That the Grand Committee do report to the House that it has considered the Local Authorities (England) (Charges for Property Searches) Regulations 2008.

Relevant document: 32nd report, Session 2007-08, from the Joint Committee on Statutory Instruments.

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.

I am grateful to the Minister for her explanation of the background to these regulations. Indeed, in principle one cannot quarrel with what the Government are trying to do in this field; they are clearly trying to produce a situation that treats everyone equally, which must be admirable, and which is clear and plain so that everyone can understand what is happening. Until now that has not been the case, so to that extent these regulations are thoroughly welcome. They give rise, however, to one or two questions.

In life, timing is all. One cannot help but wonder whether the timing of the arrival of these regulations is particularly fortunate. I was going to say that the housing market was in ferment. The trouble is that it is not; it is almost in a state of terminal decline. That is going to cause real problems for the local authorities, because there is no doubt that they will properly have to gear up what I would call their property search departments to cater for the huge demand that there has been in the recent past. That is fine and good, but for anyone working in that sector in local government there is a problem. We know from what mortgage lenders are saying that the number of applications for new mortgages has almost vanished—not completely, but it is way down from where it was. Any local authority now budgeting for next year on the basis proposed in the regulations will have historic costs based on a high volume of inquiries, and a realistic estimate of the number of inquiries next year will probably be no more than 25 per cent of that. That in turn suggests a relatively high charge.

If, as the regulations require, you balance the cost with the number of inquiries and produce a charge as a result of that calculation, the cost of an individual search could be relatively very high, especially in comparison with what was happening only a short time ago. At that point, there will be howls of complaint from most consumers about over-inflationary increases in costs. There is a real difficulty here for both local authorities and purchasers. What are the Minister’s thoughts on this? In the present circumstances, we do not want to do anything that might increase the costs of property transactions. There are enough difficulties in the market without adding this one to it.

The other oddity that I have come across recently arose at the Land Registry. I declare an interest as a property owner, and it was my own circumstances that produced this question; it is not particularly related to this issue but it is an interesting one. The Land Registry is the other half of the search side that has to be done on a property and its attitude can sometimes be different from that of the local authority. I was not aware of this until I put a property on the market. The property is and always has been two separate cottages, but they are semi-detached on one side. The local authority, quite properly, has two charges on them—they are both rated separately and all the services charges are separate and so on—but, because I am one owner, the Land Registry says that there is only one property. It is an interesting little conundrum.

I wonder whether we need to think—not with regard to these regulations; I merely wanted to raise the issue with the Government—about how we deal with that inconsistency. For instance, it could arise if a housing association were selling properties. How would the Land Registry treat what might be hundreds of houses all on a congruent site but with only one owner? Is that one Land Registry search or will it be 100? It is a separate issue but it relates to this general subject.

I agree in principle with the wording relating to the new way in which charges are to be calculated, but we have to be careful of some very unfortunate side-effects that may cause an adverse reaction. My personal view is that, while the local authority must publish these figures, as it is required to do, if it is wise it will none the less absorb a large proportion of the otherwise huge increase in unit cost that will arise in the coming year in order to try to keep search charges down and thus not provide a disincentive for people in the housing market.

I, too, thank the Minister for her explanation of the regulations. On these Benches we believe that the criteria for judging them should be whether in the end a better service will be provided for the home-buyer. It really is not acceptable that anyone should be provided with incomplete search information, but it occurs to me that, if the local authority is able to charge the recovery cost of supplying information, it should certainly provide as much information as it has access to. I have received representations from lobbies on both sides of the argument: vested interests from local authorities and vested interests from commercial organisations which make their living by obtaining these data and selling them on to customers.

I should like to put some questions to the noble Baroness. First, however, I want to make a point about the charges. I agree that it is best that charges should be set by local cost determination, but I wonder whether that will lead to postcode charging, as it were. Are local authorities likely to do this through the auspices of the Local Government Association? The order provides that local authorities have to predict the cost for the coming year, using as evidence the costs incurred during the preceding three years. The noble Lord, Lord Dixon-Smith, assumed that in a falling property market the charges are likely to be too high. However, I would point out to him—and I shall check with the Minister that I am correct—that, if this is genuine cost recovery and not the cost of funding the whole department which has been built up over preceding years in a booming property market, there may in fact be economies of scale when dealing with a lot of inquiries. Fewer inquiries may cost a little more to deal with but, according to these regulations, I understand that local authorities would not be justified in charging the whole cost of maintaining the data. Can the Minister confirm that, although a local authority may justify charging for modernising and updating the database and the quality of the information that it will supply, it cannot make a charge for the whole cost of maintaining the data; it can charge simply for searching for the data and supplying them to the inquirer?

The Local Government Association has a few questions that I should like to put to the noble Baroness. Can she confirm that a charge for access can be applied to every individual property subject to the request rather than to a single request relating to a whole bunch of inquiries that have all been put in together? That relates to the question put by the noble Lord, Lord Dixon-Smith, about the Land Registry. Further, under these regulations will local authorities have the freedom to differentiate charges based on the level of service? For example, if an inquiry required an urgent response, would the local authority be justified in charging more for that? Finally, what steps will be taken to ensure that local authorities do not overcharge, especially given the current difficulties with the property market? There is bound to be a temptation, shall we say, to do so.

