Partner Article

Home Information Packs

With Watson Burton LLP Law Firm

Home information packs (more commonly know as HIPs) became mandatory on 1 August 2007 for all sales of 4 bedroom or larger properties. They were originally identified in the 1997 Labour government’s manifesto and intended to apply to all privately owned homes. The initial scheme has been limited although proposals to phase in HIPs for 3 bedroomed houses commenced on 10 September. It is the responsibility of the marketer of the property to prepare the pack (usually the appointed estate agent). Homeowners who have not commissioned a HIP can face fines of up to £200 a day.

The intention behind the introduction was to bring “transparency” to the house buying process. Thereby reducing numbers of property sales collapsing and expediating purchases, because all necessary information would be at the disposal of the prospective purchaser from the outset.

There are three main compulsory elements of a HIP:

1. Legal evidence of title, normally in the form of land registry official copies.
2. Searches which must include local authority drainage and water and relevant planning consents.
3. An Energy Performance Certificate (EPC). This provides information for house buyers as to the energy efficiency of the property. This serves to ensure that the United Kingdom complies with an EU directive on home energy assessment which comes into force in 2009.

The proposal to include a home condition report (HCR) was scrapped in July 2006, and remains optional. This document was considered to be a hybrid of a mortgage evaluation and a full structural survey and its intention was to identify at an early stage any structural problems with the property.

Positives

Buyers will have more information at the outset so they can make an informed decision before making an offer. The government hopes this will lead to faster, unprotracted completions. Costs of compiling HIPs should ensure sellers are committed to the process and weed out speculative Sellers; once offers are accepted the sale should be more secure. It is believed that EPCs will provide greater appreciation of energy efficiency. It is hoped that this will lead to lower carbon omissions.

Negatives

Critics of the proposal have been outspoken from the outset and include the Council of Mortgage Lenders (CML), the Royal Institute of Chartered Surveyors (RICS), the Law Society and the National Associated of Estate Agents (NAEA). The RICS even sought a judicial review of EPCs. The packs have been described as bureaucratic and expensive with the cost of a HIP estimated at between £300 and £700. Also depending upon the market and certain other factors information contained in HIPs can quickly become out of date. The jury remains out as to how the profession will regard them and suggestions are that mortgage lenders will potentially insist on their own valuers even if the HCR is included. NAEA argue that the collapse of transactions more commonly results from a break in the property chain as opposed to the awareness of information to be exposed by HIPs. Individuals encouraged to qualify as energy assessors are rumoured to be dissatisfied as the market is not as wide as promised. According to the CML 4 bedroom properties constitute only 17% of owner occupied homes. However with the phasing in of 3 bedroom homes the amount of properties on the market susceptible to HIPs is thought to be in the region of 66%.

HIPs are likely to play a fundamental role in the restructuring of conveyancing in England and Wales. Initially, this will only apply for larger properties. However, should they function successfully and become accepted by the professions expect them to be gradually phased into general conveyancing. It would appear that the government is keen on a countrywide pilot using larger homes to assess the operation of HIPs in practice. The future for HIPs is unclear. They have certainly arrived but it is less certain if they are here to stay.

If you have any comments or questions about this article or any other property related matter, please contact tom.wills@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .