Home Information Packs (HIPs)

By Brenda Shaw

The Government’s New Year resolution for 2007 will be a revolution in the property market.

From January 1 2007, Home Information Packs (HIPs) will be introduced heralding one of the most radical legislative changes in the way homes are bought and sold that Britain has ever seen.

HIPs, which received Royal Assent in November 2004, will impact upon estate agents, Home Inspectors, potential HIP providers, solicitors, sellers and prospective buyers.

In just over two years a HIP must be prepared by law before a residential property can be marketed. This will leave estate agents at the sharp end in terms of getting a HIP ready for a client.

From a solicitor’s point of view the Solicitors Regulation Authority has been actively involved in the consultation process prior to the introduction of HIPs.

One certainty is that conveyancing solicitors across the country will have to get to grips with new information technology systems to deal with HIPs which major IT providers are already devising to provide the most consistent and simple way of working.

A dry run of the reforms is set to take place during the last six months of 2006 when all the procedures should be in place in time for the Act to be implemented.

HIPs will have a massive impact on conventional house buying processes as they are aimed at cutting-out timewasters and reducing the time it takes to get from the offer stage to the completion of a sale.

There are currently an estimated 1.5 million residential property sales each year. The Office of the Deputy Prime Minister estimates 7,500 Home Inspectors will be necessary to cope with demand.

HIPs are being introduced following Government concerns that many house purchases fall through – often at the eleventh hour and when people least expect – because of the time it takes to reach a completion.

Also when there is a chain of buyers and sellers, if one buyer pulls out it can ruin a whole series of purchases, costing all involved money.

There are also concerns about gazumping, where a seller switches to another buyer for a higher price, but the longer the house buying process, the more opportunity there is for gazumping to take place.

Compared to international methods, the process in England and Wales is regarded as slow, uncertain, and wasteful and not in the best interests of the consumer.

The process currently starts when an offer is accepted, then conveyancers are instructed, followed by searches, proof of title, surveys, valuations, sellers property forms and communication with the lenders.

However, under the new rules the property seller will produce a Home Information Pack (HIP) for potential buyers to see before they make an offer.

Currently the buyer has to pay for the collection of the relevant information – but from January 2007 the seller will pay for the cost of the HIP.

The price of a HIP will depend on the market but it is expected to range between £600 to £1,000, depending on the location, prize and size of the property.

People will be able to order HIPs from early 2006

Home Information Packs are expected to contain:

• Title documents for the property
• Local Authority searches
• A house condition report based on a professional structural survey
• Terms of the sale
• Warranties and guarantees
• Taxes, services and other charges
• Legal summary
• Sample contract
• Additional information for leasehold property

So in theory, if HIPs help speed up the conveyancing process and put an end to gazumping it will be a welcomed across the industry – but like all major changes we will have to wait and see how it works in practice.