Home Information Packs (Hips)

What are home information packs

From August 1st 2007 anyone marketing a property in the UK, or their representative, had been legally required to produce a home information pack (HIP) for the prospective buyer.

However, the new Conservative/Liberal Democrat coalition government elected in May 2010 announced that HIPs would be abolished. The requirement for sellers to provide a Home Information Pack was suspended with immediate effect from 20th May 2010 pending primary legislation for a permanent abolition.

But sellers would still be required to commission, though not necessarily to have received, one element of the packs – the Energy Performance Certificate – before putting their homes on the market. The new government said it would consider how the EPC could play its part in the drive for a low carbon and eco-friendly economy.

HIPs, sometimes called Seller’s Packs, were included in the provisions of the Housing Act 2004. They contained:

Home information pack index
Sale statement
Standard searches
Evidence of title
Energy performance certificate

Sale statement

The sale statement included:
The name of the seller and the address of the property being sold
Whether the property was freehold, leasehold or commonhold
Whether the property was registered or unregistered
Whether or not the property was being sold with vacant possession

Standard searches

These included:
The local land charges register relating to the property being sold. If the search was carried out by the local authority, an official search certificate would be provided.
Other records held by the local authority on matters of interest to buyers, such as planning decisions and road building proposals.
The provision of drainage and water services to the property. The local water company or a personal search company could be used (however, the search had to comply with the HIP Regulations).

Energy performance certificate

Energy performance certificates show the official energy efficiency rating of a property. Their introduction followed from the fact that 40 per cent of the UK’s energy consumption arose from the way the country’s 25 million buildings were lit, heated and used.

All certificates are logged in a central database with a unique reference number. They are commissioned by the seller (or their agent) from an accredited energy assessor who visits the property to gather the relevant data, such as the construction and location of the house and relevant fittings.

The certificate assesses both environmental impact and energy efficiency on a scale of A to G, where A is most efficient and G is least efficient. Each are asset ratings – that is, they are based on the performance of the building and its services (such as heating or lighting etc) and not the appliances within it. The rating varies according to the size, age, location and condition of the building.

The certificate also contains recommendations for improving the buildings performance and contact details for the Energy Savings Trust, who sometimes give grants and discounts to those seeking to improve their homes.

Recommendations include low-energy lightbulbs, hot water tank jackets, loft insulation, cavity wall insulation and double glazing. It distinguishes between recommendations that cost under £500 and those that cost more.

Background

The Labour party was originally attracted to HIPs in order to reduce the practise of ‘gazumping’, where a seller accepts a second higher offer for their property after having already agreed to sell it to someone else. When research revealed that gazumping occurred in only two per cent of sales, the emphasis shifted to increased speed, transparency, consumer benefit and environmental advantages.

Around £350 million was said to be lost in the UK through house purchases that stalled due to problems found by buyers. The government believed that by regulating and enforcing the information available to buyers this amount should be reduced. Furthermore, instead of each provisional buyer commissioning individual survey reports, the information would be provided to them.

Meanwhile, energy performance certificates would make the environmental standard of the property transparent, and highlight to the buyer the financial incentives of increasing the property’s energy efficiency.

A proposal to introduce HIPs featured in Labour’s 1997 manifesto but they were not announced in the Queen’s Speech until November 2003.

The original regulations were laid in parliament on June 14th 2006, covering HIP definition, contents, assembly, authentication, exceptions and enforcement.

Four days later, the Department for Communities and Local Government announced which parts of the pack would be mandatory, and excluded the Home Condition Report from the list.

Revised HIP regulations were then laid before parliament on March 29th 2007. The new regulations reflected the outcome of the consultation in January, discussions with stakeholders, results from baseline research and feedback from ongoing area trials.

On May 22nd 2007, Ruth Kelly, communities minister, was forced to announce a delay in the introduction of HIPs in the House of Commons. They were finally introduced to four bedroom properties on August 1st 2007.

On September 10th 2007 HIPs were extended to all three bedroom properties and on 22nd November the new housing minister, Yvette Cooper, announced they would be rolled out to all homes in the UK.

Controversies

HIPs were originally intended to contain a home condition report – a form detailing the general condition of the property in plain English. Industry lobbying resulted in these forms becoming voluntary. The reports were to be qualified by home inspectors and there were concerns that neither the inspectors nor the database intended to hold their reports would be ready on time.

The cost of the HIP was estimated by the government to be somewhere between £600 – £1500, although this figure included the cost of the home condition report which became voluntary and would have cost between £250 – £1000. Also, many of the items in the pack already had to be provided in the sale process.

Properties that had been on the market for some time incurred additional costs due to the information having to be brought up to date. First time buyers were said to benefit the most from the scheme because they could access the information without having to pay for it.

The introduction of HIPs drew widespread opposition from various groups.

A House of Lords committee on the merits of statutory instruments produced a report in May 2007, after listening to evidence from a variety of property experts including the National Association of Estate Agents, Which?, the Law Society and the Royal Institution of Chartered Surveyors (RICS).

Lord Filkin, chairman of the select committee, said that he had “rarely seen such widespread opposition to proposals”.

Peers were critical of government claims that the packs would make home-buying easier or more transparent and claimed that energy performance certificates were an inappropriate way to implement EU legislation, which requires house energy ratings to be renewed every ten years.

Mike Ockenden, director general of the Association of Home Information Pack Providers, criticised the committee for only speaking to opponents of the packs.

Estate agency and legal criticism centred around the insufficient amount of time given to prepare for HIPs.

There were concerns that the up-front cost of HIPS put buyers off selling and depressed the housing market. The Council of Mortgage Lenders went on record saying its members were unconvinced of the proposals, and stressed the benefits of e-conveyancing instead.

The National Association of Estate Agents considered the legislation unnecessary, overly expensive and inappropriate. Britain’s largest independent estate agency, Spicerhaart, called for a boycott of the scheme.

One of the main concerns raised by the housing industry and legal bodies was that there were insufficient qualified people capable of assessing properties for energy performance.

The government flatly dismissed this objection. Yvette Cooper, housing minister, claimed between 2,500 and 3,000 fully qualified assessors would be ready for 1st June. But on May 22nd Ruth Kelly admitted to the House of Commons that although 3,200 surveyors had passed the necessary qualifications and 2,500 more were in training, just 520 had been properly accredited.

Ms Kelly also announced that sellers would be able to market a property having merely commissioned a HIP, rather than waiting for the complete documents.

The Conservative party had vowed to scrap the legislation should they win the next election, and that promise was kept by the new coalition government elected in May 2010. The move was described as “an important step at a point of fragile recovery in the housing market” and the new government claimed it would provide a saving for consumers of £870 million over ten years, giving sellers more money to spend in the wider economy.

Quotes

“This swift and decisive action will send a strong message to the fragile housing market and prevent uncertainty for both home sellers and buyers. HIPs are history. This action will encourage sellers back into the market, and help the market as a whole and the economy recover.”
Communities Secretary Eric Pickles, announcing the suspension of HIPs – May 2010

“We’re also showing our commitment to a greener housing market by keeping Energy Performance Certificates and making them more relevant in helping buyers make informed decisions on the energy costs of their new home.”

Housing Minister Grant Shapps – May 2010