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The Problems With Home Information Packs(HIPs): Intention, Reality and Solutions.

A Guest Blog by Rob Hailstone of the Bold Group

Recent HIP Survey Results

I have had just under 200 responses to a recent Hip survey. Of those who responded, 40% were solicitors or licensed conveyancers, 26% were estate agents and 34% were surveyors, Domestic Energy Assessors (DEAs) or other property professionals.

Over 80% believe that:

• Adding additional documents to a pack, such as planning permissions, building regulation approvals and guarantees would help speed up sales.

• Developing and introducing a nationwide conveyancing protocol would make transactions quicker and less stressful.

• A less expensive, more comprehensive pack, allowing first day marketing should be introduced.

• A solicitor or conveyancer should be instructed when a property is first marketed.

And over 75% believe that:

• Hips should be adapted and renamed.

Hips were introduced in order to make home buying and selling:

• Quicker and more efficient

• Less stressful

• More certain

• More transparent

• Less wasteful (it was considered that there were too many abortive transactions)

However:

• The time between offer to exchange has not reduced substantially enough, often enough

• The up-front pack price puts some sellers off marketing their properties altogether

• Pack compilation delays marketing for estate agents and sellers

• Searches go out of date, or are not accepted and are duplicated too often

• The compulsory ordering of packs in order to sell ones home is not ideal

• Some pack contents are not consumer friendly

• The conveyancing process is fragmented. The widespread use of different forms and procedures are often the cause of delays.

1. The time between offer to exchange has not reduced either substantially enough, or often enough

There is one main reason for this. The documentation contained in the pack is not comprehensive enough to make the pack as ‘exchange ready’ as the buyers solicitor would require.

• In most cases additional deeds and documents are referred to in the Land Registry title documents. Despite their importance to the sale and purchase of the property and the ease and relative cheapness of obtaining them, those additional deeds and documents are rarely included in the pack. Solution: Obtain them and add them.

• The Property Information Questionnaire (PIQ) is not comprehensive enough. The buyer’s solicitor will require, before he can advise his client to exchange contracts, sight of a far more comprehensive questionnaire duly completed by the seller. There are a number of different, acceptable, more comprehensive forms already in existence and use. Solution: Use a more comprehensive questionnaire.

• The pack does not contain copies of essential documents that the buyers’ solicitor would need to see i.e. Planning Permissions, Building Regulation Approvals and Guarantees etc. Completion of a far more comprehensive property questionnaire would encourage the seller to locate and provide copies of those documents if they have them in their possession. Solution: Ask the seller to provide copies of any they hold.

• The Searches are not accepted by the buyer’s solicitor or, within a relatively short period of time they can go out of date. Resulting in new searches being ordered causing both additional delay and cost. Solution: see 4 below.

2. The up-front pack price puts some sellers off marketing altogether

Pack prices are now very varied ranging from below £200.00 (plus vat), up to over £400.00 (plus vat). The average price is in the region of £250.00 (plus vat).

• The easiest way to substantially reduce the pack price is to make the searches voluntary and not compulsory. If that was done the price of the pack could reduce by as much as £150.00 (plus vat). Solution: Make searches voluntary.

• A new pack price, in most cases, of just over £100.00 (plus vat) is unlikely to put off any serious sellers marketing their properties. However, the sum is probably substantial enough to deter any time wasters (the so called ‘toe dippers’).


3. Pack compilation delays marketing for estate agents and sellers

The solution would be to allow some form of restricted marketing the moment the seller wants to market their property, subject to certain conditions.

• The seller or his estate agent should be allowed to verbally advise family members, individuals or small defined groups that the property is for sale.

• Once the pack order has been placed and paid for, or an irrevocable undertaking to pay for it has been made, full marketing should be allowed to commence.

• The pack should be ordered via and should be compiled by either a solicitor, licensed conveyancer or regulated or licensed pack provider.

4. Searches go out of date, or are not accepted and are duplicated too often

Solution the Local Authority and Water and Drainage searches should become a voluntary part of the pack. The seller should be advised by their pack provider, solicitor or conveyancer under what circumstances those searches should be included and what the benefits of including them might be compared to the risks of not including them. See Appendix one, attached.

Experience tells us that the results of a Local Search and a Water and Drainage search are unlikely to change within a twelve month period. The Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) should consider relaxing their rules on these issues and the use of search insurance or refresher searches should become more widespread.

5. Compulsory ordering of packs in order to market and sell a residential property is not ideal

No one likes legislation just for the sake of it. New legislation should only be created and used if all other possible avenues of persuasion have failed. However, introducing a new way of buying and selling property was always going to be difficult. The systems and processes we have now have been in place for decades and the industry responsible for carrying out the conveyancing process, the legal profession, is not renowned for being particularly modern or creative. Any new ideas or systems have taken a long time to develop and because they have been introduced voluntarily, have rarely, if ever, been adopted on a wide scale basis.

One wonders if the majority of us would be wearing seat belts now, or not smoking in public places without the legislation that was introduced. As Grant Shapps himself said on the 26th November 2009, “sadly a great scheme doesn’t necessarily equate to a great take-up.”

A sensible solution therefore has to be to introduce a period of temporary legislation, possibly for a period of eighteen months or two years. If a new way of marketing and buying and selling property has been made compulsory for that period of time and it proves to be beneficial to buyers, sellers and property professionals, the switch from compulsory to voluntary would be virtually seamless.

