Home Information Packs- What is the impact for you?

In summary, HIP’s are intended to reduce transaction failure and facilitate a more efficient home buying and selling system. Every vendor will be required by law to produce a HIP for inspection by a potential purchaser of the property. The contents of the HIP have not yet been prescribed, but are expected to include items such as: evidence of title, terms of sale, replies to standard pre-contract enquiries, standard local searches, copies of any planning consents, a home condition report including an energy efficiency assessment, and, where appropriate, copies of the lease and other documents relevant to a leasehold sale. The introduction of HIP’s will have a major impact on readers of News On The Block including estate agents, solicitors, apartment builders, mortgage lenders, and surveyors. Yet, despite the Government’s enthusiasm for HIP’s, there has not been universal support for their introduction.

The Opposition benches are critical of the packs, which are expected to cost in the region of £500-1000. Conservative Housing Minister, John Hayes questions: “Why if these packs are such a good idea, does the government not trust the people and allow them to decide whether they want them or not?”. Similarly, Liberal Democrat spokesman Ed Davey accuses the Government’s plans of being a ‘gamble’ which could result in a ‘very costly mistake’. There are several principal concerns for the introduction of HIP’s. One is that they can date quickly, thereby adding costs to vendors who have to withdraw their property from the market. Another is that purchasers may not trust the information in the packs anyway and so still commission their own due diligence, increasing transaction costs still further. Others suggest that sales which are part of a property chain may be disrupted and the marketing of property can be delayed while the pack is put together – perhaps jeopardising the sale altogether.

In his statement to the House of Commons, Keith Hill explained: “The home buying and selling process does not function properly. Hundreds of thousands of people every year are put through the wringer because of the inadequacies of the current system. Hundreds of millions of pounds are wasted on transactions that get nowhere. That is money that ordinary, hard-working families can ill afford to lose.” Popular sound-bites perhaps, but the substance of Hill’s justification is open to criticism including that stated above.

Outside Parliament, the property industry is also nervous about the introduction of HIP’s. For example, a recent survey of its members by the National Association of Estate Agents revealed that 80% believed that HIP’s would damage the housing market with 43.9% believing that this damage would be severe and less than 5% expecting the market will be improved by the proposals. Indeed, Peter Bolton, Chief Executive of the NAEA further explained his members concern: “At the start of this government proposal the NAEA suggested that the proposed Home Information Packs should be voluntary….The market will surely decide if a Home Condition Report to sell a house merely adds an unnecessary cost to the process of moving home”.

Unfortunately, it looks like the market will not be left the option to decide for itself. It is clear that the Government is determined to press ahead with making HIP’s compulsory and the true impact on the apartment sector will remain to be seen. Keith Hill has accepted that at present 70% of transactions go through without problem. The litmus test will be how this figure changes (if at all) after the Government gets its way.