Date: 30 October 2006

HOME INFORMATION PACKS (“HIPS”) – Now a good thing

To streamline the residential conveyancing process the Government has proposed that as from the 1st June 2007, when placing residential property for sale on the open market for the first time, (whether through an estate agent or otherwise) at the point of marketing the seller will need to be able to provide all potential purchasers with a Home Information Pack.

A HIP is now expected to comprise:  

• Details of  the property address, seller’s name and details of  whether the property will sold with vacant possession; 

• Title information, which these days would usually be copies of  the property’s registration at the Land Registry and copies of any relevant title deeds referred to;  

• Results of the usual searches including searches with the local authority, environmental search and water/drainage search and together with any relevant documentation, e.g planning approvals referred to; 

• Copies of any guarantees or warranties for works carried out to the property and building regulations consents where requisite; 

• (in the case of leaseholds) a copy of the lease and any ancillary documentation, particulars of the landlord or managing agent and service charge information; 

• An Energy Performance Certificate (“EPC”) rating the energy efficiency of the property.

The HIP pack is intended to put the buyer in a position to exchange contracts on his purchase more quickly, than at present.  

It has long been our practice, for instance when acting for developer clients on plot sales, to produce what is in effect a HIP pack (less EPC) for buyers to the same purpose, ie to ensure minimum delay between the sale being agreed  and exchange of contracts. Experience shows that a well prepared pack does assist the smooth passage of the transaction, by giving the seller and his team the opportunity to sort out any defects or anomalies “up front”.

So nothing too different here then.

One of the most controversial aspects of the pack was to be the inclusion of a “Home Condition Report” intended to be an objective assessment of the property’s condition, and to be relied upon by buyers, sellers and mortgage lenders. It would be a 'mid-range' survey, similar to the current Homebuyer Survey and Valuation - not as detailed as a building survey (sometimes known as a 'full structural survey') but a lot more extensive than a mortgage lender's valuation inspection. The seller would instruct a qualified “Home Inspector” to prepare the report for inclusion within the Pack.

Mercifully, on the 18 July 2006 the Government announced that the inclusion of a Home Condition Report within the pack would no longer be compulsory. Inclusion is however voluntary, and indeed the position may be revised in the future on a “market led basis”.

However  there still remains the novel prospect of the EPC, which will have to be procured for inclusion It is understood this will be obtained from a Home Inspector, and will provide an energy efficiency rating for the property from A (at best) to G (at worst) using a Government-approved Standard Assessment Procedure (SAP). The Government has issued a sample form for such a report but Inspectors may evolve their own versions provided they include the key information.

What impact this will have in the selling market remains to be seen, but it is not hard to imagine an adventurous buyer seeking a price reduction to reflect poor ratings, even perhaps where the rating is inevitably poor by virtue of the nature of the property. Compare the rating of an 18th century mansion with that of a house built to contemporary standards. I foresee many interesting negotiations!

The introduction of HIPs across the board remains a major change to residential conveyancing procedure, despite some “best practices” already undertaken. The Government’s change of stance on the Home Condition Report is to be welcomed as keeping the legal profession at the centre of HIP preparation.

The downside for the seller of course is that the cost of the preparation of the HIP pack initially falls on his shoulders, Time will tell how the legal and estate agency professions evolve their fee structures to deal with such costs. There are still many questions to be settled.

However, I feel confident that, once implemented, HIPs will assist to speed up conveyancing. There should be fewer issues between seller and buyer pre- exchange, in incurring the expense of a HIPs pack, the seller is less likely to market the property simply to test the water, and likewise, provided with a HIPs pack, a buyer’s true intentions should become apparent more quickly.

Clive Vernon