Home Information Pack

Under the provisions of the Housing Act 2004 a Home Information Pack (HIP), sometimes called a Seller's Pack, will have to be provided before a property in England and Wales can be put on the open market for sale with vacant possession. The pack will be a set of documents about the property: an Energy Performance Certificate, local authority searches, title documents, guarantees, etc. The introduction of HIPs has been subject to delays and reduced requirements, but they became mandatory for homes with four or more bedrooms on 1 August 2007 and were extended to three bedroomed properties from 10 September 2007. [cite news |title=Hips extended to three-bed homes |url=http://news.bbc.co.uk/2/hi/business/6951171.stm |publisher=BBC News Online |date=2007-08-17 |accessdate=2008-08-11] [cite news |title=HIPs to be extended to three bedroom properties |url=http://property.timesonline.co.uk/tol/life_and_style/property/article2277710.ece |publisher=The Times |date=2008-08-17 |accessdate=2008-08-11]

The Government cited the theory that Home Information Packs would lead to a reduction in the number of abortive sales as their justification for introducing the scheme, reducing gazumping and gazundering.

History

As the idea of the Home Information Pack developed over time, so have the reasons for its introduction. A proposal to address the problem of gazumping was first made in the 1997 Labour Party manifesto. [cite web |url=http://www.labour-party.org.uk/manifestos/1997/1997-labour-manifesto.shtml |title=1997 Labour manifesto |publisher=The Labour Party |year=1997 |accessdate=2008-08-15 |quote=Those who break their bargains should be liable to pay the costs inflicted on others, in particular legal and survey costs. We are consulting on the best way of tackling the problems of gazumping in the interests of responsible home buyers and sellers.] Research after the election revealed that around 28% of sales fell before exchange of contracts, with gazumping occurring in fewer than 2% of sales. The emphasis subsequently moved to the benefits of increased speed, transparency and consumer friendliness. [cite web
url= http://www.cml.org.uk/cml/filegrab/HIPsBackgroundArticle.pdf?ref=4583
title=Background note on the development of home information packs
publisher=Council of Mortgage Lenders
accessdate=2008-08-15
quote=However, as the now Labour government then discovered via research commissioned after the election, gazumping... occurred in less than 2% of sales. The research concluded that the current home sales process was wasteful and inefficient with around 28% of agreed transactions falling through between acceptance of the offer and exchange of contracts. It was suggested that this was because of a lack of information available to the buyers in the period before an offer is accepted, and the Government then proposed the HIP as a way of tackling this.] The idea is based on similar practice used in Denmark.Fact|date=August 2007

Home Information Packs were announced in the Queen's Speech in November 2003. [cite web |url=http://www.publications.parliament.uk/pa/cm200304/cmhansrd/vo031126/debtext/31126-01.htm#31126-01_head1 |title=Sixth series, volume 415 |publisher=Hansard |date=2003-11-26 |accessdate=2008-08-15 |quote=Legislation will be introduced on housing that will help create a fairer housing market and protect the most vulnerable.]

In March 2006 the government gave the go-ahead for multiple certification schemes. By this stage a number of organisations had expressed an interest in running certification schemes and over 3,000 people were already going through training for the home inspector qualification.Fact|date=August 2007 In June 2006 draft regulations were made setting out the detailed contents of Home Information Packs, rules governing the availability of packs, exceptions from the pack duties and arrangements for enforcement.Fact|date=August 2007 In September 2006 the government approved the first Certification Schemes to oversee the work of Home Inspectors. The schemes are set up and run by industry. Government sets the standards that the schemes operate. In September the Home Condition Report Register contract was agreed. A fully operational register was scheduled to follow as soon as possible afterwards.Fact|date=August 2007

In June 2007 the government announced they would fund or subsidise 5000 HIPs by £100 prior to the official launch date of August 1, 2007. [cite web
url=http://www.publications.parliament.uk/pa/cm200607/cmhansrd/cm070625/text/70625w0037.htm#07062625001744
title=House of Commons Hansard Written Answers for 25 Jun 2007 (pt 0037)
date=2007-07-25
work=Hansard, Volume: 462, Part: 111
publisher=House of Commons of the United Kingdom
pages=Column 159W—continued
accessdate=2008-08-15
quote=We are also providing 5,000 subsidised EPCs with every HIP commissioned before 1 August.]

