Mervyn Pilley, CoPSO’s newly-appointed chief executive, looks at the challenges the search industry faces, and asks how a level-playing field can be found to ensure fair competition
“HIPs in new controversy.” Another day, another dramatic headline for one of the most talked-about pieces of legislation to have hit the housing market for years. A debate that began with discussions over whether the packs would slow a buoyant market now rages amid the turbulence of a credit crunch - and this summer has shown little respite, with the likes of Sir Bryan Carsberg, Ted Beardsall and Sir Michael Pitt adding fuel to the fire.
A discussion on what benefits HIPs bring inevitably includes a focus on the quality of searches. Spokespeople for local authorities have been quick to highlight their own offering as somehow ‘official’, while private firms insist their searches are quicker and better value. Caught between the two groups, are consumers benefiting from the competition? Unfortunately, I believe they may not be.
Before addressing the issue directly, it’s important to put into context how and why the personal search industry came about. The sector was born as a direct result of local authorities taking as long as three months to provide the various local searches required in housing transactions. The private sector is generally more nimble and this was certainly the case with searches, as personal search firms began using the public data held by local authorities to provide a more efficient service. Indeed, during the industry’s embryonic stages personal search companies were putting together searches within a week, providing conveyancers and the consumer with choice and a faster service.
As the industry grew, dynamics changed. The private sector took more market share, and hence reduced a local authority revenue stream. To put this into perspective, the recent Beardsall report indicated that there has been a 20 per cent shift in the proportion of local authority searches versus private sector searches since the introduction of HIPs, from 65:35 to 45:55. CoPSO estimates that the market share taken by private search companies is closer to 70 per cent. The result has been local authorities, whether deliberately or simply through a lack of resource, limiting access to the data they are entrusted with managing.
It’s easy to get sidetracked from the key issue here. This is not a debate on whether personal searches or local authority searches are better. The fact is they are essentially the same thing – searches based on exactly the same information. Local authorities suggesting their searches are ‘official’ has no basis whatsoever, and mudslinging to highlight sub-standard personal search firms is missing the point that poor providers exist on both sides of the divide.
CoPSO
The difference on the side of personal search firms is that in 2003, the Council of Property Search Organisations (CoPSO) was set up to give consumers and conveyancers a clear indication of which personal search firms could be trusted. Beginning with just four members, it now numbers 40. Members abide by a stringent Code of Conduct, which demands searches are accurate, complete and timely, and this is monitored by an independent ombudsman in the form of the Property Codes Compliance Board (PCCB).
In addition to improving standards of searches, CoPSO has also fought hard to see fairer competition in the sector. The increased capacity and capabilities of the private sector should have brought increased competition, resulting in good news for consumers in the form of faster, cheaper searches. However, this can only happen if a level playing field exists amongst those organisations competing. And unfortunately, this is not yet the case in the search industry.
Access guidelines
This isn’t a particularly new issue, as the Office of Fair Trading (OFT) identified concerns surrounding access and charging for data, when they published ‘Property Searches – A Market Study’ in September 2005. But it wasn’t addressed by the Government until this year when, in January, the Department for Communities and Local Government (CLG) issued good practice access guidelines for local authorities, as well as a consultation paper on charges for property search services.
The access guidelines followed the initial recommendations that the OFT had made in 2005, and stated that local authorities must make the data required to compile property searches available to “all those who ask”, and that data must be provided within 24 hours.
If followed correctly, the access guidelines should have created a level playing field for all search providers, enhancing personal search firms’ ability to produce searches, and ultimately HIPs, in a timely and efficient manner. It would also have positively impacted consumers, who would have benefited from increased choice and faster conveyancing transactions.
Five months on, however, it appears that the guidelines have largely been ignored. It would be unfair to tar all local authorities (of which there are over 400) with the same brush as I’m sure that certain local authorities have not yet implemented the guidance due to manpower issues, while some local authorities have already made improvements. On the whole though, it is still taking far too long for personal search companies to be granted access. In some cases, rather than getting access in 24 hours, as the guidance stated, it is still taking an average time of three weeks for personal searchers to be granted access.
Slow searches delay HIPs
Why is this important? Put simply, the longer it takes for search companies to get access to data, the longer it takes to produce searches. Slower turnaround on searches means slower turnaround on HIPs, putting more pressure on a concept that already receives enough criticism.
Indeed, it is this slowing of HIPs that has prompted the Government to postpone ‘First day marketing’ (the requirement to have a HIP in place before putting a property on the market), which is now due to come into effect on 1 January 2009. This is a smart move by the Housing Minister as I’m sure we’re all in agreement the housing market does not need anything that could contribute to a further slowdown, but we must not forget what has caused it. It is absolutely essential that local authorities put their house in order, and follow the guidelines to the letter by the end of the year.
