If I ever mention hips to my long-suffering girlfriend, the reaction, perhaps unsurprisingly, is not particularly positive. In days gone by, you could however mention this word in the confines of your office without fear of ridicule and derision. I am afraid to report that even those days are gone now.
When Home Information Packs (HIPs) were first brought to our attention back in the heady days of Labour’s 1997 manifesto, their purpose was very much to counter gazumping. This was a claim that was slightly tenuous to say the least, because it was based entirely on the expectation of reducing the time between an offer being accepted and exchange, leaving less time for gazumping. While there is certainly some degree of value in the assumption that this timeframe would be reduced, it is just as likely that with the additional information in the HIP any potential gazumpers would be encouraged. After all, if gazumpers are prepared to rely on the information in HIPs they might exchange with utmost haste, while the original purchaser is waiting for his own adviser to perform the normal checks. The better the HIP works, the more chance we have of gazumping.
I think that regardless of whether HIPs will promote or prevent gazumping, the powers that be realised it could not be used as the justification for them when they were informed that gazumping accounted for just 2 per cent of all sales. The government now argues HIPs will save purchasers £350 million per year because of the abortive expenditure now incurred when a purchase is abandoned after an unsatisfactory survey or the receipt of unacceptable legal information. Now, while I am prepared to admit this is likely to be a realistic figure, the converse argument does not seem to have been considered. How much new abortive expenditure will be wasted as a result of the introduction of HIPs as well as how much will be saved?
Falling over
If we take a closer look at some of the prospective figures we see the argument fall over once more. The latest figures from the government show that 2.3 million properties were put on the housing market in 2004 but only 1.4 million sales happened. It does not take a genius to conclude that properties marketed exceeded those sold by 900,000 and the vast majority of these unsold properties would have needed a HIP under the new regulations. If we make an assumption that only 90 per cent would have needed a HIP, then vendors of 810,000 properties would have to spend an average, using the Office of the Deputy Prime Minister’s (ODPM) cost estimate, of £750 before marketing their property. All of this would be a complete waste of money when no sale subsequently takes place.
Again, it does not take a rocket scientist to work out the total amount wasted on this basis is about £600 million per annum, a not so insubstantial 70 per cent more than the £350 million it is claimed they will save by introducing HIPs.
Unrealistic date
The date for the compulsory introduction of HIPs has already been deferred to the 1 June 2007, but we do not yet have a published detailed timetable for their implementation, maybe because the government is beginning to realise this date is unrealistic – it appears unlikely that there will be sufficient qualified home inspectors available by that date.
One final thought worth noting is that a loophole in the current HIP regulations means a property can be marketed with an incomplete HIP from 14 days after the HIP provider has started actively trying to obtain all required information. Information not easily obtained in that timeframe will often include important documents such as legal details on leasehold properties and maybe a home condition report if there are not enough qualified home inspectors. Thus a property could be marketed quite legally with an almost useless, incomplete HIP. Something about a coach and horses methinks.
Drew Wotherspoon is head of communications at John Charcol
