Questions & Answers
Q. What is a Home Information Pack (HIP)?
A. A collection of documents, which will be required before you can sell a dwelling on the open market, the contents will include, copy Deeds, Searches, an Energy Performance Certificate (EPC) and possibly a Home Condition Report (HCR), which is the new type of survey and voluntary at this stage.
Q. What exactly will be included in the HIP?
A. The Home Information Pack Regulations 2006 set out provisions on the “required” and “authorised” content of the Pack. Required documents must be included in the pack where appropriate and authorised documents may be included at the seller’s discretion.
To address concerns that properties cannot be marketed without all the documentation available, a change has been made so that a Pack must be ordered before a property can be marketed and should include the following documents. These are as follows;
· An index (i.e. a list of the contents of the pack)
· Energy Performance Certificate
· Title Documentation
· A sale statement (summarising terms of sale)
· Standard searches (i.e. local authority enquiries and a drainage and water search)
· Where appropriate, commonhold information (including a copy of the commonhold community statement)
· Where appropriate, leasehold information (including a copy of the lease, information on service charges and insurance)
· Where appropriate, a New Homes Warranty
Where appropriate, a report on a home that is not physically complete
In addition to the above, other “authorised documents" can be included within the pack, these include:
· A Home Condition Report*
· Guarantees and warranties
· Other searches.
· Sellers can top up their Packs voluntarily to include full Home Condition Reports; these reports are based on a professional survey of the property and will be authorised documents. Sellers offering full Home Condition Reports will be more likely to benefit from swifter sales and suffer fewer transaction failures, as accepted offers are much less likely to be re-opened as a result of new information coming to light. The Government is working with stakeholders to facilitate the take-up of the full Home Condition Report.
Q. I thought HIPs were scrapped last year?
A. No, some changes were made, the main one being the fact that the Home Condition Report (or mini survey) became a voluntary document rather than a compulsory one.
Q. When will HIPs become compulsory?
A. The Government has decided the start date will be the 1st August 2007 for properties with 4 bedrooms or more and 10th September for 3 bedrooms. Smaller properties will be included as the number of Energy Assessors rises to meet demand. However, if your property is on the market before the 1st August you will not need to provide a HIP unless your property is still on the market without a HIP on the 1st January 2008. In other words there is a 4 month transitional period. Some estate agents and conveyancers are already offering home information packs on a voluntary basis. The Government wants to encourage this and would like forward looking property professionals to follow this lead. This will help pave the way for a smooth introduction of compulsory home information packs throughout England and Wales.
Q. Who will pay for the HIP
A. The seller of the property will be expected to pay for the HIP. Although depending on the set up of the pack, a number of payment options will be available including up-front or deferred payment; this will be at the discretion of the pack providers.
Q. How long will it take to compile a HIP?
A. It is anticipated that most freehold HIPs, will be compiled within 5 working days. Leasehold may take longer. A vacant residential property cannot be marketed without a HIP.
Q. Why are HIPs being introduced?
A. A number of reasons:
Within the next few years, all residential properties should have had an energy efficiency assessment carried out on them in order to comply with an EU directive. The result of that assessment should mean that those properties will become more energy efficient, cheaper to run and release less harmful emissions into the atmosphere etc. The Government also wants to improve the condition of our housing stock.
In addition, the Government wants to make the home buying and selling process more transparent, quicker and less stressful.
Q. How long will the complete Pack be valid for?
A. The Home Information Pack is valid whilst the home is continuously marketed for sale, and the Regulations allow for a period where the property might be taken off the market whilst, for example, it is under offer or to allow a seller to change agents. Originally, if a property was taken off the market for 28 days, a new HIP was required. Now, a new HIP is required only if the property is taken off the market for over a year after the original marketing date.
The main time-sensitive items in the Home Information Pack are the local searches. These are acknowledged by some to be valid for six months, although advice should be sort from your conveyancing Lawyer.
The majority of sales complete within six months under the current process and The Government expect the Home Information Pack to shorten the time between offer acceptance and exchange of contracts.
