purchase he/she does not want.
There are advantages in both systems, but the key problem is delay. If the process could be speeded up, everyone would be happier.
What slows a deal down?
The most common delays are:
- Mortgages – stricter financial and money laundering requirements mean it can take several weeks to get an offer.
- Disorganised sellers – where is the planning permission for the extension, or the ground rent receipt? Inevitably there will be something a seller cannot find.
- Getting information from third parties – e.g. a local authority search or management information from a landlord.
- Life – even at the top of the market most sales involve private individuals with their own priorities. Time is spent negotiating matters such as price, furniture and completion dates.
- Communication – even a simple sale will involve buyer, seller, two solicitors, estate agent, mortgage broker and removal men. For each related transaction you double the number of people involved and messages get lost or confused.
- Slow solicitors – many firms have had to drastically cut their costs in order to stay competitive, forcing them to take on a disproportionate case load.
The longer a transaction goes on, the more likely it is to fall apart, with gazumping (and gazundering) a concern for most people.
Making it better
There have been attempts to improve things with the failed introduction of Home Information Packs and the Law Society's online conveyancing portal. In both cases, good ideas were watered down or implemented too slowly to instigate real change.
There has been more success with the new Conveyancing Quality Scheme. This aims to standardise the process, with greater reliance on template documents, electronic communications and limiting unnecessary enquiries.
Given that everyone who owns a property is effectively a stakeholder in the current system, widespread reform seems unlikely. Adopting the Scottish model seems a long way off.
In the absence of a change in the law, our best hope is greater efficiency: better use of electronic communication and online resources such as data rooms for the dissemination of information – rather than a further squeeze on conveyancing costs or a half-hearted attempt at reform.