Local Authorities (England) (Charges for Property Searches) Regulations 2008

That the Grand Committee do report to the House that it has considered the Local Authorities (England) (Charges for Property Searches) Regulations 2008. The regulations were laid before the House on 13 November 2008. Property searches form part of home information packs—a subject that interests noble Lords—but our regulations today are on a very specific aspect of property searches and one that is very much identified as bringing benefit and a better service to the consumer. I turn to the regulations. Property searches are a well established component of the home buying and selling process. Incidentally, since the introduction of HIPs, local authority searches have gone down by 23 per cent, which is a great credit to local authorities. When buying a property, a consumer needs information to uncover issues relating to the building or its surrounding environment that may impact on the value of the property or affect their desire to live in it—for example, assurance that any previous building work has been carried out properly. Local authorities hold all the data required to compile property searches but there is a market in producing searches. Local authorities produce official searches and the private sector has an equivalent product known as a personal search. They compete to supply these products to consumers and search companies are, therefore, reliant on having access to local-authority-held data. The problem to be addressed in these regulations is that some authorities are reluctant to provide access to data as they are concerned that they may not be able to recover the costs of providing it; similarly, some search companies are reluctant to pay for property research data claiming that local authorities do not have the powers to charge for the data. Either way, there is no framework that enables a level playing field to operate and it is the consumers who suffer; they are caught in the middle of all this. The problem is therefore not only a lack of standardised charging but a lack of a clear framework to drive fair and consistent practices. That is what the regulations are intended to do. In circumstances where a local authority restricts access, the private search sector has historically used insurance to cover for missing data. In practice this means that on occasion consumers do not have all the information on which to base their decisions. In turn, that can lead to buyers incurring additional costs if their solicitor subsequently advises them to commission an additional local authority search as a replacement. Regrettably, some search companies have been able to use insurance to avoid responsibility for providing all available data in a search. That is not acceptable. Consumers are paying for, and rightly expect, accurate and comprehensive information. They certainly should not have to pay twice. On the use of insurance in personal searches, my right honourable friend the Housing Minister announced on 8 December that the practice of private companies being able to use insurance will end on 6 April 2009. This will allow time for local authorities and the private sector to adjust working practices to the charges regulations. This is driven by evidence. The issues of access and charging are long-standing and inextricably linked. They were picked up by the Office of Fair Trading in its study of the property searches market in late 2005. The OFT made a number of recommendations to deliver improved competition in the delivery of property searches; in particular, it recommended equal access for all parties to data and clarity on how local authorities charge. The Government support this and we have taken action accordingly. In January this year we acted to address the first of these recommendations when we published Good Practice Guidance for Local Authorities and Personal Searchers. This set a benchmark for local authorities to provide access to data within three working days and provided guidance to facilitate better working local arrangements between the public and private sectors. The Local Authorities (England) (Charges for Property Searches) Regulations—which I shall refer to as the charges regulations from this point—are a response to the second part of the OFT recommended reforms. They aim to ensure that consumers receive prompt, quality, value-for-money property searches. The charges regulations are intended to provide clarity on how local authorities charge for search data. The existing charging provisions allow local authorities to charge for data but, as I say, this is disputed by some search companies. But, significantly, the charges regulations put this beyond doubt by establishing a framework that will ensure a common basis and transparency on what local authorities can charge for, how they calculate charges for data and how they must account. Flexibility is provided for authorities to recover the costs of providing property search data so that local council tax payers do not in effect subsidise them. I turn briefly to the particulars of the regulations. Regulation 5 will allow a local authority to charge for granting access to data used for compiling property searches on the basis that any such charge should also be applied internally to the different parts of an authority that require access to the data. Regulation 6 sets out how charges must be calculated; that is, the factors that ought to be taken into account. Regulation 8 gives a local authority the power to make charges for its own compiled search products—its ““official search””. In doing so, a local authority has discretion, but must, "““have regard to its costs””." Regulation 9 ensures transparency in relation to the setting of charges by requiring local authorities to publish annual information on the charges made under the regulations.The underlying principle to ensure the fairness of the charges regulations is that authorities must make search information available to all on equal terms. If it costs an authority £20 to produce the necessary data, it must charge a search company £20 for that data and no more. It is from this starting point that the ““level playing field”” envisaged by the OFT is established and from which competition begins. The charges regulations are based on existing local authority accounting practice as set out in the approved Best Value Code of Accounting Practice, so the framework will therefore not only deliver transparency but provide an appropriate route for challenge. Furthermore, we will publish guidance to support the charges regulations. I have said that these regulations are very much evidence-based. In developing them, we carried out two public consultations. There have of course been differing views and some in the private sector raised concerns about charging, but in general local authorities welcome the clarity they will provide and the fact that they address long-standing concerns. The OFT supports our approach, which it considers will lead to greater competition and efficiency in the sector and as a result create savings for consumers. Some private search companies raised concerns about the ability of local authorities to charge for certain data that might be ““environmental information”” or to set unreasonable charges. We addressed these concerns as we developed the proposals while ensuring that the needs of consumers remained paramount. The regulations would not apply where the information must be provided free of charge or another power applies. Property search charges will also be subject to local government accounting procedures. I shall outline the benefits of the regulations. Once they are in place and the use of insurance is no longer allowed, competition in delivering property searches will improve. But it is the consumer who we expect to benefit most from these changes. They should benefit from improvements to the quality of searches as they will contain all the required data. Consumers will therefore receive better value for money through not having to pay twice, in some cases commissioning a second search because the initial one had missing data. We also expect there to be further reductions in the price of property searches. As I said earlier, local authority prices have already fallen on average by £30 over the last 18 months. We believe that search companies will also benefit. Improved access to data will negate the need for insurance, improving the quality and acceptability of their search products to the legal profession and mortgage lenders. More important, this will remove any competitive advantage that some companies derive by simply not obtaining data. This will no longer be an option. Local authorities and ultimately local council tax payers will benefit by recouping the costs of delivering property searches data. I am confident that the charges regulations are proportionate, transparent and right. I believe, in conjunction with the other action we are taking to reform the property searches market, that they will deliver significant benefits to consumers. It cannot be right that consumers receive poor value for money through incomplete searches, particularly where the data are already available. That is an absurd situation. I hope that noble Lords will approve the regulations and I look forward to hearing the debate.