The Home Information Pack (HIP) dry-runs have highlighted the scale of the challenge facing local authorities as they respond to the surge in demand from the HIP providers.
For almost all the HIPs that have been put together to date, the local searches have been provided by private search firms. This represents a major shift in the market.
Pre-HIPs, the official local authority searches accounted for at least 60 per cent of the £160 million per year property search market. This was made up of searches requested by post and, increasingly, electronically through the National Land Information Service (NLIS).
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Even though most of the authorities in the dry-run do in fact turn around their own searches in less than five days and charge an average of less than £120 – which makes them highly competitive on both counts with the private sector – the market seems to be turning against their product, which could significantly impact on local authority finances put in place.
The emphasis during the dry-run has therefore been on providing access to private search firms to information held in registers. In this area, many local authorities have a long way to go. For some, this information still sits in paper form, spread across a number of departments and will take many months, if not longer to put into some form of order, let alone automate.
Acknowledging the problems
The Local Land Charges Departments and other land and property information holders within local authorities are the custodians of the information and spend most of their time and resource maintaining records and compiling official searches. They are simply not equipped or resourced to provide the level of personal access that is envisaged.
The government, acknowledging the difficulties encountered by private search companies and mindful of resourcing issues within authorities, has now put in place transitionary arrangements to permit companies to cover off with insurance any information they have not been able to obtain from local authorities within two weeks. This will be reviewed in December 2007. The government has also announced that it will provide support and guidance to all of the worst performing authorities.
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Official search fees currently bring over £100 million per year to councils’ coffers across England and Wales. This has helped fund modernisation in land and property services, but has also, to some degree, subsidised the personal search service. Owing to inequalities in the charging regime, private search firms pay a fraction of the official fee. There is talk of an increase in the personal search fee to allow local authorities to recover the costs of providing the service, which will help mitigate their losses. Nonetheless, the financial impact will be significant.
Key areas
There are three key areas where the private search firms enjoy a competitive advantage over official searches – firstly they are able to price aggressively, given their lower fixed costs; secondly, they can offer a standardised service across the country, although they will be heavily reliant on local authorities’ access to meet stringent service levels; thirdly they have built excellent relationships with the client base – the information pack providers.
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However, most importantly, the one area in which local authorities have historically had the edge is in the completeness and accuracy of their information. This was a key requirement of the pre-HIPs customer base – local solicitors and conveyancers – but how much weight will it carry with the information pack providers?
Cutting the objectives
It remains to be seen whether the majority of buyers’ solicitors continue to insist on an official search and choose not to trust the personal search included in the HIP. This would certainly help local authority revenues, but it would appear to cut across the objectives of the introduction of HIPs.
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Local authorities are beginning to acknowledge the need to review pricing, though clearly they wish to see the implementation of revised fees for private search firms introduced as quickly as possible. Much work is being done at ground roots level by the Local Land Charges Institute on increased standardisation across authorities and on developing marketing skills within their membership.
In terms of access, some Authorities are working with C-NLIS on putting in place electronic links to the information which is required by private search firms. Over 30 authorities have signed up to the C-NLIS pilots. In the longer term this will obviate the need for increased resources to cope with personal callers.
This year holds some very significant challenges for the Britain’s local authorities.