Q. Are HIPs needed at auctions?
A. Yes. People buying at auction need reliable information just as much as anyone else.
Q. Is there an impact for Right to Buy (RTB) properties? Who would have responsibility for it?
A. RTB properties are excluded from Home Information Pack legislation as the property is not being openly marketed. However, the Department for Communities and Local Government is examining the scope for adopting Home Information Pack principles for such sales and thereby providing reassurance to people exercising their Right to Buy.
Q. Are there shared ownership implications?
A. A shared ownership property marketed for sale would require a Home Information Pack.
Q. Who is liable for the information within the pack?
A. The competent provider is liable for any misinformation within the pack. For example, search provider for searches, Home Inspectors for Home Condition Reports, seller for property information form, etc.
Q. Once a HIP is produced, who has the responsibility for ‘policing’ the expiry dates, and re-producing the expired components? Also, at what point after sale agreed would any of the components have to be re-produced, e.g. if expired 1 week before sale completes?
A. None of the Home Information Pack components will have an expiry date. The main required item in the Home Information Pack that is time-sensitive is the local search.
Q. What's wrong with the present home buying and selling system?
A. Government research shows that it is slow by international standards; is wasteful and inefficient, resulting in high rates of failed transactions; is particularly prone to delays and other problems during the period between offer acceptance and exchange of contracts; does not operate in the best interests of buyers and sellers; causes considerable frustration and stress.
Q. How will these changes help?
A. They are part of a package of complementary measures requiring action by everyone involved in the process. The package is intended to: ensure that buyers and sellers are better prepared and have as much information as possible right from the start; secure faster mortgage offers and search replies; reduce delays and uncertainties; help address a number of problems caused by delays, including gazumping and problems in chains.
Q. How will the HIP help first time buyers?
A. One of the biggest beneficiaries will be the first time buyer. They do not need to commission a pack. They will be able to make an accurate estimation of the real cost of the dwelling.
Q. Technology will transform the home buying and selling process without the need for HIP legislation.
A. Information technology and e-conveyancing are the key to ensuring that information can be obtained and exchanged quickly and economically, but these developments support the introduction of home information packs; they are not a substitute. The home information packs are still required to ensure that information is available up front at the very start of the transaction.
Q. What are the benefits of the HIP?
A. The home information pack will bring together at the very start of the process important information which at present is collected piecemeal in the days and weeks after an offer has been accepted. This will: help the seller decide on a realistic asking price; give the buyer the essential information needed to make a well-informed offer and proceed with the purchase; greatly reduce the risk of the terms having to be renegotiated due to later disclosure of information, e.g. about any defects; shorten the period of uncertainty between offer acceptance and exchange of contracts, thereby reducing the window in which gazumping and other problems can occur.
Q. What types of sales will be affected?
A. The requirement to provide a home information pack will apply to open market sales of homes with vacant possession. It is not intended to catch private sales, (e.g. to a member of the family, a neighbour or a friend) where the property is not offered on the open market, or sales of tenanted property where the home is not offered with vacant possession.
Q. Will there be any exemptions from the requirement to provide a HIP?
A. The home information pack obligation will not apply to non-residential property, mixed commercial (or industrial) and residential property, properties sold with sitting tenants and therefore unavailable for owner occupation or portfolios of properties.
Q. What are the HIP requirements for new conversions i.e. barns or a house that was converted into flats?
A. If individual properties are being marketed then they do require a Home Information Pack - the converted barn therefore does, and so do individual flats. Exceptions to the duties are set out in the Regulations.
Q. Why include a local search in the HIP?
A. The government has decided that these are important to home buyers and mortgage lenders. If problems are revealed, this can lead to further investigations and delays, possible re-negotiations or even transactions collapsing altogether. The purpose of the home information pack is to introduce transparency into the system by exposing potential problems and transaction threatening information right at the beginning of the process. The local search is an important component. It is a check against other components of the pack - the home condition report and the property information form. The search therefore needs to be available up front.
A seller will need an approachable Lawyer to advise on the implications of the legal element of the pack.
Q. But searches go out of date, will sellers have to renew them?
A. Search results are generally accepted for up to six months. However, sellers will not be required to renew a search after this period. As on-line search information becomes available nationally, buyers will be able, if they wish, to update the information quickly and economically.
