Internet Newsletter for Lawyers
September/October 2006, by Delia Venables

HIPs will be business as usual
By Rob Hailstone

No one in the property business can say that we don’t live in interesting times!

After all the sound and the fury of recent tabloid headlines, and talk of a U-turn by the Government, the present position is that HIPs will still be compulsory on the 1st June 2007 (now less than 9 months away). However, it will not be mandatory, at that time, to include in the HIP a Home Condition Report (HCR). If no HCR is included then a stand-alone Energy Performance Certificate (EPC) must be included. Those are the only significant changes that have been made. However, the government reserves the right to make the HCR a compulsory element if industry fails to make a success of the roll out of HCRs.

What this means is that, for a registered freehold property the HIP will have to contain (at the very least):

  • The Index
  • The Sale Statement
  • Official Copies and File Plan
  • An HCR or an EPC
  • A Local Search
  • Water and Drainage Searches

    For unregistered, leasehold or commonhold there will be a large number of additional documents. The average registered freehold HIP is still likely to be over 80 pages long and will contain a certain amount of graphics, maps and colour pages, thereby making it difficult for people who lack the necessary computer facilities to compile it and send it out either electronically or in personally branded, professional, hard copies.

    Two-tier HIPs

    At Hipag (see www.hipag.co.uk) we will still adopt our strategy of compiling a ‘quick pack’’ (one with enough documents in it to enable marketing to commence quickly) and our member firms will, while the property is being marketed, make that pack comprehensive by obtaining any other documents that may be needed in order to speed up and make the conveyancing process less stressful. We will endeavour to make sure that the ‘quick pack’ contains replies to the Home Use Form (or whatever form is eventually prescribed) and replies to a set of Standard Additional Enquiries. We will still provide our unique Fast Track Hip and Free Hip Appraisal services.

    The only difference for Hipag is that we will now be able to offer two types of HIP, a One Star HIP, with an EPC in it, and a Two Star HIP, with a full HCR and an EPC in it. We will let the consumer decide (in most cases having been given advice by an estate agent) which HIP they want.

    HCR will benefit 70% of buyers

    Some HIP pundits are welcoming the absence of the HCR, personally I don't. It has been proven, by a number of companies over recent years that selling a property with a Pre-Sale Survey, greatly reduces the likelihood of the sale falling through. Some HIP pundits still insist on saying that the HCR will not be relied upon by the buyer. In my opinion, it will. Firstly, because less than 30 per cent of people who buy a property have any type of condition report carried out at all. On that simple basis, 70 per cent plus, of all buyers will be better off. Secondly, because the Home Inspector (HI) will be properly trained, well qualified and insurance backed, their liability will extend to the seller, the buyer and the lender.

    MOT's for homes

    I liken the HCR and the HI to an MOT and a mechanic. When we buy a second hand car it usually has a current MOT to ensure that it is safe and roadworthy. As buyers of second hand cars we do not often know how reputable and competent the garage is who carried out and issued the MOT. Yet we are prepared to rely on the MOT and drive our families at speeds of up to (and often over!) 70 MPH. Are we saying that our hard earned money and the property we live in are more important to us than the safety of our families? Of course not, it is just that we are familiar and comfortable with the MOT, as we will be one day with the HCR -- So long as we give it a chance.

    So, which HIP will offer the best value for money, the One Star HIP or the Two Star HIP, bearing in mind that the Two Star HIP will only probably only cost a couple of hundred pounds more than the One Star HIP. Picture this, two nearly identical houses for sale in the same road at similar prices. As a buyer, I would certainly be more confident making an offer on a property that can boast an HCR rather than just an EPC. As a seller, I would be more confident accepting an offer knowing that my buyer has seen the HCR and is, therefore, less likely to try to re-negotiate or even withdraw that offer later on during the proceedings.

    'In-house' production needs huge resourcing

    I know from my talks within the industry that some solicitors’ practices are still adopting a wait and see attitude to HIPs while vaguely planning to produce them in house. I wonder how many solicitors who think like this have really considered what will be involved in compiling and printing HIPs? As previously mentioned, a pack will typically be at least 80 pages long and some sections must be printed in colours to identify them. There will be extensive graphics and tables - making files many megabytes long. If there is a lot of interest in a property, then any number of copies may be required. Producing them is going to take significant computer and printing facilities to keep up with the demands of regular production. And solicitors who can’t keep up are unlikely to receive many fresh instructions from estate agents.

    Curiously enough, the government’s latest announcement on HIPs has thrust solicitors even more into the limelight than ever. Without the Home Condition Report, HIPs will now comprise almost entirely legal documents and their compilation and interpretation is going to be a job for lawyers. The message is simple: don’t ‘wait and see’ - start taking action now and join Hipag!

    Rob Hailstone is a residential property conveyancer with 25 years experience. He set up HIPAG, www.hipag.co.uk, 2 years ago for two main reasons: to ensure that the public would be able to obtain a high quality Home Information Pack and to help the High Street solicitor survive the changes that are imminent. Rob is CEO of HIPAG.

    Email rob@hipag.co.uk

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