What you need to know

You will by now be aware of the introduction of Home Information Packs (HIPs) into the house buying process from 1 August 2007 but it may not be clear what this will mean to you if you are now planning to move home.

To try and help you, our Residential Property Team has compiled a list of frequently asked questions which are below:

Q: Why did the Government think we needed to change?

A: The government wanted to improve the home buying and selling process by insisting that the sellers of most residential properties prepare a HIP before their property can be marketed.

The idea was to offer more transparency early in the process so that a potential buyer could make an offer for a property based on factual information. The intention was to make transactions clearer, less stressful, quicker and less likely to abort. Unfortunately, as the Government decided to water down the HIP due to recommendations from some estate agents, lenders and surveyors, this may not have been achieved. The local estate agents we have spoken to say that they have had very few requests to see HIPS from potential buyers.

Q: What is a HIP?

A: In theory, a HIP is a pack of information that will contain useful information for a purchaser of a property. In practice, the HIP may be more useful to a buyer’s conveyancer, but in any event, usually the HIP will contain the following:

Whilst not currently a requirement, it remains possible that in future a HIP will have to include a Home Condition Report (HCR) (effectively a survey, commissioned and paid for by the Seller).

Q: How much does a HIP cost?

A: Costs vary depending on the HIP supplier, but Mayo Wynne Baxter’s approach is to charge our clients up front the cost of the component parts of the HIP, i. e. copy deeds, Energy Performance Certificate and searches, , and as we prefer to include official searches in the HIP, the cost will partly depend on the local authority for the area in which the property is situated. However, the usual, initial cost will range from about £240 to £400. In addition, we charge a modest fee for preparing the HIP, depending on whether we act later on the sale of the property.

Q: Who pays for the HIP?

A: The seller. Initially, it was thought that sellers might think carefully before putting their properties on the market because of the expense they would incur. Increasingly we find that sellers are willing to accept that the modest cost of the HIP is simply one of the prerequisites for selling.

Q: Has everyone been in favour of the change?

A: No. There was a large amount of opposition to the introduction of HIPs. Some estate agents said it would take too long to compile which would delay the marketing of properties. The Council of Mortgage Lenders expressed concern about the impact of HIPS on the property market although the Governments “watering down” of required documents has helped in this respect. Concerns were also raised in the early stages of HIPS about the training and regulation of Home Inspectors because of multiple certification schemes. However, Mayo Wynne Baxter is well served by a number of local, freelance Domestic Energy Assessors who we find are usually able to prepare the Energy Performance Certificate within 48 hours from receiving our instructions.

The Law Society and National Association of Estate Agents were concerned that the new HIPS requirements would restrict the number of properties coming on to the market, would affect prices and have an adverse affect on first time buyers in particular. One group which may be disadvantaged by the introduction of HIPs is the growing elderly population, who often sell to move into sheltered accommodation and pay for care. They will therefore have to pay for full packs, but are less likely to benefit from the scheme if they are not buying another property.

Renewed concern has arisen recently that the necessity for a completed Property Information Questionnaire to be included in the HIP after 06/04/2009 before marketing can take place, will cause delay for sellers.

Our view is that HIPS have not been particularly helpful, but it is difficult to assess their impact in isolation when the property market has been affected by other negative events over the past year or so.

Q: When do they apply?

A: HIPS commenced on 1st August 2007 for three bedroom (or larger) properties only. HIPS for smaller properties were introduced later, so that by December 2007 every property newly marketed has required a HIP with very few specified exceptions).

The Government extended the ‘first day marketing’ provision until the 5th April 2009, so up until then the HIP only had to be ‘commissioned’ (i. e ordered and paid for) to enable a property to be put on the market.

From 6th April 2009, the concept of 'first day marketing' no longer applies so the HIP has to be ordered and paid for but, in addition, basically all documents need to be included in it except the searches, provided they have been ordered (with one or two exceptions, and depending in effect on everything being expected to be in the HIP within 28 days from first day of marketing).

Q: Who needs to prepare a HIP?

A: Anyone who is selling a residential property (known as the “responsible person”) after 1 August 2007 will need to have a pack available for a potential purchaser and it will be a criminal offence to market a property without a pack. The estate agent marketing the property will be in a position to distribute the packs to interested buyers (if required).

In our view, there are advantages in asking us to prepare the HIP for you as:

BE CAREFULOF ACCEPTING FREE PACKS. There could be a hidden catch. Please remember we are able to prepare your HIP for you at a competitive fee and so as to retain your flexibility in relation to marketing the property.

Q: Does the responsible person have to supply a HIP to anyone who asks for a copy?

A: No, there are three occasions when a HIP does not have to be provided which are as follows:

These three situations are vague and the responsible person has to ensure that unlawful discrimination does not take place.

Q: Can the HIP be provided in an electronic format only i.e. by email (pdf file), CD or memory stick for example?

A: Only if the buyer consents otherwise a hard copy needs to be provided, within a 28-day period. The responsible person can make a reasonable charge for providing a hard copy. We now normally supply the HIP in electronic format via our MoveEasier V2 website.

Q: How long will the HIP last?

A: It is difficult to say but generally lenders will not allow conveyancers to accept searches that are more than 6 months old. Searches cannot be more than 3 months old when the property is first marketed. The shelf life of a HIP would seem therefore to be 3-6 months. This raises the question of a seller being expected to pay for fresh searches or Search Validation Insurance. In practice, much more likely is that buyers will end up having to obtain fresh searches at their own expense.

Q: How long will it take to compile a HIP?

A: We can usually advise your estate agent that the HIP has been commissioned on the day or next working day after we receive instructions, including payment.

Q: What types of properties do not require a HIP?

A: Some examples are tenanted properties, business premises, portfolios of properties, unsafe properties properties due for demolition and new properties.

Q: When is a property classed as being on the market?

A: When its availability, or possible availability, for sale is advertised or otherwise made known to the public or a section of the public in England and Wales. If the property were only advertised, perhaps by word of mouth, to a neighbour or friend (as opposed to ‘the public’) a HIP would not be compulsory.

If you require any additional information on HIPs or if you would like to speak to a member of our Residential Property Team please contact us at any of our branches. As with so many things "legal", HIPs can be a minefield of their own - please let us help you!