6. Pack contents are not consumer friendly

The Energy Performance Certificate (EPC), Property Information Questionnaire (PIQ) and Land Registry Plan are relatively informative and easy to understand for a prospective buyer. However, the copy deeds and the search results are, without legal knowledge, difficult to understand. The pack could include a legal summary and the searches could be made consumer friendly (work is being done on this at the moment). However there are two other issues to consider, firstly, not many buyers get to see the pack because either they don’t ask for a copy or the estate agent doesn’t offer the potential buyer a copy. Secondly, does it matter if the buyer doesn’t understand all of the information in the pack? As long as they get to see the EPC, PIQ (or the comprehensive property questionnaire) and the Plan that should assist. Their legal advisor will explain the contents of the other documents. What is important, is that the inclusion of the documents that will speed up and make less stressful the buying and selling process.

7. The conveyancing process is fragmented. The widespread use of different forms and procedures are often the causes of delays

Solution:

There are many local and regional coneyancing protocols in use in England and Wales and rather than re-creating the wheel we should endeavour to ‘join up the dots’, so to speak, so that a nationwide system can be put in place, sooner rather than later. A group of solicitors in the Plymouth area, called FastMove, have a system and a set of forms in place that work well. The FastMove solicitors are happy to share their documentation and experiences with other property professionals.

Quotes and Testimonials

Christine Jowett, property seller, Devon November 2009: “It really made sense to produce the ‘exchange ready pack’ when my property was first marketed as I was far less stressed at that stage of the transaction.”

Steven Kenton, YVA Solicitors, London, May 2009: “The ‘exchange ready pack’ provided for my client, incorporates additional documentation and replies to general enquiries and does appear to have had a beneficial effect. The only other documentation which has been requested by the buyer’s solicitors is the completion of a fixtures and fittings form.”

Justin Nelson, Nelsons Property Lawyers, Tenterden, November 2009:
Hips, in their current format, take no account of the individual property and its idiosyncrasies and are almost useless. A properly prepared, comprehensive pack would enable the buyer’s solicitor to report on a very large part of the transaction at a very early stage, highlighting potential problems and outlining the scope of any further investigations that might be needed.”

Anon, Solicitor, November 2009: “I attended a Law Society meeting on Thursday 26th November on the Future of Conveyancing and, in my opinion, they haven't got a hope of doing anything very positive. A lot of time was spent discussing a possible membership scheme with new protocols and a portal etc but they only received 55 responses to their recent consultation and only half of those were from solicitors' firms.”

Executive Summary

• Scrap Hips and replace them with a more comprehensive but cheaper property legal pack

• Allow limited (verbal) marketing the moment a seller decides to put their property on the market

• Allow full marketing once the pack has been irrevocably ordered

• Reduce the pack cost by making the searches voluntary and not compulsory

• Make it compulsory to include a completed far more comprehensive property questionnaire

• All packs should be compiled by solicitors, licensed conveyancers or regulated or licensed pack providers

• Work towards introducing a conveyancing protocol that will be accepted on a nationwide basis

• Consider the introduction and use of exclusitivity agreements or lock out agreements

• Consider making the ordering and compilation of packs compulsory for a temporary period only

Whatever the current Government does or any new Government plans to do, three basic facts are straightforward:

• Do not just scrap Hips and not introduce a new type of pack. The momentum of change that has been created must be allowed to continue.

• Radical changes and improvements to the way we buy and sell property will probably not, initially, happen on a purely voluntary basis.

• We are part way to creating a good practical solution too many of the home buying and selling problems. We need to learn from recent experiences and build on what we have now.

Appendix One

Search advice for residential property sellers – should you include them in you pack?

The inclusion of a Local Authority Search (which reveals, amongst other things, planning details and road proposals) and/or a Water and Drainage Search (which reveals, amongst other things, details of the drainage facilities and the water supply) in your Property Legal Pack is now voluntary. You should consider the following before deciding if you want to increase the pack cost and include either, or both searches:

The possible benefits of including searches in your pack:

The searches will be available to your buyer and their legal advisor either immediately or much earlier in the transaction, slightly reducing the likelihood of your sale being delayed unnecessarily and as a result your sale falling through due to possible delays in obtaining the searches.

The possible risks of including searchers in your packs:

By the time you find a buyer for your property the searches may be considered to be out of date. Some mortgage lenders will not allow buyers to rely on the results of searches when those searches are over three months old.

Depending on the type of Local Authority Search you obtain (a full official search (compiled by the Local Authority) or a personal/private search (compiled by a search agent)) some buyer’s legal advisors and some lenders may not accept them.

Matters to consider:

If you are in a hurry to sell your property and you want to try to eliminate as many chances of the sale aborting as you can and you don’t mind paying extra for your pack then including the searches up front could be in your best interests. However, you must bear in mind that the searches you have obtained and paid for might not be relied upon by the buyer’s legal advisor, the buyer or their lender. However, if they are not relied upon the responsibility for obtaining and paying for new searches will lie with your buyer and not you.

Rob Hailstone is the founder of HIPAG and the Bold Group  and an acknowledged authority in the buying and selling process and an expert on legislation surrounding HIPs.