Counting down to Home Reports
In just under two weeks, historic changes will be made to the Scottish property market which will affect every person selling or buying a home. In this special feature, Susan Welsh looks at the pros and cons connected with the introduction of the new Home Report scheme and answers the questions on everyone’s lips. As she discovered, even those in the legal profession have mixed views on the forthcoming changes
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FROM Monday, December 1, the way people buy and sell homes in Scotland will change forever when the mandatory Home Report is introduced.
When putting a property for sale on the market – a term which covers everything from selling via a solicitor, estate agent and simply selling the property yourself using a home-made for-sale board at the bottom of your garden – sellers must include a Home Report.
The Home Report, which is paid for by the seller, will comprise three sections: a Property Questionnaire, a Single Survey and an Energy Report.
The Property Questionnaire, which is completed by the seller with assistance from their legal adviser, provides information on issues such as council-tax banding, car parking, factoring arrangements, alterations and planning permissions, and energy providers.
The Single Survey includes information on the condition of the property, a market valuation and basic accessibility information. Additionally, on request of the seller, the chartered surveyor can provide a generic Mortgage Valuation Report (MVR) for inclusion in the Home Report which the prospective purchaser can take to a lender to discuss a mortgage.
The Energy Report will also be carried out by the surveyor and will include an indication of current carbon-dioxide emissions resulting directly or indirectly from energy use within the home, any energy-efficiency measures implemented in the home and recommendations to improve the energy efficiency of the home.
News of the new rules appear to have caught both buyers and sellers by surprise, although talk of the new legislation has been around for a few years.
Robert Fraser, a partner with Aberdein, Considine & Co in Aberdeen, said: “We have found that the level of awareness of the changes is very low with the general public.
“It is a fairly simple processes to arrange but the general view from sellers is that they grudge having to pay for it.
“The two questions which come up regularly are why these changes are taking place and if there is a way around it which allows them to avoid having to pay for it.”
The answers to both these questions will be revealed within this special report.
Professor Lorne Crerar, chairwoman of Inverness-based law firm Harper Macleod LLP, said: “Home Reports will, quite literally, revolutionise house buying and selling in Scotland.
“Consumer bodies, including the Scottish Consumer Council, and the Scottish Government have the vision to see the benefits to the house buying and selling system with the introduction of Home Reports.
“As the chair of the Housing Improvement Task Force that recommended the Single Survey, I am particularly proud to be at the very heart of driving positive change for Scotland.”
Sarah Woodcock, manager of the Highland Solicitors’ Property Centre (HSPC), added: “There are very specific categories and questions to be addressed prior to preparing or using one of these reports.
“It is designed to help provide greater information, and in that respect, will be beneficial.
“Critical to interpretation of the report, however, are the legal implications, and that is where we firmly believe buyers and sellers should consult a professional.
“Solicitors at HSPC have already developed an understanding of the Home Reports and what the detail within them means, including which questions sellers will have to answer and what buyers will want to know from the report.”
Both the HSPC and Aberdeen Solicitors’ Property Centre (ASPC) websites offer information on the new Home Reports. Log on to www.hspc.co.uk and www.aspc.co.uk for further details.
THE HISTORY
It all dates back to 2003, when the Housing Improvement Task Force made recommendations from which the Home Report was established.
After a poor response to a market-led pilot, ministers decided that the Home Report should be compulsory.
The Housing (Scotland) Act 2006 received royal assent in January, 2006, in which Part 3 introduces a new requirement for specified information to be provided when a house is being marketed for sale in Scotland.
The Scottish Parliament approved regulations to introduce the Home Report, and a Home Report Implementation Group, which includes representatives from professions including the Law Society of Scotland, the Council of Mortgage Lenders, the National Association of Estate Agents, the Royal Institution of Chartered Surveyors and the Scottish Consumer Council, refined the product.
The primary driver for the introduction of the Home Report is to provide better information about the condition and value of a property earlier in the home buying and selling process so that people can make better informed decisions.
Ultimately, this will help to improve the quality of housing in Scotland.
The new system will also help to reduce the commissioning of multiple surveys and artificially low asking prices for properties.
