We are now at the point of being able to tick off the days before the launch of Home Information Packs (HIPs) on 1 June and, believe it or not, there is still uncertainty as to whether they will go ahead or not.
It seems unbelievable that at this late hour the government is still debating the pros and cons of a piece of legislation which is due to come into effect at the end of the month. The entire housing industry is expected to invest millions preparing for HIPs and will be rapped on the knuckles if not ready on time, while politicians can pull the plug at any time they wish. It seems nonsensical; why can’t we have a legislative system in which there is at least a six month period of absolute certainty before a law comes into effect?
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Even though the debates are rumbling on in Westminster, it looks as if HIPs will go live on 1 June and become compulsory for all sellers. If there is an upside to our politicians’ procrastinations, it is that home owners’ uncertainty as to whether HIPs will happen or not appears to have prevented the much predicted May rush by speculative sellers to put their properties on the market before the deadline. The housing market volatility which HIPs could have created looks as if it will end-up being little more than a ripple.
Changing face
I have to confess that I’ve been in the same camp as the majority of brokers as far as HIPs are concerned. I’ve been happy to sit on the sidelines and see what happens next. Looking back, how the HIPs show has changed. 10 years ago when the packs were first mentioned in the Labour Party manifesto, their objective was to speed up and simplify the selling process and to reduce the amount of gazumping. At the time, they were laudable objectives and most people acknowledged the need to improve an old and imperfect house selling system.
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As the idea gathered momentum the focus remained on making the system faster and more efficient. That is until July 2006, when Housing Minister Yvette Cooper announced that the controversial Home Condition Reports (HCRs) would no longer be a mandatory element of the packs. Much of the controversy surrounding HCRs concerned their lack of a property valuation and therefore unacceptability to lenders.
At this point the spotlight moved away from HIPs being a solution to the inefficient house selling process and focused firmly on them being a solution to the problem of global warming. All government communications over the past year have extolled the virtues of Energy Performance Certificates (EPCs) and justified HIPs on the basis that they are an important step towards improving the energy efficiency of the UK housing stock.
No one doubts that by making UK houses more energy efficient we can reduce the country’s carbon footprint. The key question is do we need HIPs as the vehicle to introduce EPC’s and make home owners more aware of the ways in which they can reduce energy consumption in their homes? The answer is a resounding ‘no’.
Compounding the problem
To compound HIPs’ problems, we no longer need them to resolve the inefficiencies of the house selling process itself, because most of the outstanding problems are being addressed by reforms taking place at the Land Registry, which is implementing a housing transaction automation programme which will result in the conveyancing process being fully automated. The idea is that within a few years the whole process will be fully transparent for everyone involved. So who needs HIPs?
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The answer is no one really. Sellers don’t want them because they are an additional cost. Buyers don’t want a 90-page pack of legal documents to read; that’s what they employ solicitors to do. Solicitors don’t want them because the Land Registry’s e-conveyancing system will be far better. Not even estate agents want them, as they say HIPs are an unnecessary intrusion into their main purpose, which is selling houses.
So why is the government continuing to go ahead with them? After all, the goalposts have clearly moved a long way since HIPs were first conceived. I suspect the answer is because they have built up a momentum of their own which is difficult to stop. A last minute u-turn would also involve a huge loss of face for a government which has more pressing issues to address. My guess is that it’s easier to let HIPs go ahead on 1 June and make changes over the coming years, rather than face the embarrassment of looking like a government which doesn’t know what it’s doing.
Whatever the reasons, the time has come for brokers to prepare for their launch, as HIPs not only represent another valuable income generating opportunity, but they are also an opportunity for brokers to cement their relationships with clients. Although many believe clients will approach estate agents for a HIP, this won’t necessarily be the case. When a home owner is considering moving, one of the first things they do is consult a broker to see how much they can borrow. This initial consultation is the ideal time to sell a HIP.
Bear in mind that HIPs are compulsory. Sellers have no choice but to buy one after 1 June and the person they buy from may as well be you. The truth is that the work involved in supplying a HIP will be minimal for brokers. You will essentially be an introducer to a HIP supplier and will not be involved in the gathering together all the documentation.
HIPs have travelled a bumpy road and their journey is far from over. However, they have now reached an important junction and it is time for brokers to become involved.
