Home Information Packs (HIPs) explained
Posted by markharrison on November 19, 2007
Home Information Packs are with us, at least as far as larger houses marketed through estate agents are concerned.
You need to provide a HIP if:
- You are MARKETING a property AND
- That property is in England or Wales AND
- That property has three or more bedrooms
The intention is that, once enough inspectors are recruited, they will be rolled out to all properties, presumably with two-bed places next. The government are saying that they will need about 3,000 inspectors total, but as well as the absolute number, will need to make sure that they are spread evenly across England and Wales.
[UPDATE: Since this article was written, they have been rolled out to ALL PROPERTIES]
The key word is MARKETING. A HIP is required if a property is advertised. This is, for most sellers, through an estate agent, but does not have to be. Under the terms of the Act, even a FOR SALE sign in the window is enough to require a HIP.
What this means, of course, is that, from a sellers perspective, if they are responding to a WE WANT YOUR PROPERTY flyer or ad, then it could be argued that they are not marketing their property. So a HIP is not required. For someone on the verge of bankrupcty, this could be another good reason driving them away from Estate Agents, into the hands of direct buyers. So those of us who use direct sourcing techniques are finding that the playing field is being tilted in our favour by this legislation!
So in fact, for the investor, they are more of an issue when (if) we sell than when we buy.
The Packs are somewhat watered down compared to the original proposals. They MUST contain:
- An Energy Performance Certificate
- A sale statement
- Standard searches
- Evidence of Title
- For leasehold properties, lease-related information
- An Index showing what’s included and what’s being looked for!
To take those one by one:
1: Energy Performance Certificate:
If you have bought a new appliance recently, you will have seen something similar. A little graph with A in Green at the top, down to G in red at the bottom, with the As using less energy.
The HIP versions are a little more sophisticated – they have two scales, one for energy efficiency (which tells you how much the house / flat will cost to run), and one for enivornmental impact.
In addition, each scale has two entries – one for the property as it is now, and one for what the property could be if it were
Whether people will actually be put off buying properties because of their energy efficiency has yet to be seen. The Government are, obviously, hoping that make the information so in-your-face will encourage people to make improvements now.
Of course, it is not clear whether it will actually be possible to make these improvements, since one of the suggested improvements on the Government website is covering 25 per cent of the roof with solar panels… which may require approval… which may not be forthcoming in some areas, but heh!
2: A sale statement
This is a fairly basic document, showing the address, whether it free- lease- or common-hold, whether it is registered or
unregistered (anything sold in the last few years will have been registered, but this only became mandatory in the last ten years), whether the property will be sold with vacant possession, and who is selling it.
3: Standard Searches
These must include the charges certificate from the Local Authority, as well as any other records like planning decisions or road-building schemes that the Local Authority provides.
This part of the HIP must also include information (in a particular format) about who provides drainage and water to the property. The local water company (or both, if, like me, you have a different company responsible for your water and your drains) can provide this.
4: Evidence of Title
Where a property is registered with the Land Registry, this must be the most recent copies of the Property Register, the Propietorship Regsiter, the Charges Register (if there is one), and an official copy of the title plan. The Land Registry can supply all this.
Where the property is not registered, then other documents will need to be provided, including a Certificate of Official Search from the Land Registry.
5: The Index
…. which is, fairly obviously, an Index of what is included.
If any of the required documents are missing, the Index has to give a reason why, and show what steps are being taken to find them.
In addition to the compulsory documents above, there are some optional ones, including the much-discussed Home Condition Report.
The HCR is the piece that was going to be mandatory, and basically amounted to a structural survey. As you might imagine, this was not going to be cheap, and only made sense if you could then assume that mortgage companies would accept it, and not require a separate survey of their own. A huge number of mortgage companies made it clear that they were not prepared to do this, and would still require a survey from a valuer on THEIR panel… and hence, summer last year, there was quite a change to the HIP regulations.
Considering that the HCRs were the biggest part of the HIPs, this led to all kinds of HIP Replacement puns, which you can work through for yourselves.
Other optional documents included things like lists of which contents would be included, details of rights of way, flood risk documents, mining risk documents, and so on.
In fact, all the documents that mortgage lenders insist on anyway.
Overall, the HIPs felt like a good idea – the original point was to protect potential buyers in three ways:
- By making sure that they did not get any nasty surprises AFTER they had agreed, and once the BUYERS had started spending money.
- By stopping people joke-marketing their properties, with no real intention of selling, and wasting everyones time.
- By meaning that the key documents only had to be paid for once, by the seller, rather than potentially several times by competing buyers.
Looking back on them now, they feel like a relatively pragmatic set of documents. I remain to be convinced that the Government mandating the format of some documents is inherently better than getting the industry professionals to, but that is a relatively minor point.
Overall, though, the key point is still about MARKETING properties.
If a vendor is responding directly to you, and that vendor cannot afford a HIP themselves, then this is another benefit you can offer them.
However, I cannot help but feel that some investors will use this as a tool to exploit the most disadvantaged sellers into accepting even less. Such appears to be the way of well-meaning legislation.