Robert added: “Really, it all started in Edinburgh at a time when the property market was very, very busy and, despite having to carry out multiple surveys, people were still not able to buy a property.
“The subject-to-survey system evolved from there, which meant not having to pay for multiple surveys.
“The other reason it was brought in was to protect the consumer, because a Home Report would give the consumer a better idea of what they were buying.
“That’s true to a limited extent, but in all fairness to surveyors, unless they go in and take a house apart, a lot of the survey is done in a non-invasive way.
“You can’t expect a surveyor to go up on to a roof and give a slater’s report or to check the wiring and give an electrician’s report.
“What you will find is that if they think there is a problem then they will recommend the buyer gets a report done by a specialist such as a roofer, plumber, and so on.”
Robert added: “The thinking behind the Home Report was that if it was compulsory then sellers would spend more money doing up their houses, so it would improve the housing stock.
“The argument against that is, if you are selling, then generally you won’t want to spend more money on a house you won’t be living in.
“Finally, EC legislation requires an Energy Certificate with all reports from January next year, so the thinking was, why not get the whole lot done at the same time?
“The timing is lousy because this was thought of at a time when properties were coming on the market and selling right away.
“Fast-forward to now, when we have a slow market, and you find that things have changed considerably.”
HOW IT WORKS
Every home that is advertised for sale to the public in Scotland must have a Home Report, commissioned by the seller, ready before it is advertised.
This should be available to prospective buyers on request – the majority of these will be available free on-line from property centres and selling agents.
Once the documents are in their possession, the person marketing the property has nine days in which to provide the Home Report documents following the request from a potential purchaser.
To prevent the use of an out-of-date Home Report, documents must be no more than 12 weeks old at the point of the property going on sale. The penalty for non-compliance is set at £500.
If, however, the seller or selling agent decides to withdraw the property from the market to allow for consideration of offers and holiday periods, then it must be put back on the market within four weeks or a new Home Report has to be issued.
There is no limit however, to the amount of up-to-four-week breaks taken.
The survey element of the Home Report will be used by the buyer to satisfy legal and mortgage lender requirements. The survey will be carried out by surveyors registered with, or authorised by, the Royal Chartered Institute of Surveyors in Scotland.
The legislation gives buyers a right to rely on the report as if they have commissioned the report themselves. They will have the same rights of redress as the seller who commissioned the survey report.
RICS confirms that a mortgage valuation report will be covered by the fee for the Home Report, so lenders should receive the same information from the same people in the same format as they currently do.
Lenders have reserved the right to require a separate valuation if, for any reason, the surveyor in question is not acceptable to them (which reflects current practice).
Robert Fraser offered this advice: “At present, the Law Society guidelines suggest that buyers shouldn’t rely on any report that is over 12 weeks old.
“Last year, it was unthinkable that a property would be on the market for 12 weeks. This year, that’s quite a normal length of time.
“What I suspect will happen is that the mortgage lender, and most solicitors, will advise their clients (the buyers) to have an up-to-date, independent valuation carried out.”
In Scotland, the emphasis has always been on buyers instructing a survey but, as Robert revealed, the Home Report is geared the other way around.
“In Scots law, we have something called caveat emptor, which is Latin for ‘let the buyer beware’.
“Until now, every Scottish property purchaser has been exposed to this and it’s up to them to look after their own interests and get a survey done which satisfies them.
“Potential buyers will have to ask themselves if they are happy to rely on a survey conducted on someone else’s behalf.
“Mortgage lenders, too, have a legal right to rely on the Home Report, so they can sue the surveyor if they suffer loss as a result of negligence, but they are not committing themselves just yet and keeping their rights open by getting an independent survey done.
“I would certainly advise my clients to consider having one done.”
To avoid having to pay for a Home Report, some property owners may consider selling their home privately without placing it on the market, but this, too, has its dangers.
The practice of using a work internal e-mail system to let people know your home is for sale is still considered advertising and, therefore, subject to requiring a Home Report.
The only other way to avoid it is in a private arrangement between two parties – for example, trying to let people know your home is for sale via word of mouth.
Robert added: “It is a slow market at the moment and the chances of selling your home this way is much, much lower.”