Originally the HIP was going to be required from June 1, 2007. However, just ten days before that date, Communities Secretary Ruth Kelly announced that they would be phased in from August 2007, and initially only for larger properties. Between 1 August and 10 September only homes marketed with four or more bedrooms were legally required to have an HIP. This was extended to cover homes with three or more bedrooms from September 10.

On November 22, Housing Minister Yvette Cooper announced that HIPs would be rolled out to include one and two bedroom properties as of December 14, completing the Government's phased introduction of Home Information Packs to residential homes marketed for sale within England and Wales.

First Day Marketing (FDM) is a term used to denote the mandatory requirement to make available all of the documents required within a HIP on the first day a home is marketed to the public. Initially, the date was set for the requirement to commence on 31 December 2007 but was delayed until 1st June 2008 to allow a period of transition. A home can be marketed during this time providing a commitment to pay for a HIP - including the EPC - is made and the necessary documents have a reasonable expectation of being made available within 28 days.

However, on May 8, 2008, Housing Minister, Caroline Flint, announced a further delay to first day marketing until 31 December 2008.

Contents

The pack must contain the following, which must be no more than three months old when the property is first marketed: [cite web |url=http://www.homeinformationpacks.gov.uk/consumer/14_Compulsory_items.html |title=Compulsory items |publisher=homeinformationpacks.gov.uk |accessdate=2008-08-02]

* Index
* Energy Performance Certificate
* Sale Statement
* Title documents for the property
* Local Authority and drainage searches

If the property is leasehold or commonhold, then the pack must also include the following:cite web |url=http://www.homeinformationpacks.gov.uk/consumer/21_Leasehold_and_commonhold_properties.html |title=Leasehold and commonhold properties |publisher=homeinformationpacks.gov.uk |accessdate=2008-08-02]

* Copy of the lease
* Building insurance policy
* Contact details for the landlord or management and any legal details
* Regulations that apply
* Recent service charge receipts and accounts

For a transitional period sellers can market their homes without the searches or leasehold documents as long as the pack contains evidence that they have been commissioned and will be included as soon as practicable but certainly within 28 days.

The pack may also contain some or all of these authorised documents: [cite web |url=http://www.homeinformationpacks.gov.uk/consumer/15_Optional_items.html |title=Optional items |publisher=homeinformationpacks.gov.uk |accessdate=2008-08-02]

* Home Condition Report
* Two sellers questionnaire forms called Home Use Form and Home Contents Form
* Legal summary
* Other searches such as a mining search

Home Condition Report

It was originally planned that the Home Information Pack would also include a Home Condition Report (HCR), detailing the general condition of the property in plain English. The intention was that these reports would make buyers aware of problems initially, thus avoiding shocks later in the process that may result in either delay while the price is renegotiated, or cancellation of the sale. Their mandatory inclusion has now been postponed as a result of industry lobbying, with the government keen to avoid risks to consumers from delays and potential late changes to the implementation timetable.Fact|date=August 2007

When eventually introduced, Home Condition Reports are to be carried out by qualified Home Inspectors, [http://www.mynearestdea.co.uk Find nearest DEA(Domestic Energy Accessor) as well as Home Inspector (HI) using any combination of a name, location or postcode search with interactive map.] and in particular it was feared by the industry that neither the certification schemes for the inspectors nor the database to hold their reports would be ready in time. [cite news |url=http://www.epolitix.com/EN/ForumInterviews/200606/49fd7912-bd44-4a72-8faa-863c43947893.htm |title=Jackie Bennett - Council of Mortgage Lenders |date=2006-06-07 |publisher=epolitix.com |accessdate=2007-08-02 |quote=We think that the timetable looks very challenging - Jackie Bennett]

Mandatory introduction of home condition reports remains on the table, but the Government wants more time to assess consumer demand and the results of further testing. They will also be looking at costs, the savings from avoiding waste and duplication, consumer attitudes to the Packs, failed transactions and transaction times, and people's willingness to sell with HIPs in place.Fact|date=August 2007

Energy Performance Certificate

Similar to EU appliance efficiency ratings, the energy performance ratings on the Energy Performance Certificate will provide prospective purchasers with an assessment of the property's energy consumption, together with a list of practical measures that can be taken to cut their fuel bills and carbon emissions. [cite web |url=http://www.homeinformationpacks.gov.uk/consumer/17_Energy_Performance_Certificate.html |title=Energy Performance Certificate |publisher=homeinformationpacks.gov.uk |accessdate=2008-08-02]

An Energy Performance Certificate EPC in the UK needs to be completed by a government qualified Domestic Energy Assessor (DEA). DEAs will offer advice on how to improve the energy performance of your home which could save you money and reduce your carbon footprint.

