Home Information Packs (Hips)

What are home information packs

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

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

Home information pack index

Energy performance certificate

Sale statement

Standard searches

Evidence of title

Energy performance certificate

Energy performance certificates show the official energy efficiency rating of a property. Their introduction follows from the fact that 40 per cent of the UK's energy consumption arises from the way the country's 25 million buildings are 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 lighbulbs, hot water tank jackets, loft insulation, cavity wall insulation and double glazing. It distinguishs between recommendations that cost under £500 and those that cost more.

Sale statement

The sale statement includes:

The name of the seller and the address of the property being sold

Whether the property is freehold, leasehold or commonhold

Whether the property is registered or unregistered

Whether or not the property is being sold with vacant possession

Standard searches

These include:

The local land charges register relating to the property being sold. If the search is carried out by the local authority, an official search certificate will 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 can be used (however, the search must comply with the HIP Regulations).

Failure to provide a HIP results in a £200 fine, with enforcement carried out by the local authority trading standards departments. There is some controversy over this, as the departments have objected to the task, citing the fact that they are designed to regulate businesses and that the costs of enforcing HIPs through the civil courts are too severe.

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 is lost in the UK through house purchases that stall due to problems found by buyers. The government believes 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 will be provided to them.

Meanwhile, energy performance certificates will 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 weren't 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 will 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 has 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 is estimated by the government to be somewhere between £600 - £1500, although this figure includes the cost of the home condition report which has now become voluntary and would have cost between £250 - 1000. Also, many of the items in the pack already have to be provided in the sale process.

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

The introduction of HIPs has drawn 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 has centred around the insufficient amount of time they have been given to prepare for HIPs.

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

The National Association of Estate Agents considers the legislation unnecessary, overly expensive and inappropriate. Britain's largest independent estate agency, Spicerhaart, has called for a boycott of the scheme and the Conservative party has vowed to scrap the legislation should they win the next election.

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

The government flatly dismisses 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 have passed the necessary qualifications and 2,500 more are in training, just 520 have been properly accredited.

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

Quotes

"We believe that the government need to take such criticism seriously and to do more if the market is to respond seriously."

Lord Filkin, chairman of the Lords select committee, 2007.

"They did not seek evidence from us or other bodies which are looking forward to the introduction of HIPs."

Mike Ockenden, director general of the Association of Home Information Pack Providers.