Next Monday, a new piece of legislation will creep onto the statute book. Largely unnoticed, but with huge implications for the UK’s beleaguered residential housing market, the mandatory Property Information Questionnaire to be included in a HIP will abolish the long-held principle of caveat emptor, tipping the balance in housing transactions firmly in favour of the buyer for the first time.
Over the last decade or more, residential property sellers have had it all their own way. Property prices have increased dramatically and, until recent times, the practice of sellers instructing agents to ‘test the market’ has been commonplace.
In the absence of political, legal and economic barriers, sellers have largely enjoyed a genuine ‘No Completion, No Fee’ proposition. If no buyer was found it wouldn’t cost the seller a penny, with even ‘No Completion, No Fee’ legal fees becoming the norm.
Sellers were further protected by the doctrine of Caveat emptor (“buyer beware”). Caveat emptor is a legal principle placing the onus on a buyer to ascertain the quality and condition of a property before proceeding with the purchase. If it transpired that there were problems with the property, such as dry rot or subsidence, buyers had no right of redress.
The Housing Act 2004 and the introduction of HIPs was clearly an initial attempt to try and bring the buyer and seller power balance into equilibrium.
What the government failed to anticipate, though, was an economic collapse and property downturn that in and of itself would have given buyers the upper hand.
The various legislative changes over the last 18 months have further compounded a seller’s problems by causing a violent power shift from a seller’s to buyer’s market
The speculative seller was made largely extinct by the average £400 cost of a Home Information Pack. In a climate where buyers are sparse, a speculative seller must be either brave, optimistic or naïve – gazundering, the practice which sees buyers wait until the last moment before lowering their offer on a home, has become common again.
And now, just when sellers thought that it couldn’t get any worse, the government has added to the HIP legislation the aforementioned PIQ, a new seven page document which will be mandatory for all home sellers to complete before marketing their property: detailed, and occasionally subjective questions which go way, way beyond the bland, generic necessities of the previous HIP.
The introduction of PIQs fundamentally changes the landscape of residential conveyancing, in that for the first time potential sellers are liable to potential buyers for the information provided – even before a contract is exchanged.
In other words, the seller can be held liable for misstatement about information concerning the property in the PIQ, whether that is negligent or otherwise. A potential buyer will be able to claim that as a result of the information contained in the PIQ, he became interested in a property and incurred costs – such as legal and survey fees plus charges associated with obtaining a mortgage. Furthermore, the threat of such claims could force sellers to reduce the sale price of their property, rather than face litigation.
As lawyers specialising in this area, in some ways it would be easy for us to get drawn into supporting this type of legislation. And, of course I would encourage any seller to get in touch with a property specialist such as my firm while the legislation is still in place.
The reality, though, is that the good old-fashioned principle of “buyer beware” lasted as long as it did because it has been an effective principle in encouraging a vibrant market. It is surely counter-intuitive that in a depressed market, already hard-pressed sellers are now being told “seller beware” by the government.
Even if they can’t bring themselves to abolish the PIQ – and I believe that the Tories will do so if they come to power – the Government needs seriously to consider making changes to this poor piece of legislation if they are to help sellers overcome the barriers which are about to be erected.
Otherwise, PIQs will be just the latest bad news story for an already depressed market and will not help the popularity of the HIP.