The government wants housebuilders to treat customers fairly, and has threatened to crack down on those who use arcane and unintelligible language in their contracts
Housebuilders need to be aware that consumer rights are moving up the political agenda. The Office of Fair Trading has just issued its annual plan for 2006/7: it will focus on five sectors, one of which is construction and housing. And then there is Kate Barker's review of housing supply.
Apart from the many recommendations relating to supply the Barker Review also had something to say about the customer. In particular, recommendation 32 required that: "The housebuilding industry must demonstrate increased levels of customer satisfaction." The recommendation also called on housebuilders to use fair contracts complying with the Unfair Terms in Consumer Contracts Regulations 1999.
If progress is not satisfactory, said Barker, then the OFT should "conduct a wide ranging review of whether the market for new housing is working for consumers".
Housebuilders should make sure that the legal documentation they use to sell their homes does not fall foul of the regulations. In a consumer contract, a term is unfair if it has not been individually negotiated and, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer. Good faith means that a business must deal fairly and openly with consumers.
The consequence of having an unfair contract term is that the term is unenforceable against the consumer. Additionally, the consumer can complain to the director general of fair trading. That can lead to an injunction against any person who appears to be using, or recommending the use of, an unfair term drawn up for general use in contracts concluded with consumers.
In particular, the regulations require that any written term of a contract be expressed in plain, intelligible language. That can represent a challenge to property lawyers. After all, the buying and selling of real estate is a technical area of law involving arcane language. Some of the technicalities date back hundreds of years, others are creatures of more recent statutory provisions.
Then there are the standard conditions of sale. These are produced by the the Law Society and used in practically every domestic transaction in England and Wales. These conditions are written in commendably clear language but deal with technical issues and use small print. These are generally incorporated by reference and so are not immediately available to the consumer reading the contract.
By way of example, condition 4.13 (fourth edition) says: "Where the property has an unregistered title, the proof is to include:
Regulations require any written term of a contract is expressed in plain, intelligible language. That can represent a challenge to property lawyers
(a) An abstract of title or an epitome of title with photocopies of the documents; and
(b) Production of every document or an abstract, epitome or copy of it with an original marking by a conveyancer against either the original or an examined abstract or an examined copy."
This wording is perfectly clear to a conveyancer, but not necessarily to anyone else.
The use of plain English is much more common in legal documentation than was once the case. Just compare a provision, once common in plot sale transfers: "With the object of giving the Transferor a full and sufficient indemnity but not further or otherwise the Transferee hereby convenants with the Transferor that he will from the date of this transfer observe and perform the covenants (if any) referred to in the registers of the estate title number so far as they relate to the Property and remain capable of taking effect and will indemnify the Transferor against all liability in respect of them."
In the new world order that might translate to: "The buyer agrees with the seller by way of indemnity only that the buyer will always comply with the obligations and restrictions (where they still affect the property) referred to in the charges register of the title."
Old habits may die hard but surely we will soon see the end of "hereto", "herein", "herewith", "howsoever" and "inter alia". So the challenge to housebuilders - and to their lawyers - is to produce plain language documents that still deal with the necessary conveyancing formalities.
Bill Mackie is a partner with lawy firm Cripps Harries Hall and head of the development group. Email firstname.lastname@example.org