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Home Information Pack

(Updated July 2006)

Overview

Fundamental changes are about to be made to the way in which residential property is bought and sold within the United Kingdom – The Housing Act 2004 comes into effect on 1st June 2007 and anyone buying or selling a house in the UK after this date will find that the process of buying or selling their home has undergone a substantial makeover.

At the heart of the changes lies the Home Information Pack or HIP, (also sometimes incorrectly referred to as the Seller’s Information Pack). The main significance of this is that in attempting to streamline the process of buying and selling a house, the seller will now be responsible for much of the legal and administrative work normally undertaken by the buyer or their solicitor. The aim of this is that the time-consuming assembly of all relevant information should be completed before a potential buyer even views the property that is being offered for sale.

The seller’s Home Information Pack already exists in other countries where is has been found to work well. In this country it was initially piloted in Bristol and it has since been tried in different regions across the country.

These changes have largely come about as a result of governmental concern regarding the existing process and its inherent flaws; at present around 30% of residential property transactions collapse prior to contracts being exchanged – a situation the government claims to be costing consumers around a million pounds every day. Where the transaction in question is part of a chain as is usually the case, this invariably results in delays, inconvenience and additional expense for a significant number of other buyers and sellers.

The current system lends itself to property defects and legal complications only becoming apparent at a late stage of the process and this serves only to increase the amount of time and money that is wasted should either party be unable or unwilling to proceed as a result of any such findings.

‘Gazumping’ – where the seller has agreed a price with a buyer and subsequently accepts a higher offer from another buyer - is an additional area of concern and is arguably more likely to occur where the time period between an offer being accepted and contracts being exchanged is excessive. It is also currently possible for timewasters to cause great inconvenience to all concerned since until contracts have been exchanged the buyer has no legal obligation to proceed with the purchase.

As part of the conveyancing process a number of enquiries are made by the buyer’s solicitor and these can take several weeks to be completed in some cases – longer if any findings require further clarification or investigation. Where a transaction falls through once this process is underway, any subsequent prospective buyer would have to arrange (and pay for) the same searches through their own solicitor and so not only is the work itself duplicated (along with any related costs) but a great deal of time is wasted.

Under the new Home Information Pack (HIP) system the onus is placed on the seller, who is responsible for making all relevant information available to prospective buyers - this will be compulsory from the date on which the new law comes into effect. While the costs to sellers will increase slightly as a result of their additional responsibilities the costs to buyers will decrease, though as most sellers are also buyers the cost will even itself out in most cases. First time buyers will certainly benefit as they will no longer have to bear the equivalent cost of a survey and searches on a property that they wish to purchase.

According to government research, 90% of those surveyed are dissatisfied with the existing arrangements for what is arguably the largest and most significant purchase of most people’s lives. A recent NOP poll shows support for the new Home Information Pack (HIP) to be around 82%, suggesting that the new system has strong public support.

Initial public support for the Home Information Pack may be overwhelmingly positive as these figures suggest, however the various professional organisations involved in the process have differing views though this is largely to be expected and their objectivity must be questioned. The estimated £350 million that is wasted annually under the old practices must be going somewhere - one can perhaps expect that many solicitors and surveyors fear that new practices will have a financial impact on their own businesses and that this is their primary concern.

Update

July 2006 - It would appear that despite initial commitment to the introduction of the HIP as above, the government has now watered down the proposals so that the survey, or 'Home Condition Report' which is arguably the most important component of the pack is now to be purely voluntary, certainly as far as the initial June 2007 launch of the pack is concerned.

This will (in the short term) address concerns that surveys commisioned and paid for by the vendor may not be completely unbiased, though this has not been the government line in terms of the apparent u-turn. Officially this element will be phased in over time following further 'dry-runs' and there are also concerns that the industry is not ready to adopt the changes in full - many mortgage lenders apparently do not have the required systems in place as yet to support the use of "Automated Valuation Models" and the government claims that it does not wish to inconvenience consumers by forcing a system upon an industry that is not yet ready to adopt it.

In reality it is probably safe to assume that significant pressure has been placed upon the government by the industry, in order to buy itself a little more time. The government's comments to the effect that they now regard the introduction of Home Condition Reports as 'market-led' seems to point to the timescale now being dictated by the industry to some degree. There are also concerns that the wider support infrastructure such as the required network of Home Inspectors is not yet in place.

It is now anticipated that the roll-out of the Home Information Pack will be phased and that this it will initially begin with the HIPincluding searches and the new "Energy Performance Certificate", which details the energy efficiency of a property and issues it with a grade between A-G (A being best) as have been allocated to domestic appliances for some years now. The requirements of the Home Information Pack will be added to over time with Home Condition Reports playing no mandatory part in the HIP at launch.

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