The Energy Saving Trust estimates that by following the proposals in the energy performance certificate, the average home owner will save £300 a year on fuel bills. Government also hopes that the information could be used to support the growth of green mortgages and other incentives. [cite news |url=http://www.gnn.gov.uk/content/detail.asp?ReleaseID=228873&NewsAreaID=2 |title=Cooper calls for incentives to improve home energy ratings |publisher=Government News Network |date=2006-09-21 |accessdate=2007-08-02 |quote=Energy Performance Certificates should be linked to incentives such as green mortgages - Yvette Cooper]

This part of the Home Information Pack is required in order to meet the requirements of the European Energy Performance of Buildings Directive. [cite web |url=http://europa.eu/eur-lex/pri/en/oj/dat/2003/l_001/l_00120030104en00650071.pdf |title=Directive 2002/91/EC, on the energy performance of buildings |publisher= Official Journal of the European Communities |date=2002-12-16 |accessdate=2007-08-02 |quote=|format=PDF]

Cost

Initially the cost of a Home Information Pack, including the Home Condition Report, was estimated to be around £600 by the Government. [cite news |url=http://news.bbc.co.uk/2/hi/uk_news/4933442.stm |title=Minister defends home info packs |publisher=BBC News website |date=2006-04-22 |accessdate=2007-08-02 |quote=The government says the packs will cost about £600 plus VAT and will make home buying quicker and cheaper.] This was to include the cost the of the postponed Home Condition Report, which is expected by the Department for Communities and Local Government to cost between £250 and £1000.Fact|date=May 2007. Industry now expects the Home Information Pack (excluding the HCR) to cost between £300 - £600 for the vast majority of properties in England and Wales. Naturally, for larger or more complex properties, the costs could be significantly higher. [cite web |url=http://www.thepartnershiplimited.com/html/hip_timing_cost.html |title=Home Information Packs - Timing and Costs |publisher=The Partnership Ltd |accessdate=2007-08-02 |quote=Single fees for a home condition report are not practical and larger properties will naturally be higher. Whilst the government has estimated a figure of £300 plus VAT, for larger properties the figure is expected to be between £750-£1000.] Some estate agents are offering HIPs for free, however homeowners should be vigilant and only sign up to these after carefully considering the small print. The Law Society has recommended that you use independent HIP providers to avoid being tied in or triggering penalty clauses. [cite news |url=http://www.directspace.co.uk/residential/home-information-pack/beware-of-free-home-information-packs.aspx |title=Beware of “free” home information packs|publisher=courtesy of [http://www.directspace.co.uk] |date=2007-08-13 |accessdate=2007-09-28 |quote=Its Deputy Vice-Chairman recommended using solicitors, rather than estate agents to compile an HIP...“then you can take it wherever you like” - Law Society]

The Government point out, however, that most of the items in the pack already have to be provided during the sale process, so this is not all an additional cost. [cite news |url=http://news.bbc.co.uk/1/hi/uk/4933442.stm |title=Minister defends home information packs |publisher=BBC News website |date=2006-04-22 |accessdate=2007-08-02 |quote=If you think about it, at the moment if a sale falls through another buyer comes along and pays for exactly the same searches, exactly the same legal requirements, pays for exactly the same surveys. You are paying for all of the same information again and again. That is a huge amount of waste. - Yvette Cooper] However the Council of Mortgage Lenders reported that their members were planning to insist on a separate valuation in addition to the Home Condition Report, while those purchasers requiring a structural survey would also have to pay extra.Fact|date=May 2007

For properties that have been on the market some time, it is likely that there will be additional costs incurred to bring the information in the HIP up to date.Fact|date=May 2007

