Home information packs The decision to abolish HIPs has been welcomed in some quarters. Richard Martin examines their demise and the alternatives on offer
HIP effect |
? Home information packs have been abolished with immediate effect ? However, the requirement for energy performance certificates has been retained ? It is hoped that the abolition of HIPs will provide a stimulus for increasing the number of properties on the market |
The coalition government’s abolition with immediate effect of the home information pack (HIP), announced on 20 May, met with the approval of most estate agents and conveyancers acting in the residential market. However, was the HIP experiment a total failure or can positive lessons be learnt?
Introduced in 2007, HIPs comprised an up-to-date local authority search, drainage search, an energy performance certificate (EPC), a copy of the title to the property and any lease plus a completed property information questionnaire. Their aim was to accelerate residential property transactions and prevent failed transactions with the consequent wasted costs for buyers. Sellers paid up to £400 for the pack before marketing their property, which it was claimed discouraged many from selling their homes. The cost of HIPs may have also deterred many from testing the water to gauge the value of their property.
Criticisms of the scheme
Solicitors and licensed conveyancers were, in the main, critical of the scheme. The Council of Mortgage Lenders (CML), which sets out the requirements for conveyancers acting for most residential property lenders, stipulates that local searches used where mortgage advances are being made should not be more than three months old. The local searches included within the HIP were personal searches carried out by a search provider. CML, although accepting such searches, put the obligation on the conveyancer to decide whether the personal local search should be relied on. Consequently, an up-to-date local search was often carried out at the expense of the buyer, thereby duplicating costs.
In many leasehold property sales the HIP documents were not complete. Where a lease extension had been entered into, often only the short extension document would be included within the pack without a copy of the original lease, which contained the full terms and conditions.
The property information questionnaire in the HIP was merely a tick-box document with minimal detail and was unreliable in providing full answers to the enquiries the conveyancer would expect to receive. In all cases, the seller would have been asked to complete a more detailed form duplicating information already provided.
The only part of the HIP that has been retained is the EPC, which must have been only commissioned before marketing commences. EPCs provide an energy-efficient rating for the property being sold together with recommendations of ways in which to increase the energy efficiency. However, they are not considered to bea significant factor in deciding whetherto buy a property.
The Law Society remains keen to ensure that potential buyers receive information on property as early as possible. It is proposing to produce a comprehensive set of documents to be prepared by a solicitor, who has the benefit of legal training and professional responsibility. No doubt these initiatives will emerge over the months ahead.
Parts of the residential market have adopted the “information upfront” approach. Developers’ conveyancers have always tended to provide a complete information pack when individual plots are sold. This includes the relevant searches and replies to detailed questions, including planning documents, and ensures that contracts can be exchanged at the earliest possible time. This practice will inevitably continue.
Mortgage difficulties
In the current economic climate, the majority of delays in residential transactions are caused not by the late issue of searches or sellers’ conveyancers supplying outstanding information but by the difficulty and time taken in obtaining mortgage funding.
Assessing the effect of HIPS on the property market is difficult their introduction coincided with a huge downturn in residential sales following the banking crisis. However, the hope is that their abolition will provide a stimulus, increasing the number of residential properties put on sale. Early indications suggest that agents have seen a significant rise in the number of new instructions. How many are successfully completed remains to be seen.
Richard Martin is a partner at Davies Arnold Cooper
