Date:  1 June 2006

ARE HIPs hip?

Home information packs (HIPs) will revolutionise residential property sales and purchases just over twelve months from now.  From 1 June 2007 homeowners or their selling agents will have to produce a HIP before putting a property on the market.

The pack will contain a comprehensive log book of the property including information which traditionally the purchaser has had to obtain or glean after an agreement for sale has been reached, for example, particulars about the legal title to the property, applicable covenants and if leasehold, a copy of the lease. Also included will be the results of a local authority search, copies of planning and other permissions/consents, guarantees for work carried out on the property and the replies to the usual standard questions currently asked by buyers.

The whole process is “front loaded” by the seller in favour of the buyer to save the buyer’s time and speed up the legal conveyancing process.  The theory is also that only serious sellers will go to the trouble and expense of having a HIP prepared, making it less likely that they will pull out of the transaction at a later date.

An important document within the pack which I have not yet mentioned will be a home-condition report prepared following a survey of the property by a home inspector, including an energy efficiency assessment.

Some sellers/estate agents are already making use of packs voluntarily and a trial run is being undertaken starting in Cambridge next month.

Despite the very good motives behind the scheme there is much opposition to it from estate agents and solicitors (not all) and other property professionals.  Points that they have raised include:

• The cost of putting a pack together is estimated to be between £600.00 - £1,000.00 and, although, many may not realise it at present, this will be borne ultimately by the sellers (many agents are expected to absorb the initial cost and then add it to their fee if the transaction proceeds successfully);
• There may not be enough trained home inspectors to write the condition reports. Less than half the anticipated 7,000 inspectors are qualified or are under training at the moment;
• More importantly, the Council of Mortgage Lenders has announced that most lenders will not accept the seller’s home-condition report alone and will still insist upon obtaining their own valuation;
• The packs will only have a limited shelf life and there is uncertainty about what will happen when a property does not sell for months;
• Estate agents will have to provide packs to potential buyers.  The bona fides of the buyer will need to be checked but inevitably packs containing sensitive information about properties could find their way into the hands of someone unscrupulous or even potential burglars.

Despite these perceived disadvantages the bandwagon is rolling and it is almost inconceivable that the government will do a U-turn or even revise the scheme.  Property professionals across the board are doing their best to prepare for it.  Let the seller beware!