Enforcement

Failure to provide a Home Information Pack, or supplying an incomplete pack carries a fine of £200. [cite web |url=http://www.homeinformationpack.gov.uk/pdf/070509ProceduralGuidanceforHIPRegs.pdf |title=The Home Information Pack Regulations 2007: Procedural Guidance |publisher=www.homeinformationpack.gov.uk |date=2007-05-11 |accessdate=2007-08-03 |quote=Regulation 35 set the penalty charge initially at £200.|format=PDF]

Enforcement is to be carried out by local authority Trading Standards Departments, however they claim that this is inappropriate as they normally regulate businesses, and that it would cost them too much to enforce through the civil courts. [cite web |url=http://www.lacors.gov.uk/pages/trade/GetBriefing.asp?ArtID=1118 |title=Home Information Packs Unenforceable, Warns Local Authorities Regulator |publisher=lacors.gov.uk |date=2006-07-18 |accessdate=2007-08-02 |quote=Trading Standards traditionally regulate businesses, not individual private house sellers... this is inappropriate as it would cost too much money to make it worthwhile pursuing such cases. - Geoffrey Theobald, LACORS Chairman]

On July 31, 2007 the Office of Fair Trading advised estate agents on their obligations. From August 1, 2007 estate agents in England and Wales that fail to comply with the new Home Information Packs regulations could result in a ban from estate agency work.Fact|date=August 2007

Industry and public reaction

On 15 May 2007 the Royal Institution of Chartered Surveyors (RICS) started Judicial Review proceedings against the Department for Communities and Local Government for what they regards as the department's failure to carry out a full consultation on HIPs. [cite news |url=http://investing.reuters.co.uk/news/articleinvesting.aspx?type=personalFinanceNews&storyID=2007-05-15T152244Z_01_HIL541572_RTRUKOC_0_BRITAIN-HIPS.xml |title=HIP's - Now the Government is taken to court |publisher=Reuters |date=2007-05-15 |accessdate=2007-08-02 |quote=The government is being taken to court over an alleged failure to consult properly on its controversial home information pack (HIPs) legislation.]

Despite their initial objections to the HIPs scheme, RICS now provide courses on Home Inspection and Domestic Energy Assessment, as well as courseware manuals for the professions of Home Inspector & Domestic Energy Assessor.

There are fears that the up-front cost involved may put off some people from putting their house on the market, [cite news|url=http://news.bbc.co.uk/1/hi/business/935739.stm|title=Concern grows over 'sellers' packs' |publisher=BBC News website |date=2000-09-22 |accessdate=2007-08-02 |quote=at a likely cost of between £500 and £700, 'sellers' packs' could make people in areas with low property prices more reluctant to sell, a study has found.] which may in turn depress the housing market.

The property industry has been largely against these changes. [cite web |url=http://timesbusiness.typepad.com/money_weblog/2005/11/hip_or_hype_1.html |title=HIP or hype? |publisher=Times Online Money blog |date=2005-11-18 |accessdate=2007-08-02 |quote=This week's announcement from the Government that HIPs will be introduced on June 1, 2007, was met with "disappointment" by the mortgage industry] but the government says the new system will leave all homeowners better off. [cite web |url=http://timesbusiness.typepad.com/money_weblog/2005/11/hip_or_hype_1.html |title=HIP or hype? |publisher=Times Online Money blog |date=2005-11-18 |accessdate=2007-08-02 |quote=£1 million a day is lost out of buyers' pockets in valuation, legal advice and searches on transactions that ultimately fall through]

The Council of Mortgage Lenders report that their members are not yet persuaded that the perceived consumer benefits will be achieved. They believe that the forthcoming introduction of e-conveyancing will have a much more positive impact.Fact|date=March 2007

The National Association of Estate Agents hold the view that the legislation is unnecessary, does not cover the important reasons why home sales and purchase transactions fall through, [cite web |url=http://www.naea.co.uk/about/latest_news_details.asp?id=248 |title=NAEA response to Government implementation on HIPs |date=2006-07-18 |accessdate=2007-08-02 |quote=The announcement today is something of a U-turn by the Government on legislation it has been working on for over five years. It calls into question the effectiveness of an HIP when the documentation included is now largely available online. The legislation would seem unnecessary and does not cover the important reasons why home sales and purchase transactions fall through] and that the cost is too high. [cite web |url=http://www.naea.co.uk/about/latest_news_details.asp?id=247 |title=NAEA comment on reschedule of opposition debate on HIPs |date=2006-07-17 |accessdate=2007-08-02 |quote=the 14 day delay is unnecessary, the cost is too high and that in its current form, HIPs will not prevent property sale transactions falling through.]

