Estate Agents Sussex

Home Information Packs

Under the provisions of the Housing Act 2004, from June 1, 2007, 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.

Reasons for introduction

As the idea of the Home Information Pack developed over time, so have the reasons for its introduction. A proposal to introduce them was first made in the 1997 Labour Party manifesto, in the expectation that they would reduce the practice of gazumping. 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.

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.

Another major benefit is reduced cost to the provisional buyer: instead of each prospective purchaser commissioning individual surveyors reports, the information is provided to them. This can save a considerable amount if the buyer is interested in several properties.

Contents

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

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

If the property is leasehold, then the pack must also include the following:

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.

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

Home Condition Report
Two sellers questionnaire forms called Home Use Form and Home Contents Form
legal summary
Other seraches 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.

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.

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.

Energy Performance Certificate

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.

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.

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 (Directive 2002/91/EC).

Cost

The cost of a Home Information Pack, including the Home Condition Report, is estimated to be around £600 - £1500 by the Government. This includes the cost of the postponed Home Condition Report, which is expected by the DCLG to cost between £250 and £1000.

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. 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.

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.

The main beneficiaries may be first-time buyers, since they will benefit from the information without having to pay for a HIP on an existing property.

Enforcement

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

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.

Industry and public reaction

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

The property industry has been largely against these changes but it was felt by the government, that any change in the house buying process can only be a change for the better.

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.

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, and that the cost is too high.

Britain's largest independent estate agency, Spicerhaart, has called for a boycott of the home information packs scheme.

In contrast, the introduction of HIPs is supported by Which?, who believe that they will reduce the number of failed transactions resulting from problems that can be identified at an early stage.The organisation criticised the decision to postpone the introduction of Home Condition Reports.

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'.

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