As the criticism of the architects of the ill-fated HIPs legislation, Ruth Kelly and Yvette Cooper, grows, it is worth reflecting on how a seemingly sensible piece of legislation has become a laughing stock that threatens the careers of two government ministers.
The idea was initially an admirable attempt to speed up the process and provide greater transparency for buyers, albeit at the expense of the sellers, by specifying what would be needed in order to market a property. The main component was to be a Home Condition Report (“HCR”), a kind of mini survey. That was ditched last summer on concerns there wouldn't be enough inspectors to do the work. Instead HIPs will consist only of title deeds, local authority searches and an Energy Performance Certificate (“EPC”).
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However, even in this watered down state the policy ran into the buffers because there still were not enough people who were qualified to do energy assessments. Government figures show that while 3,000 would have been needed to meet the June 1 deadline, 1,902 people passed the exam, but only 520 were actually accredited to produce them. London would have been covered by substantially less than 200. The Royal Institute of Chartered Surveyors (RICS) believe that 5,000 are needed if there are not to be bottlenecks.
The RICS is so concerned that it instigated a judicial review on the grounds the government failed to meet its obligations over EPCs. The courts subsequently issued an order preventing EPCs from being included in the Home Information Packs until they had fully considered the RICS application.
In response to this decision, the government has postponed HIPs until August 1 when it will phase them in commencing with homes with four or more bedrooms. However, as there is no legal definition of “bedroom” it remains to be seen how they will prevent people calling what Estate Agents particulars usually described as a “bedroom” by another name (such as “study”, “reception room” or “storage”) in order to avoid the requirement for a HIP before they market it. From what ministers have said this would probably be perfectly legal, and since the fine for avoidance is less than the cost of a HIP there would seem to be remarkably little incentive for vendors to play safe and get a HIP.
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The RICS has agreed to the stay of the judicial review on condition that the government provide a 12 week consultation period on EPCs, and that it publish a Regulatory Impact Assessment including a full cost-benefit analysis.
The issue of EPCs was always the fatal flaw in this piece of legislation. Serious concerns over the numbers of qualified inspectors needed, and the ability to have enough inspectors up and running when the legislation would go ‘live’, were there from the start – this is the rock that HCRs foundered upon, and it does have to be wondered at how ministers could not have learned from this and allowed EPCs to fail on exactly the same grounds.
Added to this was public uncertainty over which properties would need a HIP, a general uneasiness over the need for the legislation and a feeling this was simply another layer of bureaucracy and lack of clarity over the mechanics of obtaining or requesting the information that would be central to the HIP.
There is no doubt that it has been the RICS, with the support of the Conservative party that has succeeded in, if not scrapping the policy, of at least stalling its introduction.
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However, the RICS has not dodged criticism - as one of the bodies responsible for carrying out the training of Inspectors some commentators have accused it of acting in a way that is contrary to the interests of its members. We now find ourselves in a state of limbo where the legislation is paralysed on one side by a legal threat by the RICS and on the other by small businesses seeking recompense for the investment they have already made. It remains to be seen whether HIPs will ever be implemented.
This all could have been avoided had the government taken on board industry feedback throughout the process rather than dismissing what amounted to almost all professionals involved in the world of residential property as groups with a “vested interest” in maintaining the status quo, and insisting that they knew better.
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