Home information packs: Are you prepared?

By MoneyhighStreet Staff. Published on July 30, 2007 This post currently has no comments.

Selling up

Home information packs (HIPS) become a reality on Wednesday but there is still much confusion about who needs them and what they are so we try to shed some light on this confusing situation in this article.

What are home improvement packs?

Home improvement packs (HIPS) are designed to provide up front information about the ownership, results of local authority searches and the energy efficiency of the property to prospective buyers.

By providing this information, the Government hopes to reduce the high percentage of house sales that fall through between acceptance of an offer and exchange.

In its drive towards energy conservation, the Government has stipulated that each HIP must contain an energy performance certificate that is obtained from a qualified energy assessor.

The other key point to note is that, following a change of plan by the Government, only houses with four or more bedrooms, need a HIP.

From 1st August 2007 it will be illegal to market a house a house in England or Wales with this number of bedrooms without a HIP.

Where do you obtain the packs?

You will be able to arrange a HIP from estate agents, solicitors or specialist companies being established in some areas.

It will be possible to compile the packs yourself, though the energy efficiency report must be undertaken by a qualified assessor.

Home information packs are expected to cost at least £500 to prepare, with costs for leasehold flats, which require detailed legal scrutiny of more documents, expected to near £1000.

Penalties for marketing without a HIP

You can be fined £200 per day if you are discovered marketing a house that has four or more bedrooms, without a HIP, or cannot at least show that you have ordered a pack.

The fear or these penalties on the one hand, and the costs of preparing the HIPs on the other, is forcing sellers to find loopholes in the law.

Seeing an opportunity to discredit the unpopular HIPS, the Tories have helpfully offered some tips that may allow sellers to avoid paying for one of these packs.

When is a bedroom not a bedroom?

A key way to avoid purchasing a HIP is by reducing the number of bedrooms stated in your marketing material. Calling a fourth bedroom a study, or moving the bed out of one the bedrooms and calling it a “spare room” would obviate the need for a home improvement pack.

Be careful about this though. The Property Misdescriptions Act 1991 makes it illegal for an estate agent, or a private seller, to make false statements about a property, so you have to be careful how you describe each room to comply with this law.

Perhaps the most important reason to consider very carefully before understating the number of bedrooms to avoid a HIP, is that most buyers search for houses according to the number of bedrooms advertised.

Whilst an estate agent, in person, may be able to say that the “study” could easily fit in a double bed, users searching property web sites such as rightmove.co.uk often enter the number of bedrooms that they require.

You do not want to devalue your property, or make it harder to sell, just to save the £500 and the hassle of arranging a HIP.

Delaying the HIP preparation

Any house marketed before January 1st 2008 can be marketed as long as a HIP has been ordered. The HIP need not actually be compiled, although an energy performance certificate must be produced by the time of contract exchange.

If the housing market remains buoyant, it is entirely possible that a house might be sold before the HIP is completed, so the seller then need only pay a cancellation fee and the costs of the energy efficiency inspection and report. This could save the seller hundreds of pounds.

To our mind, though, a tactic like this may make a prospective purchaser wary. Why is the seller going to such lengths to avoid producing a HIP? A shortage of energy assessors and the time taken to compile all the information for a HIP may be the reason, but a seller would have to be careful about giving the wrong impressions.

Will home improvement packs be around for long?

Although there are some good intentions behind HIPS, many estate agents and property experts are predicting that introducing these packs will have a bad effect on the house market as delays and confusion, plus the additional costs of the packs, will make sellers lees eager to put their property on the market.

According to Trevor Kent, information contained within these packs could be used by local councils to re-assess council tax valuations and many aspects of the home such as conservatories, parking spaces and even the quality of the views recorded and made available to valuation authorities.

The recent changes in Government strategies about HIPS point to legislation that has many flaws and loopholes. Should the housing market stall when they are introduced and there be an outcry that shortages of qualified inspectors is slowing down, rather than speeding up house sales, maybe HIPS will be withdrawn entirely.

In the meantime, however, the law states that a HIP is mandatory if marketing your house with four or more bedrooms in England and Wales from Wednesday onwards.

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