No easy solution to price disclosure

REPORTING PRICESMany countries are grappling with the problem of disclosing sale prices and how much information the vendors should be obliged to give to buyers, writes Pat Igoe

SHOULD HOUSE sale prices be kept secret or fed into the market? Ireland is not unique in not quite knowing which way to turn.

The conflict between a vendor's right to privacy on the price achieved for a house or apartment and the market's need to know sale prices is not new.

Different countries around the world are grappling with this conundrum and with how much information the vendors should be obliged to give to buyers.

Price disclosure is a serious issue in the property market here for both sellers and buyers. A market starved of critical price information can easily lead to false markets and too much or too little being paid for houses or apartments.

The literature clearly warns that lack of transparency facilitates underhand dealing and even fraud. Which should prevail - the individual's right to privacy or the market's need to know?

The recently-elected president of the Irish Auctioneers and Valuers Institute, Edward Carey, recently reportedly suggested that "a properly-informed property market and consumer are of greater importance to the national economy and the needs of consumers as a whole must outweigh the concerns of individuals involved in property transactions".

More trenchantly, the president of the European Central Bank, Jean-Claude Trichet, speaking about the money markets, argued last week that "the absence of pertinent, credible and reliable information drives market participants to assume the worst possible hypothesis".

In England and Wales, since the Land Registration Act 2002 came into effect on October 13th, 2003, all new Land Registry documents are open to the public for full inspection. It has been suggested that the new era of transparency in property transactions as ushered-in by the act, coupled with new tools including online search facilities operated by the National Land Information Service (NLIS), have also significantly reduced the time it takes to sell property.

In Sweden, public information on land and property has been made available by the authorities since the 1960s. Since then, they have developed a computer database called Real Property Register (fastighetsregistret). This consists mainly of a register of property locations and boundaries, and of various rights over land. The register also includes other administrative records, including buildings, addresses and tax assessment values.

Along with its digitised map index, showing the location and approximate shape of the property, the register enables users to conduct computer searches and instantaneously view various types of information on any property in Sweden. It is run by a government organisation, the National Land Survey (Lantmätriet).

In Germany, on the other hand, the property market still lacks the transparency of the US or British markets. Improved transparency in the past 15 years has helped the market, according to local reviews. Information is publicly available in respect of districts, rather than in respect of individual properties.

In a recent European-wide endeavour, a project called EULIS (European Land Information Service), seeks to standardise systems for the presentation of information on properties as between countries. EULIS seeks to be able to provide online information to would-be buyers of properties throughout Europe. Earlier this year, the EU Commission encouraged member states to adhere to the service.

Ireland's Property Registration Authority, which incorporates the Land Registry and the Registry of Deeds, joined last September. It is a developing project.

In the US, different states adopt different approaches to sale price information and are either "disclosure states" or "non-disclosure states". But, even in non-disclosure states, such as Idaho, Kansas and Texas, the mortgaging system enables reasonable calculations on sale prices to be made public. Idaho earlier this year came close to legislating for full sale price disclosure.

Most US states favour some degree of disclosure to the market. More than two-thirds of states also require that vendors give to potential buyers disclosure forms listing known physical defects, sometimes even covering such things as suspected "paranormal activity" in a house. US lawyers are increasingly speaking of "vendor beware". In Massachussetts, vendors are required to disclose all facts that materially affect the value or desirability of a property.

In South Carolina, go online and you'll find information like: "Charleston. Twenty One George Street LLC. Sold Unit 13-A, 21 George St to John W and Barbara R Falkenbury for $645,000."

As in the US, Australia also adopts a state-by-state approach. In Victoria, the Land Titles Register can be searched by anybody. But, as in Ireland, there is consciousness of the issue of privacy law.

Property information can be linked to identifiable individuals and thereby likely to fall foul of Victoria's Information Privacy Act as with Ireland's Data Protection Act.

Many developed countries disclose transaction prices to some degree to the market. Japan's system is different. The main reason may be differences in the property registration and taxation systems.

In many European countries, including Ireland, in the US and in some Asian countries, transaction price information had to be notified to the state registration office in the registration process, with the transaction-price information being recorded and stored in registries, often for property tax reasons, and open in varying degrees to the public.

Unlike these countries, there is no requirement in Japan for the registration of information on transaction prices, and it is the "assessed value" (not the transaction price) that provides the basis for property acquisition tax and stamp duty license tax. In Japan, the state has no significant function in collecting and storing transaction price information.

England and Wales, Hong Kong, Sweden and the US are among the states that Ireland's legislators might usefully look at in seeking to reconcile a seller's privacy with the market's need to know.

Pat Igoe is a solicitor practising in Blackrock, Co Dublin