Home Information Packs - They will be Introduced on 1st June 2007

The way transactions are conducted for residential properties has been under review by various Governments for a considerable number of years. Finally, a conclusion has been reached. Radical alterations to the home buying process are being introduced under The Housing Act 2004. The latest news from the Government is that Home Information Packs (HIPs) will be mandatory when selling a residential property as from 1st June 2007.

Many points of practice remain unresolved but the following is a useful guide as to how HIPS will work:-

What is a HIP? The principal contents of a HIP will be:

a) A sale statement - describing the property being sold. b) Forms the seller can use to give more information about the property and fixtures and fittings. c) Evidence of Title - from the Land Registry or copies of the deeds to the property. d) Replies to standard searches - such as planning permissions, Building Regulation approvals, road schemes, water and drainage. e) Warranties and guarantees for building work. f) A Home Condition Report including how energy efficient the property is - this is to be prepared by a licenced Home Inspector.

Why do we need them? The Government has introduced the Home Information Pack with a key objective 'to reduce the high rate of transaction failure' (ODPM). Statistics have been analysed to show that 1 in 4 transactions currently fails between offer acceptance and exchange of contracts.

The Pack is intended to provide a clear picture of the condition of the property and any legal difficulties/problems to reduce the risk of sales falling through. The Government has estimated that the current process of buying and selling costs consumers and industry £1m a day in wasted costs. In addition, it is thought that the HIP will speed the process up.

Do they apply to all properties? HIPs are not needed for commercial properties, or those with mixed commercial and residential elements. Other exceptions are tenanted residential properties that are sold with a tenant in residence and residential properties with leases of less than 21 years.

What will they cost? The Government, and its advisers, currently estimate that the HIP will cost between £600-£700 + VAT for the average home. Costs will vary according to the type of property and market forces when HIPs are introduced. The cost of the HIP will be met by the vendor selling the property. When and how this will happen is still fairly open. Three possibilities are envisaged. These are:- a) It may be paid in full when the property is placed on the market, possibly with a short-term loan agreement; b) it may be delayed and added to sales commission, although for most estate agents this would cause significant cash-flow problems; or c) it may be met by a mortgage lender and added to any new mortgage advance. The Government has left this aspect for the market to decide.

Who produces a HIP? There are a number of organisations gearing up to become pack providers and it is likely that they will be instructed through the estate agent specifically forming to supply HIPs. The component parts of a HIP will be put together, without the need for the home seller to instruct each of the professionals involved in providing the information. Parsons Son & Basley will have procedures in place to provide HIPs when marketing a residential property.

How detailed is the Home Condition Report (HCR)? The HCR is to be prepared by licenced 'Home Inspectors'. These Home Inspectors could be Chartered Surveyors, but may also be other people who have satisfied the process of qualification as a Home Inspector.

The report is to be in a standard format. The various elements of the building will be categorised in terms of their condition. It is intended that the level of inspection and detail within the report will be similar to that currently provided by the RICS Home Buyer Survey & Valuation. However, no valuation will be provided as part of the HCR.

Parsons Son & Basley are currently preparing for the changes. We will be able to offer HIP services when marketing residential properties. A number of our Chartered Surveyors will undertake the licensing process to become Home Inspectors prior to the introduction of the new scheme. In addition, we will continue to use our established local knowledge and experience to guide the parties through home purchasing/selling transactions. We will still provide survey and valuation advice in the way we always have.

FOR FURTHER INFORMATION ON HIPS TRY: WWW.ODPM.GOV.UK

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