Home Information Pack - the shaky, shaky HIP

The HIP (Home Information Pack) is not irretrievably broken but general consensus is that it has been severely dislocated by the recent Government U-turn. The Home Condition Report (HCR) element of HIP will now not be mandatory for house sellers when the scheme is introduced next June.

However the diminished (skeletal, if you like) HIP will still be compulsory and will require the provision of an energy efficiency report. Are you prepared to cope with the possible bureaucratic minefield of a 'green' assessment, supposedly introduced by the Government to satisfy our EU partners, or would it be better to avoid this HIP business altogether, get your house on the market, sell and move on before June 2007? Only you know the answer to that.

But whether you love or loath the whole process of house moving (reckoned to be life's third most traumatic event, after death of a loved one and divorce), at least you now know that the housing market will not be destabilised by the impending threat of home condition reports.

The proposed compulsory inclusion of an HCR triggered the HIP controversy when the scheme hovered into view at the beginning of the year. The content of a HIP was then deemed to include all relevant searches and title deeds, an energy audit and other information currently paid for by the buyer (eg house survey). The HCR was to be an objective assessment of the property's condition that buyers, sellers and mortgage lender would have a legal right to rely on.

Qualified inspectors, approved by the Secretary of State, would prepare the HCRs. Two major problems surfaced almost immediately. First, the house seller, not unnaturally, was expected to meet the cost of his own HIP, estimated to be £600-1,000 + VAT. The HCR element was reckoned to cost around £300 for an average home. So, more costs for the seller. At the buyer's beneft? Not really, because lenders raised the second problem by making it clear they would not rely on the content of an HCR and would continue to seek separate mortgage valuation surveys from buyers.

The Council of Mortgage Lenders (CML) noted that the HCR's lack of information regarding subsidence, flood risk or land contamination would render it useless to a lender for valuation purposes. Who was to gain, then, from a scheme designed to speed up the housebuying process and prevent such bad habits as gazumping?

HIPs would paralyse the housing market, said the chairman of Persimmon, one of Britain's biggest housebuilders; house prices could be forced up as there would be fewer properties for sale. Others argued a price fall as sellers rushed to market before the mandatory HIP date. Either way, a disrupted marketplace, so no gain there; there would have been a gain in another direction though, as opposition to the scheme was quick to point out: a VAT windfall of more than £110 million for the Treasury!

What happens now the HCR is no longer a requirement?

With the removal of HCR compulsion the HIP's "expensive red tape" image has been diluted to a softer shade of pink. Consumer body Which? has branded it a half-HIP, claims the Government has shown "its house is made of straw" and that the outcome on 1 June 2007 will be "a useless, expensive waste of time".

For its part, the Law Society has pointed out that buyers could not "sensibly rely on an HCR commissioned and paid for by the seller."

Unless the Government changes tack again (note that HCRs are not banned, but will be encouraged as a voluntary addition to a HIP), what will you need to do, at what cost, when selling your home in the streamlined HIP era?

The revised Home Information Pack will contain the deeds of the property, any local authority searches and planning applications, details of fixtures and fittings, and an energy certificate indicating the 'greenness' of the house. Latest estimates indicate that the re-pinned HIP will cost the seller about £400. It will obviate the need for search fees being paid several times over by as many buyers pursuing the same home.

One element in particular that could be a genuine benefit for both buyer and seller is the legal report. According to Mark Chilton of Purely Mortgages, many sales hit a stumbling block when there is confusion about title rights, such as planning or ownership (right of way across property or a nearby new development plan, for instance). "The inclusion of this type of search in the HIP at relatively little cost will help allay these potential pitfalls from the start."

Whither the home inspector now that the HCR is not compulsory?

Housing Minister Yvette Cooper admitted part of the reason for scrapping HCR compulsion was the failure to train sufficient inspectors (dedicated destroyers of caveat emptor or snooping jobsworths, depending on your viewpoint); apparently only a few hundred have been trained, yet it was estimated some 7,000 would be needed. Do those who took £5,000 training courses get their money back or are they expected to whip up enough voluntary business?

Will the house buying process by speeded up?

Experienced conveyancing solicitors argue HIPs will have only a marginal effect on the speed of transaction which is governed almost entirely by that most intractable of factors, human nature. Buyers will always be seeking more information, if only as a way of marking time while finances are sorted out. The present protocol, apart from searches, provides more information than will be the minimum required in a HIP, yet human venality and market conditions still generate gazumping, gazundering, delay and prevarication.

27 July 2006 © Moneyextra.com

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