Britain's largest independent estate agency, Spicerhaart, initially called for a boycott of the home information packs scheme, [cite web |url=http://www.thisismoney.co.uk/mortgages/article.html?in_article_id=410968&in_page_id=8 |title=Boycott home packs, say agents |publisher=thisismoney.co.uk |date=2006-07-21 |accessdate=2007-08-02 |quote=without the mandatory inclusion of the home condition report... home information packs... will be of no value to consumers.] although has since revised this position to one of full support. [cite web |url=http://www.spicerhaart.com/news/PressReleaseDetails.aspx?pid=154 |title=HIPs move a step closer |publisher=Spicer Haart |accessdate=2007-07-17 |quote=By reducing the time it takes to sell a property, transactions are far less likely to fall through, reducing the stress considerably for everybody concerned - Stephen Nation, Managing Director for Haart]

In contrast, the introduction of HIPs was originally supported by "Which?", who believe that they could reduce the number of failed transactions resulting from problems that can be identified at an early stage. [cite web |url=http://timesbusiness.typepad.com/money_weblog/2005/11/hip_or_hype_1.html |title=HIP or hype? |publisher=Times Online Money blog |date=2005-11-18 |accessdate=2007-08-02 |quote=Despite industry whingeing, we need to embrace HIPs as a way of protecting home buyers. - Louise Hanson, head of campaigns at Which?] The organisation has since withdrawn its support following the Government's decision to postpone the introduction of Home Condition Reports. [cite web |url=http:http://www.which.co.uk/advice/home-information-packs-explained/index.jsp |title=Which? slams government over HIPs backtrack |publisher=Which? |date=2006-07-18 |accessdate=2007-08-02 |quote=The home condition report was an essential part of the HIP. It seems extraordinary that the first major decision by your new department is to reduce the consumer benefits of a flagship policy.... - Nick Stace, in a letter to Ruth Kelly]

Should the Conservative Party come to power at the next election, they currently plan to scrap the legislation, calling it 'expensive and deficient red tape'. [cite web |url=http://www.conservatives.com/tile.do?def=news.story.page&obj_id=130995 |title=Labour climb-down on Home Information Packs |publisher=The Conservative Party |date=2006-07-18 |accessdate=2007-03-04 |quote= [Michael Gove] said the Blair administration was slowly discovering that the HIPs project amounted to 'expensive and deficient red tape' ] Indeed, Conservative opposition to HIPs was instrumental in a defeat in the House of Lords, where peers voted by 186 to 160 in favour of abandoning the packs. This brought them in conflict with the Association of Home Information Pack Providers' Mike Ockenden. [cite web
url=http://www.mfgonline.co.uk/ccstory/24090/111/HIP_rejection_%E2%80%98no_bearing_on_implementation%E2%80%99.htm
title=HIP rejection ‘no bearing on implementation’
date=2007-07-21
publisher=Mortgage Finance Gazette
accessdate=2008-08-15
quote=While yesterday’s vote in the Lords was not fatal and will not hinder the government’s resolve to introduce HIPs as planned, it is disappointing that the Tories have once again made a political football out of HIPs. Clearly, Tory politicising is not going to get in the way of delivering this vital reform to the benefit of consumers and the environment.]

ee also

*Conveyancing
*British residential property market

References

External links

* [http://www.homeinformationpacks.gov.uk/ Home Information Pack] - government site
* [http://www.cml.org.uk/cml/policy/issues/1683 Home information packs - recent developments] - Council of Mortgage Lenders
* [http://www.communities.gov.uk/index.asp?id=1150984 The Home Information Pack] - Department of Communities and Local Government
* [http://www.opsi.gov.uk/si/si2006/20061503.htm The Home Information Pack Regulations 2006] - Office of Public Sector Information
* [http://www.propertycodes.org.uk/hipcode/index.html HIP Code] - Property Codes Compliance Board