Are You HIP to the New Home Sellers Packs?
By Nick Funnell
Tuesday 29th May 2007
“Government attempts to make buying and selling houses easier” proclaimed the usually even-handed Economist magazine early in May, “are staggering from tragedy to farce”. And this was before what opposition leaders described as a “desperate last-minute retreat” on May 22 nd , postponing and greatly narrowing the scope of what had been a flagship government policy initiative.
Home Information Packs (HIPs) were supposed to be compulsory for sellers to provide for all properties marketed from 1 st June this year. But, despite the government repeatedly insisting there would be no implementation problems, Communities Secretary Ruth Kelly suddenly announced a two month delay a mere ten days before this deadline. A legal challenge from surveyors (who feel they have not been consulted properly) coupled with reported shortages of qualified inspectors meant a postponement was unavoidable. HIPs will now be compulsory from 1 st August, but only for larger houses with four or more bedrooms- smaller properties have received an indefinite stay of execution.
New Labour- A New Way of Selling Houses
Remember those heady days of 1997, when fresh-faced new PM Tony Blair ruled over ‘Cool Britannia’? First proposed in their winning manifesto of that year, New Labour touted home sellers’ information packs as the solution to what was perceived to be a big issue at the time- gazumping. This was the headline-grabbing evil of sellers accepting a higher bid after agreeing to a sale, though it was subsequently found to be a factor in less than 2% of transactions.
What was found to be much more of an issue was delay and failure to exchange contracts due to problems encountered during buyers’ conveyancing work. Nearly 30% of all sales fell through in this manner, leading to over £300m being wasted each year on surveys and fees. The packs were therefore redressed as helping the consumer through increased transaction speed and transparency.
In Poor Condition- the HCR is Scrapped
The Home Condition Report (HCR) had always been intended as the central plank of the HIP. Described by the Government’s official website being a ‘mid-range’ survey- “not as detailed as a Building Survey but certainly a lot more extensive than a mortgage lender's valuation inspection”- this was to provide buyers with all the up-front information they needed concerning the physical condition of the property.
However, the HCR soon came in for criticism from several quarters, reflecting the many interests held in the booming UK housing market:
- Lawyers advised buyers not to place reliance on surveys commissioned by sellers.
- Mortgage lenders also insisted they would rely on their own house reports.
- Surveyors feared being sued by buyers, sellers and lenders.
- Estate agents preached a dire sermon; there would be a glut of properties on the market before the June 07 deadline, then none thereafter.
- The press told stories of woeful inadequacies, both in the number of inspectors in the training pipeline and the systems infrastructure required to handle the information generated. Experience of similar large government initiatives in other areas (such as the NHS and farm payments) hardly inspired confidence.
In the summer of 2006, the Government bowed to the inevitable and announced that the HCR would only be an optional component of the HIP .
Europe to the Rescue: Send for the Greenwash Inspectors
The scrapping of the HCR left the poor HIP as a policy initiative in search of a reason to exist. This was not only a problem for the Government, but also for more than 3000 people training for the new Home Inspector qualification. Many of them had given up their jobs and invested around £9000 in the 12-18 month courses. Without a compulsory HCR, it looked as though they could all be out of pocket and without a future.
Fortunately, a handy European Union directive on climate change was seized upon as providing the HIP’s new centrepiece. This directive, according to the government, necessitated an Energy Performance Certificate (EPC) for a property every time it is sold. The EPC gives the property a band rating (A to G, A being the highest) for both energy efficiency and CO2 emissions. It will also contain tips for improving these ratings, such as fitting cavity wall insulation and solar panels and not leaving appliances on standby. Current guidelines state that the EPC will need to be less than 12 months old when the property is first put up for sale, though the government is ‘consulting further’ on appropriate EPC ageing.
This may sound like a pretty bog-standard checklist, and indeed the Economist sniffily dismisses the EPC as ‘frippery’ containing no more than “observations that buyers could easily make themselves”. The calibre and qualification standard of the new hastily trained army of Home Inspectors may also be called into question in the near future. Official training websites state that the final examination will be a 30-minute online multiple-choice affair, with a mere 70% pass mark. Inspectors can expect to certify up to eight properties per week, earning £100-£160 per report. Nice work if you can get it?
Costs and Fines- Let the Seller Beware!
The cost of the HIP to the seller is currently unregulated, and figures quoted in the press over the past year have varied wildly from £250 to over £1000. Many have speculated that the current inspector shortage could lead to profiteering by HIP providers if left unchecked. With such a heated atmosphere the Government could eventually feel under pressure to put its neck on the line and issue maximum price limits (similar to those in place for the annual MOT vehicle test).
Marketing a property without a HIP is not a criminal offence, but does carry a £200 fine. This relatively low figure has led many journalists to salivate over a potential wave of middle-class civil disobedience, stating that many will simply forego the HIP and pay the fine. However, it should be noted that paying over the £200 does not necessarily put an end the matter if your property is still on the market. The government’s procedural guidance document warns that ‘further penalty charge notices’ could be issued if the first fine doesn’t kick you into commissioning a HIP.
Fuelling this non-compliance speculation is the distinct lack of enthusiasm shown by Trading Standards Officers, who, having ended up with the short straw, now find themselves in charge of enforcement. No new resources have been allocated to them, and official pronouncements from their camp only state that guidance has yet to be issued and other ongoing tasks may well be prioritised. Their requests to pep up the fine to £500 (thereby making it more of a deterrent) were met only with refusal by a nervous government.
The current HIP situation appears murky indeed. However, if you are in the market for selling a larger house after 1 st August, best advice is:
- Don’t put your local Trading Standards department to the test, get a HIP.
- Estate agents will always try to sell you their own HIP package, but they can’t stop you buying direct. Shop around potential HIP providers for the best deal available.
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