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Home Information Pack

 

The government has suspended the use of Home Information Packs (HIPs) with immediate effect from 21 May 2010. Homes sold on or after tomorrow will no longer need a HIP pack.

Homes marketed for sale on or after 21 May 2010 will no longer need a Home Information Pack (HIP). Suspending HIPs will reduce the cost of selling a home, remove a layer of regulation from the process and provide a welcome help to the housing market during the recovery. The Energy Performance Certificate (a smaller and less expensive element of the HIPs) will be retained. This ranks the energy efficiency of a home with A to G ratings. It costs about 60. Sellers will have to produce an EPC within 28 days of putting a home on the market.

 

Under the provisions of the Housing Act 2004 a Home Information Pack (HIP), sometimes called a Seller's Pack, will have to be provided before a property in England and Wales can be put on the open market for sale with vacant possession. The pack will be a set of documents about the property: an Energy Performance Certificate, local authority searches, title documents, guarantees etc.. The introduction of HIPs has been subject to delays and reduced requirements.

As the idea of the Home Information Pack developed over time, so have the reasons for its introduction. A proposal to introduce them was first made in the 1997 Labour Party manifesto, in the expectation that they would reduce the practice of gazumping.

Research after the election revealed that around 28% of sales fell before exchange of contracts, with gazumping occurring in fewer than 2% of sales. The emphasis subsequently moved to the benefits of increased speed, transparency and consumer friendliness.

"Official launch date was Aug 01 2007"

The Government estimates that 350 million is currently lost through house purchases that do not go ahead because of problems found by buyers during the house-buying process. The government expects that, by providing the purchaser with more initial information, fewer people will change their mind later, and that the time it takes for the buyer's conveyancer to carry out the legal work should also be reduced. Originally the HIP was going to be required from June 1, 2007. However, just ten days before that date, Communities Secretary Ruth Kelly announced that they would be phased in from August 2007, and initially only for larger properties.

 

The pack must contain the following, which must be no more than three months old when the property is first marketed:

  • Index
  • Energy Performance Certificate
  • Sale Statement
  • Title documents for the property
  • Local Authority and drainage searches

If the property is leasehold, then the pack must also include the following:

  • Copy of the lease
  • Building insurance policy
  • Contact details for the landlord or management and any legal details
  • Regulations that apply
  • Recent service charge receipts and accounts

For a transitional period sellers can market their homes without the searches or leasehold documents as long as the pack contains evidence that they have been commissioned and will be included as soon as practicable but certainly within 28 days.

The pack may also contain some or all of these authorised documents:

  • Home Condition Report
  • Two sellers questionnaire forms called Home Use Form & Home Contents Form
  • Legal summary
  • Other searches such as a mining search

Home Condition Report

 

It was originally planned that the Home Information Pack would also include a Home Condition Report (HCR), detailing the general condition of the property in plain English. The intention was that these reports would make buyers aware of problems initially, thus avoiding shocks later in the process that may result in either delay while the price is renegotiated, or cancellation of the sale. Their mandatory inclusion has now been postponed as a result of industry lobbying, with the government keen to avoid risks to consumers from delays and potential late changes to the implementation timetable.

When eventually introduced, Home Condition Reports are to be carried out by qualified Home Inspectors, and in particular it was feared by the industry that neither the certification schemes for the inspectors nor the database to hold their reports would be ready in time.

Mandatory introduction of home condition reports remains on the table, but the Government wants more time to assess consumer demand and the results of further testing. They will also be looking at costs, the savings from avoiding waste and duplication, consumer attitudes to the Packs, failed transactions and transaction times, and people's willingness to sell with HIPs in place.

 

Energy Performance Certificate

 

Similar to EU appliance efficiency ratings, the energy performance ratings on the Energy performance certificate will provide prospective purchasers with an assessment of the property's energy consumption, together with a list of practical measures that can be taken to cut their fuel bills and carbon emissions.

The Energy Saving Trust estimates that by following the proposals in the energy performance certificate, the average home owner will save 300 a year on fuel bills. Government also hopes that the information could be used to support the growth of green mortgages and other incentives.

This part of the Home Information Pack is required to meet the in order to meet the requirements of the European Energy Performance of Buildings Directive (Directive 2002/91/EC)

 

Cost

 

Initially the cost of a Home Information Pack, including the Home Condition Report, was estimated to be around 600 - 1500 by the Government. This was to include the cost the of the postponed Home Condition Report, which is expected by the DCLG to cost between 250 and 1000. Industry now expects the Home Information Pack (excluding the HCR) to cost between 300 - 600 for the vast majority of properties in England and Wales.

