There’s been so much information disseminated about Home Information Packs (HIPs) over the last few months that it may be useful to go back over the scheme in the form of a client-friendly FAQ to remind us all of the essential points to consider.
Why has the government introduced HIPs?
Buying and selling a property doesn’t always go according to plan. Nine out of 10 people say they are dissatisfied with the current process. Currently, one-in-four transactions collapse before contracts are exchanged and one million pounds a day is wasted due to transactions failing at a late stage. To combat this, the government initiated plans for the HIP.
What is a HIP?
The HIP is a set of documents providing important information about a property such as searches, copies of the deeds and information regarding its energy efficiency.
From 1 June 2007, all home owners in England and Wales will need to prepare a HIP before putting their home up for sale.
What is an Energy Performance Certificate (EPC)?
EPCs will give home buyers and sellers A to G ratings for their home’s energy efficiency to help cut carbon emissions and fuel bills. EPCs will become mandatory as part of HIPs from June.
Only those who are qualified and certificated will be able to prepare EPCs.
What will HIPs cost?
Estimates of the cost vary greatly at this stage, depending on who you ask and what is to be included in the pack. A HIP without a Home Condition Report (HCR) should be between £300 and £450. A HIP with a HCR could rise to £700-£1000.
Do you have to wait for all HIP components to be assembled before marketing the property?
A home must be marketed with a HIP at the time the property is put up for sale. Providing reasonable attempts have been taken, in certain circumstances the property can be marketed with an incomplete HIP – but these will be exceptions only.
How long will the complete HIP be valid for?
The HIP is valid while the home is continuously marketed for sale, and the regulations allow for a period where the property might be taken off the market while, for example, it is under offer, or to allow a seller to change agents.
Are HIPs needed at auctions?
Yes. People buying at auction need the same information as everyone else.
Are there shared ownership implications?
A shared ownership property marketed for sale would require a HIP.
Who is liable for the accuracy of the contents?
The provider is liable for any misinformation within the HIP. For example, search provider for searches, home inspectors for HCRs, seller for property information form, etc.
Is the HIP transferable?
Yes, but you need to be careful to check with the provider that you can take it with you and what the cost will be.
Who can see the sellers HIP?
Access to a HIP is available to genuine prospective buyers, except where a seller has stipulated that they would not be prepared to sell to that person.
Can you charge for copies?
Yes, a reasonable charge can be made for making, and if requested, sending a paper copy. This does not apply for providing copies in electronic form.
What are the penalties for marketing a property without a HIP, or for those who make insufficient effort to obtain the data within the 14-day period?
Trading Standards officers are responsible for enforcement and will have a number of options. These range between providing help and guidance, to the serving of a £200 penalty charge notice which can be repeated for ongoing non-compliance.
If the HCR is being commissioned by the seller, how can you ensure it is impartial?
Only inspectors qualifying under a Certification Scheme approved by the Secretary of State will be able to prepare HCRs. The schemes will be responsible for monitoring and auditing inspectors’ work. This will be robust to ensure standards are maintained.
What will the HCR cover?
The HCR will be an objective report on the condition of the property that can be relied upon by buyer, seller and lender. The report will be in a standard format prepared in accordance with standards set by the Department for Communities and Local Government (DCLG). It will cover matters of importance to a buyer, including the condition of the property, its age, how energy efficient the home is and any defects or other matters requiring attention.
Will lenders accept the HCR, or will further cost be incurred for additional documentation to be commissioned?
Discussions with the regulator have not revealed problems with using the HCR as part of the mortgage valuation assessment. The valuation methodology chosen by the lender will depend on the circumstances of each case so at this stage every individual lender will have to make their own decision on whether they require a survey.
What’s it all meant to achieve?
The government believes the introduction of HIPs will speed up conveyancing and reduce the wasted costs of paying for surveys, searches and other fees. It is also following through other e-initiatives that will speed up the conveyancing process. While it may take a while for these initiatives to come to fruition, there is no doubt that improvements can and are being made to buying and selling properties to take some of the stress out of the process.
