Property Investment

The ins and outs of HIPs

The introduction of Home Information Packs (HIPs) for all properties in England and Wales has caused controversy and confusion in the UK housing market. Mark Briegal, corporate associate of Manchester law firm Ralli, explains how to comply.

Why were HIPs introduced?

The Government first introduced HIPs in an attempt to speed up the conveyancing process in the residential market.

A HIP is a set of documents containing a range of property information, such as its energy efficiency and planning consents, and it must be organised before a home can be put up for sale.

The Government argues the packs are of huge benefit to buyers as they can find out important information about a prospective home from the outset, which can lead to future savings.

Critics however have claimed HIPs are hampering sales and deterring would-be sellers from putting their properties on the market. HIPs were made compulsory for all homes on 14 December 2007.

What should a HIP include?

A HIP is split into two parts – compulsory and optional.

Compulsory aspects are an energy performance certificate, a sale statement, evidence of title, standard local searches and water and drainage searches, and an index of what is included in the Pack.

Commonhold and leasehold information should also be included in the compulsory information where appropriate. Additional non-compulsory details include a home condition report, any property warranties or guarantees, copies of planning, listed building or building regulations and a legal summary. The issue for buyers is that the format of these searches is not specified and some lenders will not lend against documents not supplied in a specific form.

How does this differ from the old selling process?

Prior to HIPs, the buyer’s solicitor would obtain the searches for both the buyer and the buyer’s lender. Now these are provided in the pack, although some buyers and some lenders will still obtain their own searches.

Searches also lose validity after six months, so if a buyer is not found quickly the searches may have to be renewed. The Energy Performance Certificates are new. The Home Condition Report is optional. Many buyers will obtain a survey and all lenders will require a valuation survey.

What is an Energy Performance Certificate?

This is a measure of how energy efficient a house is. The scale is graded from A to G and the certificate includes recommendations on how you can lower carbon emissions as well as fuel bills. The Certificate is prepared by domestic energy assessors or Government approved home inspectors.

This is the only new part to the whole process, although most savvy buyers would spot that a large draughty old house would be less energy efficient than a newly built, double-glazed house.

What is a Home Condition Report?

This report, perhaps unsurprisingly given its name, informs a buyer of the condition of a property they are hoping to buy is in. The report is conducted by Government approved home inspectors.

This can be beneficial to sellers as it identifies problem areas in their home and has obvious value for buyers who are made aware of physical faults with the property.  If you are buying with a mortgage, your lender will probably want their own report.

How will Home Information Packs help the property process?

The idea is to minimise stress for both buyers and sellers by ensuring key documents are available throughout the process. This should mean more peace of mind and security for both parties. It will also make sales falling through less likely as people are aware of property condition, energy efficiency and other factors from the outset rather than discovering at survey and withdrawing their interest. In theory it may have little impact as buyers and lenders will want to conduct their own searches and surveys.

How do I get a Home Information Pack and how much will it set me back?

There is a multi-agency approach to this. Estate agents, lenders and specialist Pack providers can advise you. HIP providers, domestic energy assessors and home inspectors can be found through business listings. Packs are expected to cost about £350, which includes £100 for an Energy Performance Certificate.

Is there anything else I should be aware of?

Some people have called the packs a waste of money and have argued they have no real influence on the buying and selling process. Many buyers and sellers claim they have not seen documents ahead of exchanging contracts and moving.

Sellers should be aware the bigger the survey carried out, the higher the cost. This should come as no surprise but it is worth remembering as, if the lender decides your survey is insufficient, you will be left with an ineffective and costly HIP.

We would advise you to buy on price and many estate agents are offering deals to their clients, but do shop around. The final point worth bearing in mind is HIPs are only valid for six months. If your property fails to sell in that time, you are left with a useless, out-of-date and expensive pile of paperwork.

For more information about HIPs from Ralli, enquire through the fast facts nuimber below.

Fast Facts 44460