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The regulations introducing
Home Information Packs have
come into effect and now
every residential seller will be
required to produce a home
information pack before a
property can be marketed.
Once produced, a prospective
buyer will be entitled to see a
copy on request. So what is a
Home Information Pack?
Watch Those Hips
Under the regulations the
Pack will consist of a
number of mandatory
elements and a number of
optional elements. This will obviously
determine the cost. The mandatory
elements include an Index, Energy
Performance Certificate, Local
Authority and Drainage Search, Title
Information and Plan and a Sales
Statement. Of the mandatory
elements the Energy Performance
Certificate represents the newest and
possibly most controversial aspect of
the Pack. The certificate represents an
assessment of the property from an
environmental perspective and will
score the property in relation to
energy efficiency.
The certificate will
also indicate the cost of upgrading
the property to improve its energy
efficiency.
All new-build properties should fall
into the highest score of energy
efficiency, but the vast majority of
other properties are unlikely to do so.
It is widely expected that the vast
majority of people will be unwilling
or unable to afford to upgrade their
property.
The seller of a property will be liable
for the cost of producing the pack.
This could range from £300 for a
freehold to £400 for leasehold.
However, many providers have
indicated that this would not be paid
for up-front, but rather from the
proceeds of the sale. This clearly
means that the balance of costs of
moving home has shifted in favour of
the buyer, more particularly the first
time buyer. If you are buying and
selling then the overall costs should
effectively balance out.
Why are the Government introducing
this scheme? The Office of the
Deputy Prime Minister said in relation
to moving home, “Currently this can
be a stressful and costly experience
which is prone to delay and failure.
From 1st June 2007 all home owners
in England and Wales will need to
arrange for a Home Information Pack
to be prepared before putting their
homes up for sale. ”The idea is to
bring a degree of stability to the
market and add certainty to
transactions. However, many estate
agents are using the introduction of
the Pack as leverage to entice as many
seller’s into the market before 1st
June as possible, creating the possible
danger of a sharp increase in sales
followed by a sharp decrease.
As with any new scheme there is a
degree of apprehension amongst
practitioners and academics, but the
scheme has already been tried on a
voluntary basis in different parts of
the country with some success.
Unfortunately, the trials may not
necessarily reflect the true nature
and effect of the packs on the market.
Nevertheless, the Office of the
Deputy Prime Minister says that
81% of consumers feel that Home
Information Packs is a good idea.
If this were true when stated, then
one wonders whether the sample
questioned was qualitative at all.
Fortune tellers suggest that once the
pack is introduced in June 2007 a
number of effects will arise. Firstly,
the number of first-time buyers will
increase as a result of the reduced
cost to them of the transaction
process. Secondly, there will be a lull
in listings (as there was in Denmark
when a similar scheme was
introduced there). Thirdly, the number
of listed long-term sales will fall. It is
not clear that any of these events will
actually happen. The housing market
is driven mainly by house prices and
mortgage rates, but the stability the
new scheme seeks to bring to
individual transactions will largely
depend on how providers sell their
packs to home owners. There are
many questions that will arise in June
when the Government meets its
timetable for the publication of the
Regulations and every home
owner should keep a keen eye
on the development of the scheme -
particularly given the political
uncertainty surrounding the
Government at the moment. The
questions are further fuelled by the
Conservatives, who say the packs
simply saddle sellers with additional
costs, while doing nothing to halt
gazumping or to help to speed up the
process of buying a house, and are
currently committed to abolishing the
scheme if elected, as part of a wider
policy on housing.
Clearly the dynamics of the housing
market are changing, and whilst
Denmark and the Australians in New
South Wales have systems that appear
to work well and have general
consumer approval, it remains to be
seen whether a scheme can be
successfully introduced in England
and Wales. With many agents and
lawyers not properly prepared there is
certainly going to be some interesting
reaction. However, the regulations will
only apply to a property which is
placed on the market from 1st June
2007, and any property already on the
market before then will be exempt.
Again, however, this will create two
tiers of properties in shop windows,
those with Packs and those without.
Since the Pack benefits the buyer both
in terms of cost and information, one
wonders whether a buyer looking at
two similar properties would put an
offer in for the one with the Pack in
the belief that there is more benefit
to them.
If you have any concerns about Home Information Packs and
want to find out more visit the following websites:
www.jahughes.com/hip.html
www.homeinformationpacks.gov.uk
J A Hughes is the oldest and largest firm of Solicitors in the Vale of Glamorgan offering Conveyancing services in all sectors of the national property market. They have developed a range of flexible HIP solutions to mmeet the requirements of the residential property market. |
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