Three-bedroom houses now need HIPs

Home Information Packs (HIPs) are to be compulsory for three-bedroom properties from today [Monday, 10 September 2007]. Anyone selling a home with three bedrooms or more will have to supply to prospective buyers an HIP - also known as a "seller's pack".

The pack will need to include information about the property, such evidence of title, copies of planning, listed building or building regulations consents; local searches and guarantees for any work on the property and, crucially, an energy performance certificate.

Failure to provide a pack could leave sellers open to a fixed-penalty charge of £200 for each day the property is marketed without one, or one has not been commissioned.

At present, around 30% of prospective sales collapse between offer and exchange of contracts - the equivalent of around 500,000 transactions a year - leading to £350 million being wasted in fees. Supplying all the information needed to make the sale in one pack was supposed to help to stop this waste.

However, critics claim the "waste" has now been transferred to the seller, and that an estimated £200 million will be spent on HIPs compiled for the 500,000 properties on the market that fail to sell each year. The critics add that this is of little concern to the Government, which will collect more than £100 million in VAT revenue on HIPs compiled for the failed sales.

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Key feature now missing from HIPs

When the packs were first mooted, it was intended that they should be compulsory for all homes being put on the market after 1 June 2007, and their key feature would be a survey of the structural condition of the property. This feature, known as the "home condition report", which was supposed to make buyers aware of possible problems, was scrapped at an early stage, when it was realised that mortgage lenders would still require their own valuation, which would include some kind of structural inspection, and buyers would also probably want a survey done for their own peace of mind, by someone they employed themselves rather than relying on a document supplied by the vendor.

It was further feared that, unless the home condition report was carried out by a qualified surveyor, it would be pretty much worthless, and there would not be enough qualified surveyors available to do the work. It is still the Government's intention that a home condition report should be included in the seller's pack eventually, but consultation is continuing on how this can be achieved.

It has also been claimed that the introduction of HIPs without the home condition report has rendered them a barely concealed strategy for enforcing by stealth compliance with an EU directive from 2002, which requires all homes to have an Energy Performance Certificate (EPC). By 2020, producing EPCs is expected to have cost UK consumers £4.7billion.

Not only were home condition reports ditched, there was then a shortage of energy inspectors to provide the EPCs. Just ten days before the packs were due to become compulsory, the then Communities Secretary Ruth Kelly announced that introduction would be delayed until 1 August 2007, and then only phased in, starting with properties of four bedrooms or more. Smaller properties would be included later.

10 September 2007 © Moneyextra.com

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