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Under the provisions of the Housing Act 2004 a Home Information Pack (HIP), sometimes called a Seller's Pack, will have to be provided before a property in England and Wales can be put on the open market for sale with vacant possession. The pack will be a set of documents about the property: an Energy Performance Certificate, local authority searches, title documents, guarantees, etc. The introduction of HIPs has been subject to delays and reduced requirements, but they became mandatory for homes with four or more bedrooms on August 1, 2007 and will be extended to three bedroom properties from September 10, 2007. [1][2]

The Government estimates that £350 million is currently lost through house purchases that do not go ahead because of problems found by buyers during the house-buying process. The government expects that, by providing the purchaser with more initial information, fewer people will change their mind later, and that the time it takes for the buyer's conveyancer to carry out the legal work should also be reduced.[citation needed]

History

As the idea of the Home Information Pack developed over time, so have the reasons for its introduction. A proposal to address the problem of gazumping was first made in the 1997 Labour Party manifesto.[3] Research after the election revealed that around 28% of sales fell before exchange of contracts, with gazumping occurring in fewer than 2% of sales. The emphasis subsequently moved to the benefits of increased speed, transparency and consumer friendliness.[4] The idea is based on similar practice used in Australia and Denmark.[citation needed]

Home Information Packs were announced in the Queen's Speech in November 2003.[5]

In March 2006 the government gave the go ahead for multiple certification schemes. By this stage a number of organisations had expressed an interest in running certification schemes and over 3,000 people were already going through training for the home inspector qualification.[citation needed]

In June 2006 draft regulations were made setting out the detailed contents of Home Information Packs, rules governing the availability of packs, exceptions from the pack duties and arrangements for enforcement.[citation needed]

In September 2006 the government approved the first Certification Schemes to oversee the work of Home Inspectors. The schemes are set up and run by industry. Government sets the standards that the schemes operate. In September the Home Condition Report Register contract was agreed. A fully operational register was scheduled to follow as soon as possible afterwards.[citation needed]

In June 2007 the government announced they would fund or discount 5000 HIPs by £100 prior to the official launch date of August 1 2007.[citation needed]

Originally the HIP was going to be required from June 1 2007. However, just ten days before that date, Communities Secretary Ruth Kelly announced that they would be phased in from August 2007, and initially only for larger properties. Between 1st August and the 10th of September only homes marketed with four or more bedrooms were legally required to have a HIP. This will be extended to cover homes with three or more bedroom from September 10th.[6]

Contents

The pack must contain the following, which must be no more than three months old when the property is first marketed:[7]

  • Index
  • Energy Performance Certificate
  • Sale Statement
  • Title documents for the property
  • Local Authority and drainage searches

If the property is leasehold or commonhold, then the pack must also include the following:[8]

  • Copy of the lease
  • Building insurance policy
  • Contact details for the landlord or management and any legal details
  • Regulations that apply
  • Recent service charge receipts and accounts

For a transitional period sellers can market their homes without the searches or leasehold documents as long as the pack contains evidence that they have been commissioned and will be included as soon as practicable but certainly within 28 days.[8]

The pack may also contain some or all of these authorised documents:[9]

  • Home Condition Report
  • Two sellers questionnaire forms called Home Use Form and Home Contents Form
  • Legal summary
  • Other searches such as a mining search

Home Condition Report

It was originally planned that the Home Information Pack would also include a Home Condition Report (HCR), detailing the general condition of the property in plain English. The intention was that these reports would make buyers aware of problems initially, thus avoiding shocks later in the process that may result in either delay while the price is renegotiated, or cancellation of the sale. Their mandatory inclusion has now been postponed as a result of industry lobbying, with the government keen to avoid risks to consumers from delays and potential late changes to the implementation timetable.[citation needed]

When eventually introduced, Home Condition Reports are to be carried out by qualified Home Inspectors, and in particular it was feared by the industry that neither the certification schemes for the inspectors nor the database to hold their reports would be ready in time.[10]

Mandatory introduction of home condition reports remains on the table, but the Government wants more time to assess consumer demand and the results of further testing. They will also be looking at costs, the savings from avoiding waste and duplication, consumer attitudes to the Packs, failed transactions and transaction times, and people's willingness to sell with HIPs in place.[citation needed]

Home energy performance rating charts

Energy Performance Certificate

See also: Energy efficiency in British housing

Similar to EU appliance efficiency ratings, the energy performance ratings on the Energy performance certificate will provide prospective purchasers with an assessment of the property's energy consumption, together with a list of practical measures that can be taken to cut their fuel bills and carbon emissions.[11]

The Energy Saving Trust estimates that by following the proposals in the energy performance certificate, the average home owner will save £300 a year on fuel bills. Government also hopes that the information could be used to support the growth of green mortgages and other incentives.[12]

This part of the Home Information Pack is required to meet the in order to meet the requirements of the European Energy Performance of Buildings Directive.[13]

