(1374) COMM - Article - Standard Bearers: Residential Surveys

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STANDARD BEARERS: RESIDENTIAL SURVEYS An important new Home Survey Standard from The Royal Institute of Chartered Surveyors (RICS) will lead to fewer aborted conveyancing transactions. That, at least, is the view of the managing director of Arnold & Baldwin Chartered Surveyors who was part of the formal consultation process at RICS’ invitation.

What’s the new standard?

This is a new Home Survey Standard - a professional statement of mandatory requirements for all RICS professionals. It was launched in November 2019 with the aim of improving an important element in the conveyancing process – the survey. Adoption of the standard will be mandatory from 1 June 2020.

This upcoming overhaul of the home survey process is intended to introduce greater protection for homebuyers and improve transparency in the process.

Furthermore, survey offerings will be standardised and RICS said the standard will become the best practice benchmark in promoting and enforcing the highest standards in the residential sector.

RICS’ Global Property Standards Director, Paul Bagust, has said it will bring vital standardisation and clarity to the process, “ where RICS professionals can work effectively to meet the changing needs of the market ”.

What problems will be remedied?

Its emphasis will be on consumers being able to understand fully the importance and benefits of commissioning a home survey before going ahead with their purchase and to understand the process better. The process and language has, says RICS, been simplified and buyers will be protected.

One of the perennially problematic areas of the house buying process is the survey. Confusion reigns for many a buyer, particularly those new to the process or with little experience of buying and selling residential properties.

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Buyers have, for a long time, been frequently confused about the different types of survey available; the differences between them; their purposes; the limits to each; and so on.

“The process and language has been simplified and buyers will be protected’’ At the same time, property solicitors and other conveyancers don’t always actively promote surveys and, in any case, are often commissioned by the buyer before solicitors are instructed. Though conveyancers should at least advise a client to have a survey carried out and which may be best suited to their needs, buyers often decide not to take it up.

Cost is undoubtedly a factor in the failure to have a survey. They can cost from £300 to £2,000 upwards – a lot of extra cash in addition to the legal fees and stamp duty already payable by cash strapped buyers.

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The prevailing confusion around home surveys means vast numbers of people are paying huge sums on the basis of uninformed choices.

Following the consultation, RICS concluded that a set of mandatory requirements is necessary to ensure consistency in approach to serve market changes and to improve the residential conveyancing process.

Increased trust Joe Arnold highlights a number of fundamental differences between the old and the new standard, most notably that the new standard: •

facilitates and promotes improved communication between a homebuyer and their surveyor;

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uses benchmarks that embrace new technologies and media to make much easier for homebuyers to understand their survey results;

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puts greater responsibility on the surveyor to be clearer about their observations and recommendations;

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states that surveys should include fewer caveats and assumptions.

Writing online, Arnold states: “This is a really key change that will … lead to increased confidence, and this is likely to result in fewer aborted transactions.”

Enforcement In light of the issues, RICS undertook a paper-based consultation with consumers and with the property industry in the first half of 2019 having reviewed the existing guidance on surveys. The conclusion was, it “clearly identified the need for a professional statement”.

RICS also undertook consumer research and found that:

Before its June implementation date, the standard can be adopted voluntarily. Then once it becomes mandatory (for RICS members to avoid repeating), the new standard will harmonise and replace the previous RICS guidance notes and statements for all levels of home survey.

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25 per cent of recent house buyers did not have any kind of home survey carried out before buying their property.

It also sets out a number of concise mandatory requirements establishing ‘benchmarks’ around which surveyors can design and deliver services to meet their clients’ needs. Failure to comply could lead to a finding of negligence against the surveyor or firm.

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21 per cent of recent homebuyers did have a home survey but could not remember what type it was.

The standard covers condition-based residential surveys at all service levels as follows:

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Survey level one which is designed for clients seeking a professional and objective report on the condition of the property at an economic price.

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Survey level two designed for buyers seeking a professional opinion at an economic price and therefore less comprehensive than a level three survey. The focus is on assessing the general condition of the main elements of a property.

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Survey level three which is designed for clients seeking a professional opinion based on a detailed assessment of the property.

All the requirements are split into three key areas of home survey services: setting up the service, carrying out the service and the actual survey report.

There will be minimum expectations as well as mandatory requirements for RICS members and firms who undertake residential property surveys and are regulated by the RICS. For instance, they must: •

have a clear understanding of the needs of their client;

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have the appropriate knowledge, such as relating to the locality of the property and other relevant factors, such as leaseholds and other properties with shared facilities;

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have the skills and experience to provide the agreed service, and ensure potential clients understand the nature of and differences between the levels of service offered so they can make an informed choice;

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agree the full details relating to the terms of engagement with the client before delivering the service;

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include other features and issues that potentially impact the property and require further investigation by residential conveyancers. These could be flying freeholds, rights of way and boundary issues.

In with the new Residential conveyancers, chartered surveyors and estate agents need to understand what this new standard means in practical terms. They need to ensure they are familiar with the framework and the obligations placed on surveyors, and the implications for solicitors who will most likely be handed the finished report for scrutiny.

In particular, solicitors will need to be alert to cases where a survey report falls short of the minimum expectations and / or mandatory requirements. If they are unfamiliar with the new standard and cannot flag up problems that become apparent, they could potentially face a negligence claim.

The standard states: “The legal adviser is responsible for checking the relevant documents but will not be familiar with the property. The RICS member will be the ‘eyes and ears’ of the legal adviser and so should identify apparent and specific items and features that have possible legal implications.

“It is unlikely the legal adviser will read the whole report so the RICS member must clearly highlight the relevant legal matters and remind the client they should bring these matters to the attention of their legal adviser. A separate legal section in the report is an effective way of achieving this. Where appropriate, if the situation can be physically resolved, the RICS member will describe what needs to be done (for example, removing/improving unauthorised work, rebuilding a boundary wall or cutting back an overgrown hedge).”

Some solicitors may dispute some of RICS’s assertions in the standard (for example, that they are unlikely to read the full report or “will not be familiar with the property”).

However, the fact remains – it is for the solicitor to pick on those issues that have legal implications for the client and their intended purchase.

RICS standard can be found here.

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