In just a few short weeks Home Information Packs (HIPs) will become compulsory for all home sellers in the UK.
This controversial move is currently being heralded by government as its latest weapon in the war against climate change, with an essential ingredient of every HIP being an Energy Performance Certificate (EPC). Much like an energy rating on a fridge or microwave oven, these A to G ratings will give an indication of how energy efficient, or inefficient, a house is. Along with the rating is a recommendation about how the property can be made more ‘green’.
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This is good news, because the government reckons that the average saving which can be made by implementing these recommendations is about £300 per household – which just so happens to be the cost of a HIP. Which is very convenient for all involved. If this leaves you feeling a little cynical, then the fact that the government has placed such a big emphasis on the environmental credentials of HIPs should be leaving you more so. Why? Because when HIPs were first mooted, cleaning up the environment was not among the government’s objectives. The key objectives of HIPs were to speed up the house buying process, reduce gazumping and get rid of wasted costs on aborted housing transactions. Most importantly, HIPs also transfer the up-front cost of a housing transaction from the buyer to the seller and, despite the many changes which HIPs have undergone, this is still the case.
The good news is that although these objectives have been relegated down the list of HIPs priorities, they are being addressed and, arguably far more effectively, via a series of reforms being quietly implemented by the Land Registry.
The Land Registry has recognised for some time that the house buying and selling process in the UK has been in desperate need of an overhaul. The current process of conveyancing is still largely driven by paper and involves numerous different parties, all working to different timescales and priorities. It only takes one cog in the machinery to get out of sync and the whole process comes to a grinding halt.
Move to reform
Which is why the Land Registry has decided to reform the whole conveyancing process. The Land Registry website states that it wants to transform the conveyancing service in England and Wales and to improve the house buying and selling process for the public. It’s vision is to ‘deliver a world class conveyancing service where the worry and risk of the conveyancing process are significantly reduced’ and where ‘authorised parties involved in a conveyancing transaction can exchange information quickly, securely and reliably’.
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The move to reform the conveyancing system started in 1998 when the Law Commission and Land Registry presented their preliminary ideas in a report entitled: ‘Land Legislation For The 21st Century’. A period of consultation then followed, involving lenders, estate agents and conveyancers and in 2002 the Land Registration Act was passed, which came into force in October 2003. This Act contained the legislative provisions for the introduction of e-conveyancing. The Finance Act of 2003 also introduced Stamp Duty land tax (SDLT) which, amongst other things, enabled Stamp Duty to be processed at the same time as land registration. The full package of reform was delivered in December 2003.
The Land Registry is developing an integrated e-conveyancing service comprising three main elements:
- a central ‘chain matrix’ service;
- an electronic funds transfer service;
- a channel access service.
An electronic funds transfer service will be linked to the central service. The central service will be responsible for processing and accounting for all monies involved in a transaction and in a chain of transactions, required to effect legal exchange and completion and to settle associated costs.
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It will enable payments to be made simultaneously with greater efficiency and certainty than at present. It will also enable home buyers to know not only the day of completion but also the time when the keys to their new home will be released.
A channel access service is also being developed to enable users to access these services.
Resisting the ‘big bang’ approach
The project is ambitious and will take several years to complete and the Land Registry has resisted the temptation to go for a ‘big bang’ approach in which all the changes are implemented at the same time. Wisely, it has opted for a softly softly approach in which changes are drip-fed over a longer period of time, allowing for proper testing.
The Land Registry’s IT infrastructure needs to be enhanced to support these developments and a range of e-signature solutions are also being tested in conjunction with IBM. Further consultation meetings with interested bodies are planned to take place before the project moves forward but the Land Registry is hopeful that it will be able to deliver a fully functioning electronic e-conveyancing system by 2009.
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The first phase of this project is the testing of a prototype chain matrix in Portsmouth, Fareham and Bristol. The Land Registry views the chain matrix as the backbone of its new approach, as it will tackle one of the key issues of the current system – a lack of transparency.
The chain matrix system enables conveyancers and their clients, and other authorised parties such as lenders, to log-on to a private website and track the progress of all transactions in a housing chain, identifying progress against key milestones. The chain matrix project will be implemented in various stages and the Land Registry hopes it will be fully operational in 2009.
There is much to do but there is also plenty of evidence that progress is already being made on a number of different fronts. At the moment, it takes on average 13 weeks to progress from offer to completion, a timeframe which most people in the industry agree can be shortened dramatically. However, faster turnaround times are not the only benefit that the new e-conveyancing system will bring. It should also help reduce errors and the scope for fraud. At the moment 50 per cent of applications to the Land Registry have something wrong with them. It may be a simple spelling mistake or more significant issues, such as incorrect information. The system is also vulnerable to fraud, particularly impersonation. The new system, when fully implemented, will be both more accurate and more secure.
Adding fuel to the fire
The reform of the Land Registry and implementation of an e-conveyancing system has added fuel to the debate about the real necessity to introduce HIPs in June. If you remove from a HIP all those documents which are only of real interest to a solicitor, you are left with an EPC, which has to be provided by the estate agent as part of the sales particulars anyway.
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So, with the Land Registry reforms being implemented which will take care of all the ‘hardcore’ legal documentation, why bother with HIPs? It is a question which has left many in the industry scratching their heads.
However, the HIPs bandwagon roles on and its now looking certain that they will go live on 1 June. It will be interesting to see if, when the Land Registry reforms are fully implemented and proven to be fit for purpose, whether HIPs will slowly fade into the background and be dropped? At this late stage, it would be a big political embarrassment to can the whole HIPs project. However, in a couple of years it could be positioned as an astute government reacting to changing circumstances. Place your bets.
If you want more information about e-conveyancing and the changes being implemented by the Land Registry, you can go to the Land Registry’s website: www.landregistry.gov.uk which is packed with information.