Cost

Initially the cost of a Home Information Pack, including the Home Condition Report, was estimated to be around £600 by the Government.[14] This was to include the cost the of the postponed Home Condition Report, which is expected by the Department for Communities and Local Government to cost between £250 and £1000.[citation needed]. Industry now expects the Home Information Pack (excluding the HCR) to cost between £300 - £600 for the vast majority of properties in England and Wales. Naturally, for larger or more complex properties, the costs could be significantly higher.[15]

The Government point out, however, that most of the items in the pack already have to be provided during the sale process, so this is not all an additional cost.[16] However the Council of Mortgage Lenders reported that their members were planning to insist on a separate valuation in addition to the Home Condition Report, while those purchasers requiring a structural survey would also have to pay extra.[citation needed]

For properties that have been on the market some time, it is likely that there will be additional costs incurred to bring the information in the HIP up to date.[citation needed]

Enforcement

Failure to provide a Home Information Pack, or supplying an incomplete pack carries a fine of £200.[17]

Enforcement is to be carried out by local authority Trading Standards Departments, however they claim that this is inappropriate as they normally regulate businesses, and that it would cost them too much to enforce through the civil courts.[18]

On July 31 2007 the Office of Fair Trading advised estate agents on their obligations. From August 1 2007 estate agents in England and Wales that fail to comply with the new Home Information Packs regulations could result in a ban from estate agency work.[citation needed]

Industry and public reaction

On 15 May 2007 the Royal Institution of Chartered Surveyors started Judicial Review proceedings against the Department for Communities and Local Government for what they regards as the department's failure to carry out a full consultation on HIPs.[19]

There are fears that the up-front cost involved may put off some people from putting their house on the market,[20] which may in turn depress the housing market.

The property industry has been largely against these changes.[21] but the government says the new system will leave all homeowners better off.[22]

The Council of Mortgage Lenders report that their members are not yet persuaded that the perceived consumer benefits will be achieved. They believe that the forthcoming introduction of e-conveyancing will have a much more positive impact.[citation needed]

The National Association of Estate Agents hold the view that the legislation is unnecessary, does not cover the important reasons why home sales and purchase transactions fall through,[23] and that the cost is too high.[24]

Britain's largest independent estate agency, Spicerhaart, initially called for a boycott of the home information packs scheme, [25] although has since revised this position to one of full support. [26]

In contrast, the introduction of HIPs was originally supported by Which? magazine, who believe that they could reduce the number of failed transactions resulting from problems that can be identified at an early stage.[27] The organisation has since withdrawn its support following the Government's decision to postpone the introduction of Home Condition Reports.[28]

Should the Conservative Party come to power at the next election, they currently plan to scrap the legislation, calling it 'expensive and deficient red tape'.[29] Indeed, Conservative opposition to HIPs was instrumental in a defeat in the House of Lords, where peers voted by 186 to 160 in favour of abandoning the packs. This brought them in conflict with the Association of Home Information Pack Providers' Mike Ockenden.[30]

