For over a decade now, with a few exceptions, anyone in Scotland selling their house has to provide potential buyers with a Home Report. The aim is to give buyers a clearer picture of the property right at the start of the sales process.
This blog post looks at the background to Home Reports and some of the main questions which SPICe receives on this issue. It also outlines recommendations for reform following a five-year review of the system (it is not yet clear whether these recommendations will be taken forward).
Why were Home Reports introduced?
Under the previous system, people in the process of buying houses were the ones who normally had to commission their own surveys and valuations.
The Housing Improvement Task Force, set up in 2001 by the then Scottish Executive recommended flipping this round so that the responsibility fell on the seller in the first instance.
The main aims behind this change were to:
- improve information on property conditions to provide an incentive for repairs to be done.
- reduce the costs linked to multiple valuations and surveys.
- reduce the risk of sellers setting artificially low asking prices.
Home Reports were ultimately introduced on 1 December 2008 by the Housing (Scotland) Act 2006 and associated regulations.
What’s in a Home Report?
Home Reports are made up of three documents:
- A single survey – a chartered surveyor’s valuation and assessment of the condition of the home (including whether repairs are needed).
- A property questionnaire – completed by the seller and including information on things like: council tax; property alterations; specialist work; guarantees and notices; and previous structural damage.
- An energy performance certificate – a surveyor’s assessment of the energy efficiency of the home.
What do Home Reports cover?
Home Reports are designed to give buyers a general overview of a property’s condition, energy efficiency and likely value.
They don’t, however, provide a cast-iron guarantee. For example:
- Surveys – a Home Report survey should highlight the most common defects in a property. However, as it’s only based on a non-invasive, visual inspection it won’t reveal every defect (and is not designed to pick up things like damp, dry rot or asbestos if they aren’t visible). It isn’t the same as the more expensive full structural survey which includes much more information as well detailed advice on repairs.
- Property questionnaires – the questionnaire covers many of the key questions buyers have (e.g. on property alterations, damage etc). However, it relies on sellers filling in the form accurately. In addition, certain questions only ask sellers whether they are aware of a problem (e.g. the costs of common repairs) thus adding an element of subjectivity.
- Valuations and sale prices – although chartered surveyors have to provide an accurate valuation, the price a property is sold for really depends on the state of the local market and interest in the property. In popular areas (e.g. parts of Edinburgh) sales prices are often above the valuation, whereas in less popular areas this may not be the case.
- Valuations and mortgages – although not required by law, most Home Reports also include a Generic Mortgage Valuation Report (GMVR). However, mortgage lenders won’t necessarily accept this valuation as they will have their own policies and risk assessments. Mortgage lenders can also require sellers to get a surveyor to ‘refresh’ a single survey if the property has been on the market for some time. This is normally just a simple re-inspection rather than a new survey), but the costs often fall on the seller.
Who is liable for the information in the Home Report?
One of the questions people often have is what happens if the Home Report misses an important problem in the condition of the house – who is liable?
There is no simple answer to this as it really depends on the facts. Chartered surveyors do have professional responsibilities to both the seller and the purchaser. There are also regulations which can make surveyors liable to pay damages to buyers if they don’t work with reasonable skill and care, and this leads to a material loss. However, single surveys aren’t full structural surveys and so buyers shouldn’t expect them to provide an extensive level of detail. This is reflected in their terms and conditions which limit the scope of the survey and consequently surveyors’ obligations.
The liability of sellers for inaccurate statements in the property questionnaire is less clear. As this isn’t dealt with in legislation, buyers have to argue that sellers owe them a duty of care under the law of negligence, which is not necessarily straightforward. Solicitors are unlikely to be liable for the actions of their clients (see the Law Society of Scotland’s guidance).
What did the Home Report Review find?
The Scottish Government began its five-year review of Home Reports at the end of 2013. This included a consultation held in December 2013 and a research report published in January 2015.
The research report concluded that buyers and sellers were most positive about the Home Report, with front-line housing industry professionals being most critical. It also noted that buyers relied most on the single survey, followed by the valuation, when choosing whether or not to buy a property (see table below).
The report also made several recommendations, including:
- Reducing the size of the Home Report especially the property questionnaire.
- Adding a front summary page with the key findings.
- Providing more guidance to deal with buyer and seller misperceptions.
- Adding a new objective for the Home Report linked to energy efficiency.
- Incorporating the classification in the energy report into the main repairs category to give it more prominence.
- Reconvening the Home Report Implementation Group (a body set up to inform the development of the Home Report prior to its introduction).
Although the Scottish Government is considering how this work might be taken forward in the context of energy efficiency, it has not taken a more general stance on the recommendations and has not yet set a date for reconvening the Home Report Implementation Group. Consequently, it is currently not clear whether the above recommendations will be taken forward or what changes, if any, will be made to the system.
Julia Hurst, Enquiries Assistant
Angus Evans, Senior Researcher (Civil law)