The body that represents property search companies has written to conveyancers’ representatives to set out ground rules for using search insurance at a time when councils are struggling to deliver.
Among them is a requirement that homebuyers make a declaration saying that they know their search results are incomplete and they consent to insurance being used “in lieu of data”.
According to the Council of Property Search Organisations (CoPSO), with the stamp duty holiday ending on 31 March 2021 and conveyancers under “intense pressure”, delays by local authorities in returning searches were becoming a major issue and putting an “increasing focus” on insurance.
As an “extreme example” of the delays, CoPSO said Hackney council in London has said there were “no searches available” on any property in the borough until the spring.
CoPSO, whose members deliver 80% of all private sector searches, has written to the Law Society, Society of Licensed Conveyancers, Chartered Institute of Legal Executives, the Conveyancing Association and the Bold Legal Group, setting out the insurance terms of its search code.
James Sherwood-Rogers, chairman of CoPSO, said that with the expiry of the stamp duty holiday “looming large, and with a hyperactive property market”, conveyancers were under “intense and increasing pressure” to complete property transactions before 31 March.
As a direct result of the pandemic, he went on, there were “many locations” in England and Wales where the provision of searches was subject to delay.
Where this was the case, the “appropriate use” of search delay insurance had an important role to play.
The Property Codes Compliance Board (PCCB) is a trading name of CoPSO and the search code is regulated by the PCCB.
The PCCB said it had recently been contacted by lawyers regarding the options available to their clients where councils could not provide the required data in time.
It said firms that subscribe to its code “will only provide ‘search delay insurance’ where local authority delays mean search information cannot be obtained within the timeframe required by the conveyancer and their client”.
The code goes on: “With the conveyancer’s agreement the firm will provide an incomplete search with the missing information covered by search delay insurance.
“The firm will then provide the conveyancer with the missing information as soon as it becomes available.
“This ensures that the transaction can proceed quickly, the missing information is always provided later, and if any of that information proves to be adverse more timely action may be taken as this is covered by the delay insurance.”
The code said that ‘no search’ insurance products, which provided insurance as a substitute for definitive search information, were not compliant with the search code.
“Firms which subscribe to the search code can provide incomplete search reports in extreme cases such as a delay in obtaining information from the local authority.
“However, this may only be done where the client expressly sanctions its omission from the final search report.”
Insurance should only be sought when the local authority search cannot be completed in time.
“To comply with search code auditing requirements, the client should be asked to make a declaration saying that they are aware that the search they are purchasing is incomplete and that, where applicable, they have consented to insurance being used in lieu of data that is not available within the timeframe they require.”
The PCCB said that where an incomplete search is provided, with or without insurance, the missing data “must always be subsequently obtained and passed on to the client, even if the property purchase has been completed in the meantime”.