See also

References

  1. ^ http://news.bbc.co.uk/1/hi/business/6951171.stm
  2. ^ HIPs to be extended to three bedroom properties (Times Online)
  3. ^ "1997 Labour manifesto". The Labour Party. 1997. Retrieved 2007-08-02. Those who break their bargains should be liable to pay the costs inflicted on others, in particular legal and survey costs. We are consulting on the best way of tackling the problems of gazumping in the interests of responsible home buyers and sellers. {{cite web}}: Check date values in: |date= (help)
  4. ^ "Background note on the development of home information packs," (PDF). Council of Mortgage Lenders. Retrieved 2007-08-02.
  5. ^ "Sixth series, volume 415". Hansard. 2003-11-26. Retrieved 2007-08-02. Legislation will be introduced on housing that will help create a fairer housing market and protect the most vulnerable. {{cite web}}: Check date values in: |date= (help)
  6. ^ "Home info packs delayed to August". BBC News website. 2007-05-22. Retrieved 2007-08-02. Communities Secretary Ruth Kelly told MPs the packs would be phased in {{cite news}}: Check date values in: |date= (help)
  7. ^ "Compulsory items". homeinformationpacks.gov.uk. Retrieved 2008-08-02.
  8. ^ a b "Leasehold and commonhold properties". homeinformationpacks.gov.uk. Retrieved 2008-08-02.
  9. ^ "Optional items". homeinformationpacks.gov.uk. Retrieved 2008-08-02.
  10. ^ "Jackie Bennett - Council of Mortgage Lenders". epolitix.com. 2006-06-07. Retrieved 2007-08-02. We think that the timetable looks very challenging - Jackie Bennett {{cite news}}: Check date values in: |date= (help)
  11. ^ "Energy Performance Certificate". homeinformationpacks.gov.uk. Retrieved 2008-08-02.
  12. ^ "Cooper calls for incentives to improve home energy ratings". Government News Network. 2006-09-21. Retrieved 2007-08-02. Energy Performance Certificates should be linked to incentives such as green mortgages - Yvette Cooper {{cite news}}: Check date values in: |date= (help)
  13. ^ "Directive 2002/91/EC, on the energy performance of buildings" (PDF). Official Journal of the European Communities. 2002-12-16. Retrieved 2007-08-02. {{cite web}}: Check date values in: |date= (help)
  14. ^ "Minister defends home info packs". BBC News website. 2006-04-22. Retrieved 2007-08-02. The government says the packs will cost about £600 plus VAT and will make home buying quicker and cheaper. {{cite news}}: Check date values in: |date= (help)
  15. ^ "Home Information Packs - Timing and Costs". The Partnership Ltd. Retrieved 2007-08-02. Single fees for a home condition report are not practical and larger properties will naturally be higher. Whilst the government has estimated a figure of £300 plus VAT, for larger properties the figure is expected to be between £750-£1000.
  16. ^ "Minister defends home information packs". BBC News website. 2006-04-22. Retrieved 2007-08-02. If you think about it, at the moment if a sale falls through another buyer comes along and pays for exactly the same searches, exactly the same legal requirements, pays for exactly the same surveys. You are paying for all of the same information again and again. That is a huge amount of waste. - Yvette Cooper {{cite news}}: Check date values in: |date= (help)
  17. ^ "The Home Information Pack Regulations 2007: Procedural Guidance" (PDF). www.homeinformationpack.gov.uk. 2007-05-11. Retrieved 2007-08-03. Regulation 35 set the penalty charge initially at £200.
  18. ^ "Home Information Packs Unenforceable, Warns Local Authorities Regulator". lacors.gov.uk. 2006-07-18. Retrieved 2007-08-02. Trading Standards traditionally regulate businesses, not individual private house sellers. ...this is inappropriate as it would cost too much money to make it worthwhile pursuing such cases. - Geoffrey Theobald, LACORS Chairman {{cite web}}: Check date values in: |date= (help)
  19. ^ "HIP's - Now the Government is taken to court". Reuters. 2007-05-15. Retrieved 2007-08-02. The government is being taken to court over an alleged failure to consult properly on its controversial home information pack (HIPs) legislation. {{cite news}}: Check date values in: |date= (help)
  20. ^ "Concern grows over 'sellers' packs'". BBC News website. 2000-09-22. Retrieved 2007-08-02. at a likely cost of between £500 and £700, 'sellers' packs' could make people in areas with low property prices more reluctant to sell, a study has found. {{cite news}}: Check date values in: |date= (help)
  21. ^ "HIP or hype?". Times Online Money blog. 2005-11-18. Retrieved 2007-08-02. This week's announcement from the Government that HIPs will be introduced on June 1, 2007, was met with "disappointment" by the mortgage industry
  22. ^ "HIP or hype?". Times Online Money blog. 2005-11-18. Retrieved 2007-08-02. £1 million a day is lost out of buyers' pockets in valuation, legal advice and searches on transactions that ultimately fall through
  23. ^ "NAEA response to Government implementation on HIPs". 2006-07-18. Retrieved 2007-08-02. The announcement today is something of a U-turn by the Government on legislation it has been working on for over five years. It calls into question the effectiveness of a HIP when the documentation included is now largely available online. The legislation would seem unnecessary and does not cover the important reasons why home sales and purchase transactions fall through {{cite web}}: Check date values in: |date= (help)
  24. ^ "NAEA comment on reschedule of opposition debate on HIPs". 2006-07-17. Retrieved 2007-08-02. the 14 day delay is unnecessary, the cost is too high and that in its current form, HIPs will not prevent property sale transactions falling through. {{cite web}}: Check date values in: |date= (help)
  25. ^ "Boycott home packs, say agents". thisismoney.co.uk. 2006-07-21. Retrieved 2007-08-02. without the mandatory inclusion of the home condition report, ... home information packs ... will be of no value to consumers. {{cite web}}: Check date values in: |date= (help)
  26. ^ "HIPs move a step closer". Spicer Haart. Retrieved 2007-07-17. By reducing the time it takes to sell a property, transactions are far less likely to fall through, reducing the stress considerably for everybody concerned - Stephen Nation, Managing Director for Haart
  27. ^ "HIP or hype?". Times Online Money blog. 2005-11-18. Retrieved 2007-08-02. Despite industry whingeing, we need to embrace HIPs as a way of protecting home buyers. - Louise Hanson, head of campaigns at Which?
  28. ^ "Which? slams government over HIPs backtrack". Which?. 2006-07-18. Retrieved 2007-08-02. The home condition report was an essential part of the HIP. It seems extraordinary that the first major decision by your new department is to reduce the consumer benefits of a flagship policy... - Nick Stace, in a letter to Ruth Kelly {{cite web}}: Check date values in: |date= (help)
  29. ^ "Labour climb-down on Home Information Packs". The Conservative Party. 2006-07-18. Retrieved 2007-03-04. [Michael Gove] said the Blair administration was slowly discovering that the HIPs project amounted to 'expensive and deficient red tape'
  30. ^ "Industry still at odds over Hips". The Mortgage Provider Online News. Retrieved 2007-07-27. Mike Ockenden, AHIPP director general, said that the Conservatives were simply attempting to make "a political football" out of the packs and asserted that government resolve had not been shaken.
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