The Government point out, however, that most of the items in the pack already have to be provided during the sale process, so this is not all an additional cost. However the Council of Mortgage Lenders reported that their members were planning to insist on a separate valuation in addition to the Home Condition Report, while those purchasers requiring a structural survey would also have to pay extra.

For properties that have been on the market some time, it is likely that there will be additional costs incurred to bring the information in the HIP up to date.

 

Enforcement

 

Failure to provide a Home Information Pack, or supplying an incomplete pack carries a fine of 200.

Enforcement is to be carried out by local authority Trading Standards Departments, however they claim that this is inappropriate as they normally regulate businesses, and that it would cost them too much to enforce through the civil courts.

 

Industry and public reaction

 

As of 15/05/07 The Royal Institution of Chartered Surveyors (RICS) has started Judicial Review proceedings against the Department for Communities and Local Government for what it regards as its failure to carry out a full consultation on HIP's.

There are fears that the up-front cost involved may put off some people from putting their house on the market, which may in turn depress the housing market.

The property industry has been largely against these changes but it was felt by the government, that any change in the house buying process can only be a change for the better.

The Council of Mortgage Lenders report that their members are not yet persuaded that the perceived consumer benefits will be achieved. They believe that the forthcoming introduction of e-conveyancing will have a much more positive impact.

The National Association of Estate Agents hold the view that the legislation is unnecessary, does not cover the important reasons why home sales and purchase transactions fall through, and that the cost is too high.

In contrast, the introduction of HIPs was originally supported by Which?, who believe that they could reduce the number of failed transactions resulting from problems that can be identified at an early stage. The organisation has since withdrawn its support following the Government's decision to postpone the introduction of Home Condition Reports.

Should the Conservative Party come to power at the next election, they currently plan to scrap the legislation, calling it 'expensive and deficient red tape'.

 

Timeline

 

Home Information Packs were announced in the Queen's Speech in November 2003, although the idea was originally raised in 1997 and is based on similar practice used in Australia and Denmark. The Government had determined through research that the traditional home buying process was time consuming and not very effective.

 

Key points in the timeline for introduction include:

 

* March 2006 - Government go ahead for multiple certification schemes, meaning lower set up costs for industry and robust standards set by government to ensure quality home inspectors and a trusted, objective Home Condition Report for consumers. A number of organisations who are interested in running certification schemes have already come forward and the Government is considering their proposals. Over 3,000 people are already going through training for the home inspector qualification;

* April 2006 - Government launch HIP publicity campaign to industry and details of a three-phased product launch and dry run will be published;

* June 2006 - draft regulations are made setting out the detailed contents of Home Information Packs, rules governing the availability of packs, exceptions from the pack duties and arrangements for enforcement;

* June 2006 - June 2007, a three phase approach to product testing - that builds up to Government and industry testing across all aspects of the process, involving estate agents, solicitors, pack providers, lenders and others who play a part in delivering Home Information Packs to consumers, from ensuring that certification schemes are up and running, so that Home Inspectors can register Home Condition Reports, to offering voluntary packs to consumers in advance of mandatory implementation.

The Summer of 2006 will also see the launch of a series of geographical industry led trials;

* September 2006 - Government approve the first Certification Schemes to oversee the work of Home Inspectors. The schemes will be set up and run by industry. Government will set the standards that the schemes will operate. In September the Home Condition Report Register contract will be agreed. A fully operational register will follow as soon as possible afterwards;

* November 2006 - June 2007 - product testing continues with phase two and three leading the programme into implementation on June 1. By now, lenders will be able to use information from the Home Condition Report for valuation purposes, resulting in less on site valuation and costs savings for consumers;

* March 2007 Review of the outcomes of the final phase of the product launch make final adjustments ready for going live 1 June 2007 The detail of the timeline will be further developed in partnership with industry and be continuously updated.

* April 2007 - public awareness publicity campaign is launched

* May 2007 - Government announcement of the delay and phased introduction due to concerns that industry was unable to meet the target of 1500 qualified Domestic Energy Advisors (DEAs) necessary for a June 1st 2007 launch of Home Information Packs.

* June 2007 Government clarified phased HIP implementation would be driven by Industry and their ability to provide qualified Domestic Energy Advisors in sufficient numbers for each phase. Industry had earlier anticipated the phased roll out would be date driven.

* June 2007 - Government announcement they would fund/discount 5000 HIPs by 100 prior to the official launch date of Aug 01 2007.

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