The commercial organisations that have written to us have raised an important matter of principle and are threatening judicial review on the issue. I am sure the noble Baroness will have heard rumours about this. They say that the underlying feature of the regulations is the reversal of a long-standing legal presumption enshrined in case law that public information which was freely available is now to be restricted by cost. They wonder whether this will have a major impact on many small businesses and create a precedent that could be used elsewhere. They are most anxious that local authorities charge only the cost recovery and not the whole cost of maintaining the databases.

These organisations are also asking about regulation and monitoring. Will this be carried out by the district auditor? In what way will local authorities be checked as to whether it is genuine cost recovery? To the man in the street, the information would be gobbledegook; no one would understand it. It will need someone who is knowledgeable and able to analyse the way in which local authorities publish and charge, and say whether or not that is reasonable.

How are we going to know that there is a level playing field and equal access to this information? It is right that there should be a level playing field and that taxpayers should not subsidise organisations which are making a profit out of their activities, but it needs to be fair. Some serious questions have been raised on both sides of the argument and I hope that the Minister will be able to answer them.

I am grateful for the welcome that the regulations have received. The appearance of the noble Baroness on the Front Bench on this issue is very welcome. I cannot greet her perspicacious questions so warmly, but it is very nice to see her.

It is only temporary.

I understand it is temporary but I look forward to seeing her again.

The important point raised by the noble Lord, Lord Dixon-Smith, has to be considered seriously because, clearly, everything that we are doing in housing at the moment is conditioned through the prism of what is happening in the housing market. Whatever we do, we have to be careful that it will add to people’s capacity and ability to buy and sell houses. Whether they are lenders, buyers or estate agents—the whole industry—we do not want to put any accidental or deliberate obstacles in the way of the process. The fact that the OFT has committed to looking at the process as a whole is a welcome step forward. We are working closely with all the stakeholders in this field, including the consumer bodies, Which?, the Royal Institution of Chartered Surveyors and so on.

The noble Lord’s final argument was that the discipline of a falling market means that people are going to be careful about how they do things, including how they charge. The regulations give us far greater transparency on the costs—how they are incurred, what is being charged and value for money. People will not be fobbed off by a private search company telling them that they cannot get hold of the information, because now they will be able to do so. Competition is now built in and the cost of searches has been dropping. That should hold steady because, for the first time, we have a genuinely competitive situation.

Paragraph (2) of Regulation 6 reads:

“Subject to paragraph (3), each charge or recharge … for access to property records made during a financial year must be calculated by … dividing a reasonable estimate of the likely total costs to the local authority in granting access to property records … during the financial year; by … a reasonable estimate of the number of requests for access to property records likely to be received”.

In my view, that is explicit. It does not leave a great deal of room for manoeuvre on what the charge should be; or does it? If it does, perhaps I should be content, but my reading of the wording is that it is very explicit and that it almost sets the charge.

The crucial words there are “a reasonable estimate”. I think that local authorities know what they are up against these days and they are aware of their responsibility to try to maintain as lively and thriving a market as possible. However, other factors come in as well. My advice is that Regulation 6(2) regarding the unit charge applies only to access to a property search; the costs to the consumers are discretionary. So two things are happening there and I am grateful for clarification on that.

The other thing that we need to think about is that, in trying to remain competitive in a declining market, the private sector will be restrained in passing on additional costs to consumers. I think that improved competition based on the OFT’s envisaged level playing field will place additional pressure on search prices to fall, certainly in the medium to longer term. The guidance also states that local authorities are allowed to charge for units of data, so they will not be so reliant on collecting data for a property search.

The noble Baroness asked whether you would be paying to maintain your archive. The answer is no. The costs you would pay would relate to what you have to deliver to the consumer, so we can be certain that it would be the relevant portion of the specific data.

The noble Baroness asked some specific questions and perhaps I may address the important one about whether we have reversed an existing point of law. We certainly would not agree with that. Essentially, the regulations are intended to clarify a point of law which was disputed by some. We were of the view that the previous regulations allowed local authorities the discretion to charge for data where the statute is silent on charging, although the personal searchers certainly disputed that and some local authorities were unsure. It is worth putting that on the record because the new regulations put the issue beyond doubt. That was explicitly covered in the original consultation on charging, which ended in April 2008, and it is also the position that the OFT set out in its 2005 report.

Essentially, property search data fall into three categories: data held on public registers that can explicitly be inspected free of charge; data held on public registers where the statute says nothing about charging; and data not held on a public register. We believe that local authorities always have the power to charge for the latter two categories, and the new charging regulations reflect that. I hope that that satisfies the noble Baroness.

She also asked whether the local authority would be checked by the district auditor. That will indeed be the case. She asked whether the local authority would have the freedom to differentiate between different levels of service support—if, for example, there was a particular challenge or a particular urgency—and, again, the answer is yes. She also asked me something that I cannot answer; I am afraid that I shall have to write to her about that. I think I have picked up most of the questions that the noble Baroness asked.

On the noble Lord’s final question about bundling up, I am not sure what the Land Registry’s practice is. I will look into that. It seems not to be entirely logical if the registry does not distinguish between units of dwelling in property searches. I will check. My understanding is that there would have to be an individual property search on each property—in fact, I am sure that that is the case—but I will see if I can throw some light on this strange situation that may have arisen with the Land Registry.

I think I have answered all the questions but, if I have not, I will be happy to do so in writing when I have read Hansard tomorrow.

I thank the Minister. I am deputising for my noble friend Lady Hamwee and ask that the Minister and her officials copy the letter to her; she is more likely to make head or tail of it than I am.