Whether that will happen or not remains to be seen, but my feeling is that, left to their own devices, it won’t. Therefore, I would urge the CLG to re-visit this issue and put the appropriate measures in place to ensure compliance – guidelines that aren’t followed aren’t worth the paper they are written on.
Postcode lottery on charges
There are similar issues surrounding charges local authorities make to access the data required to compile a property search. Historically, local authorities have had carte blanche over charges, which has resulted in something of a postcode lottery. Depending on which local authority a property is within, costs can range from £40 to £280. In the same study referred to earlier, the OFT addressed the issue of charging, stating a preference for charges to be based on a cost recovery basis. In their January consultation paper the CLG appeared to be in favour of such action.
Again, this is important to the entire industry, because the cost of access to search data is ultimately paid for by consumers in the cost of their HIP. Giving local authorities the green light to set their own charges has potential disaster written all over it. The proposed change will further the existing postcode lottery, with homebuyers being charged different amounts for exactly the same data, dependent on where they live. Most significant of all ‘cost recovery’ charging fails to provide local authorities with any incentive to improve the efficiency of how they collate and hold property search data - and that means consumers will be left to foot the bill.
There is no firm evidence to support why this is the CLG’s favoured option as it is based on a KPMG report (commissioned by the Government to investigate the matter following the OFT’s market study) that involved feedback from only seven of the 400 local authorities in the UK. The initial OFT report proposed two charging options – setting uniform costs for all local authorities or cost recovery. Despite the former option appearing eminently more sensible, offering a level playing field for all and leading to a truly competitive search market that would play a key role in delivering a faster and more efficient home buying process, it appears to have been inexplicably ruled out by the CLG.
The results of the charging consultation, however, are yet to be announced, and I would again urge the Government to look at this issue very closely before finalising recommendations. While investment is needed to drive efficiencies in the way councils both hold and provide access to information, a level playing field is also essential, and to that end neither personal search firms nor consumers should be funding inefficient local authorities.
It might seem that a lot of what I have said is demanding action from the Government to solve the industry’s problems, but I fully appreciate that we all have a role to play in making searches work. While the relationship between local authorities and personal search firms is far from a cosy one, it is essential that we improve communication between the two sides if we are to reassure consumers that they are getting the best service possible.
CoPSO and Land Data
The two parties will not become best friends overnight, but the process to bring them together has started. Earlier this year, CoPSO and Land Data, who support local authorities and other property information holders, held their first joint ‘local search summit’. The event saw heated debate and opinions from both sides of the divide, but crucially it demonstrated clearly that both are ultimately pulling in the same direction.
As Alex Fraser, Land Data’s CEO, commented at the time, “engaging with the widest possible range of stakeholders who have the potential to influence the sector to better manage property searches is the first step towards helping to make improvements.” I couldn’t put it better myself, and we will certainly be looking to follow this up with a second ‘summit’ in the future. We are keen to continue to work with Land Data, and indeed its commitment to moving towards the electronic provision of property data fits very much with our own opinions.
Electronic property data
Indeed, this is an idea that has much industry support. In the report Ted Beardsall, deputy chief executive of the Land Registry, recently produced on local property searches for the Housing Minister Caroline Flint he supported a move to the electronic provision of local authority data. This was echoed in Sir Bryan Carsberg’s recent Review of Residential Property, which stated there should be ‘the objective of electronic availability online as soon as practicable’.
These suggestions must be followed. Electronic provision of data - or ‘data banking’ – is very common in the private sector to speed up the provision of searches to consumers, but technological developments have largely been ignored by local authorities. I imagine most consumers would be very surprised to learn that the majority of the crucial data upon which they are basing what is likely to be the biggest financial decision of their lives is still stored in paper format.
I consider this to be the Government’s responsibility. Measures must be put in place to ensure that local authorities are obliged to store data electronically, in standardised format and accessible online at a set charge. This would, almost overnight, resolve the main challenges the search industry faces. The sooner we start to look at this issue, the sooner we can find the level playing field everyone – from consumers, to local authorities, to personal search firms – would like to see.
Mervyn Pilley is chairman and chief executive of The Council of Property Search Organisations (CoPSO), the trade association for the property search industry. CoPSO has represented the search industry on the Ministerial Stakeholder Group on house-buying reform, a panel set up by former Housing Minister Yvette Cooper as a forum for discussion on HIPs progress and to identify ways of improving the home-buying and selling process.
Date: 7th, August, 2008
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