Q. What are the advantages of including a Home Condition Report (HCR) in the HIP?
A. The home information pack will ensure that the necessary preparation is undertaken to enable the transaction to proceed smoothly. The aim is to ensure that any information that might delay or prevent a sale is available up front at the very start of the transaction. Late availability of condition information frequently causes problems.
Government research suggests that 43% of failed transactions do so as a result of problems revealed by a valuation inspection or condition survey after terms have been agreed. The cost to consumers can be around £1,000 per transaction. Moreover, even where transactions do not fail they are often delayed whilst renegotiations take place. In a chain situation the effects go well beyond those directly involved. That is why you may want to ensure that condition problems are identified up front.
There are advantages for both sellers and buyers. These include: helping sellers make decisions about how much to ask for their home, and give them the option of having any necessary work done or else getting quotes before they market the property. helping buyers make an offer, which reflects the true condition of the property, and avoid unexpected bills when they move in. For both seller and buyer there is much less risk that the transaction will be delayed or fail due to problems with the condition being revealed later.
Q. What will the HCR cover?
A. The home condition report will be an objective report on the condition of the property that can be relied upon by buyer, seller and lender. The report will be in a standard format prepared in accordance with national occupational standards. It will cover matters of importance to a buyer - the general condition of the property taking account of its age, character and location; how energy efficient it is; and any defects or other matters requiring attention.
Q. Will the HCR include a valuation?
A. No. Valuations are subjective and can vary over a short period of time. Government believes that including a valuation in the condition report would interfere with the usual bargaining process between buyers and sellers. Also, not all home inspectors are valuers. Estate agents are often in the best position to advise sellers on value, given their knowledge and experience of the local market.
Q. But only a minority of buyers currently have a survey?
A. The Government believe it is a false economy to buy a home without a professional report on its condition. It is important not to rely solely on a mortgage lender’s valuation inspection because it is not a report on condition. According to research by a major firm of estate agents, 18% of buyers who relied on their lenders valuation faced unexpected repair bills in the first four months of moving in to their new home. In 48% of these cases the bill amounted to £500 or more, and in 17% of cases the bill exceeded £1,000.
Q. But buyers won’t trust a report commissioned by the seller?
A. Only inspectors qualifying under a certification scheme approved by the Secretary of State will be able to prepare home condition reports. The scheme will be responsible for monitoring and auditing inspectors work to ensure that standards are maintained.
The home condition report will be an objective report on the condition of the property that can be relied upon by buyer, seller and lender. The report will be in a standard format prepared in accordance with the QCA approved national occupational standards so there will be no doubt what is required, and how it is to be carried out. To ensure that consumers are protected, inspectors will need to have suitable insurance which will be backed up by insurance of last resort provided by the certification scheme.
If inspectors fail to maintain the correct standard or act in a way that is partial to one party contrary to the rules of the scheme, their certification will be removed, and along with that their ability to produce HCR’s. Therefore, any inspector not complying with the scheme’s requirements would be jeopardising his/her livelihood, would risk being sued by buyer, seller or lender and risk losing his insurance. Given these safeguards The Government believes that buyers will have every reason to have confidence in the report. Research published in 2003 by the Yorkshire Bank revealed that fewer than two in ten house buyers said they would not trust a survey provided by the seller.
Q. A certification scheme for HCR’s and Energy Performance Certificates (EPC’s) is excessive government regulation.
A. Not at all. It is mainly self-regulation by the industry and other key stakeholders, all of who endorse the need for a certification regime to protect consumer interests. The government’s role will be to identify and evaluate the requirements of certification arrangements, and to vet any scheme presented for approval.
Q. The HIP will not deal with problems caused by chains?
A. Chains are an inevitable consequence of people wanting to co-ordinate their buying and selling. The answer lies in speeding up the process for each link in the chain. Two thirds of the respondents to Land Registry consultation on complementary proposals for e-conveyancing supported the idea of a "chain matrix" of linked transactions which would track the progress of all transactions in a chain, and add further transparency.
Q. Will sellers be able to use multiple estate agents?
A. Yes, although permission will be required to use the pack from the pack provider.
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