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Home Information Packs (HIPs) - Housing Act 2004

In spite of much gnashing of teeth from many people, Home Information Packs (HIPs) will become law in England and Wales on 1st June 2007.

Why the Change?

Under the existing house purchase process much of the important information, such as legal facts and information about the structural quality of the building are only made clear weeks after an offer has been accepted on a property.

If this information shows up problems it often results in a buyer pulling out at the last moment; usually after paying hundreds of pounds in legal and survey fees.

The result is disappointment for both seller and buyer.

Buyers can also lose out if, at the eleventh hour, the seller switches to another buyer for a higher price or simply decides to not sell after all, basically due to the long delay in the whole process.

The government says that approximately 30% of house sales fall through each year.

In theory, to put an end to all this, the Government has now passed HIPs into law and from June 1, 2007 all sellers in England and Wales will have to provide one to potential buyers. 

The big change is that it will be the seller who has to pay for the cost of the pack, instead of the current system where the buyer has to pay his conveyancer and mortgage lender / surveyor for the collection of all the relevant information.

The government reckons the pack will cost £500 to £600 to put together and slightly more in London.

This breaks this down into around £280 for a “home condition report”, £200 for local authority searches and £135 in legal fees. However, the Law Society thinks the true figure will be nearer to £1,000.

The whole process, it appears, will create a whole new market in home inspectors and HIP pack providers.

For suppliers of HIPs see the LandlordZONE Directory “HIP Providers”

Welcome to the February 2006 Issue

There’s certainly going to be plenty to keep landlords busy in the coming months. Whilst HIPs will affect everyone selling property from June 2007, landlords are going to be affected by: New HMO Regulations, mandatory and optional Licensing, the new Housing Health & Safety Rating System (HHSRS), the Tenancy Deposit Scheme (TDS) and Empty Dwelling Management Orders (EDMO). Within a couple of years landlords will be required to have Energy Efficiency Certificates for their properties.

In addition, Land Registry changes will mean every lease over 7 years will require a lease plan to be registered.

All of this will create a lot of work but some marketing opportunities for many.

Whilst increasing regulation is the “way of the world” in developed nations, and this can lead to efficiencies when coupled with new technology, there is also the danger that all this can work against the consumer long-term, as we’ve seen before—Editor.

• Useful Links:

• Gov Direct: Home Information Packs

• ODPM— Draft Regulations

• Scottish Parliament—Briefing paper HIPS

What Information will be in the Packs?

The following information will be required:

· A “Sale Statement” describing the property

· Copies of title deeds

· Replies to standard enquiries, such as whether you are aware of any problems with the property. (At the moment the buyer’s solicitor asks for these).

· Results of local authority and water searches, including information on any planning and building regulations as well as consents and approvals

· Copies of warranties and guarantees if the property is newly built and for guarantees for work that has been carried out.

· A draft contract

A home condition report based on a structural survey of the property which will include information on how energy efficient the property is

For leasehold properties it will also need to include:

· A copy of the lease and the most recent service charge accounts

· Details of the buildings insurance policy

· Any regulations made by the landlord or management company which are additional to those on the lease

· Contact information for the landlord or management company

Information about any planned work.

Do HIPs represent a change for the better?

Well it depends on who you ask.

The Consumer’s Association (CA) gives it a cautious “thumbs up”. Their survey found that only 7% would be put off selling their home if it meant they had to get a home information pack first.

A Yorkshire Building Society survey also found a large proportion of the public in favour.

However, the CA worry that the Government may find it hard to train the estimated 5,000 to 10,000 new home inspectors needed to carry out the home condition reports. (Each of these inspectors will need to be qualified under a certifications scheme approved by the Secretary of State.) They also say the Government should create a watchdog to rule on disputes.

Supporters of the packs point to the fact that similar schemes already exist in other countries and work well. They also point to trials in the South West of England which demonstrated the workability of the scheme.

However, not everyone is so keen. Some lawyers, estate agents and members of the mortgage lending industry are skeptical.

For example, the National Association of Estate Agents (NAEA) worries about the extra costs and red tape involved.

They point out that the packs will mean an end to day one marketing, where estate agents can try to sell the property on the very day the owner puts it up for sale, since a pack will have to be put together before prospective buyers can view.

Instead, it argues, it could take weeks to compile a pack, holding things up for the seller and it may take time for each seller to find the cash to compile a pack.

Another criticism is that the packs could go out of date before a sale is actually made. Also, the buyer may not trust a condition report compiled on behalf of the seller and paid for by the seller and will end up spending their own money on having a separate report done. 

HIP supporters point out that lenders valuations often rely in part on automated valuations so the need for an additional survey is totally unnecessary unless buying an older or unusual property, in which case a full structural survey will be needed, as is the case now.

The Council of Mortgage Lenders' point out that the scheme could lead to lots of sellers trying to offload properties before June next year .

This will then be followed by a shortage of homes for sale immediately afterwards which will in turn be compounded by would-be buyers waiting until after June 1, to benefit from the extra information contained in the packs.

There is concern that HIPs could lead to hundreds of thousands fewer house sales a year because the cost of assembling packs could deter some would be sellers.

Some mortgage lenders think the information contained in home condition reports could mean more gazumping and that Insurers may refuse to give professional indemnity cover to inspectors until the scheme is up and running, which could lead sellers to face a period where it would be difficult to sue negligent inspectors.

.           

Mackenzie Ward Estate Agents

MacKenzie Ward is privately owned and was founded in 1997                      

The current owners took over the running of the firm in the summer of 2003.

The company continues to pride themselves in providing a better service and firmly believe that with the assistance of their new premises next to the Hind Hotel in the centre of Wellingborough, Offices in Park Street Wellingborough Spencer Parade Northampton and Wellingborough road Finedon, will help the business grow from strength to strength.

Mackenzie Ward  sell and let homes to prospective clients throughout Northamptonshire as a county.

Beautifully presented brochures and digital imaging to enhance special features are standard. Coupled with a newly redesigned website, we pride ourselves on our property marketing .

Book Review:   Give Me Your Money: A Straighforward Guide to Debt Recovery  by Anthony Reeves

Anthony Reeves works with Etheringtons Solicitors specialising in Debt Collection. He has worked with the LandlordZONE™ TenantVERIFY™ debt collection system of some time now.

His book is, just as it says on the jacket, a really Straightforward guide to Debt Recovery. With this thoroughly up-dated guide and his previous book, See you in Court, I have personally (Editor) been ably guided through the Small Claims system several times—yes, you can do it without a solicitor  and achieve successful results every time. 

The book is valuable to all those Landlords and Business Owners who wish to understand more about this complex area: credit checking, terms of business, chasing commercial debtors, chasing individual debtors, issuing a county court claim, taking a defended debt claim to trial & collecting money after a court judgment.

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