Home information packs

The panacea to simplifying house purchase procedures?

Nothing new

In 1999, the government published its report The Key to Easier Home Buying and Selling which led to the abortive Homes Bill 2000 and, later, the Housing Act 2004, with Part 5 of the 2004 Act containing the legislative framework for HIPs.

The idea of requiring information to be collated in advance of the marketing of a residential property was, however, nothing new.

Margaret Thatcher’s 1983 general election manifesto contained a commitment to “simplify house purchase procedures” and New Labour’s 1999 report updated ideas that had first been suggested in reports commissioned by the Thatcher government in the 1980s.

The thrust of the 1999 report, though, had less to do with simplification of the conveyancing process, and more with the abolition of ‘gazumping’ the, then, bête noire of the popular press.

Diverted attention

Even by 2003, though, the government remained fixated with the phenomenon of gazumping.

The first paragraph of its consultation on HIPs published that year concluded:

“Research shows that although the [domestic conveyancing] process is cheap by international standards when things go smoothly, it is often affected by delays and transaction failure, is a cause of great stress and anxiety and a contributory factor in the incidence of problems such as gazumping.”

With the passage of time, however, the press has diverted its collective attention elsewhere.

Government, not for the first time, followed suit and, subsequently, the implementation of the HIP project become no longer an attempt to buck the market.

Instead it set out to become the basis by which the Conservative party’s 1983 manifesto promise was kept – albeit a quarter of a century late and by a Labour government.

Contract law

The fundamental problem with simplifying domestic conveyancing is contract law.

A prospective seller is not legally bound to sell, nor a prospective buyer legally bound to purchase, a property until contracts have been exchanged.

HIPs have evolved with the intention of removing the inherent delays in the process of proving title and the provision of information and searches in order to limit the time once an offer is accepted (“subject to contract”) before contracts could safely be exchanged.

Transactional failure

Government argued that the prime cause of transactional failure in the housing market was house condition issues.

Reducing the incidence of failures, thereby improving the process, provided a powerful argument for making Home Condition Reports (HCRs) compulsory.
That, it appears, was the high point of the HIPs project.

In July 2006, however, the government’s policy changed dramatically. It decided that HCRs should no longer be a mandatory element in HIPs, although, it said, they could be voluntarily provided.

At the time, the government said that it was concerned to avoid duplication of cost for consumers. It also recognised that its own timetable for implementation had left insufficient time to train enough inspectors to meet the demand for production of the requisite numbers of HCRs.

According to the report of the House of Lords Select Committee on Merits of Statutory Instruments, published on 1 May, this policy change has caused the wheels to well and truly fall off the HIPs project.

Considering the merits

The Select Committee had been considering the merits of the Home Information Pack Regulations 2007 and the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007.

The former prescribes the content of HIPs required for sales of residential properties from 1 June 2007, and contains information about energy efficiency and other provisions relating to HIP duties.

The latter requires the production of Energy Performance Certificates (EPCs) and contains recommendations for the improvement of the energy performance of buildings when constructed, sold or rented out.

Obviously the HIP Regulations under consideration by the Committee reflect the policy change that has meant HIPs would not have to include HCRs.

Whilst HCRs are no longer required to be included in HIPs, EPCs are.

Consequently, the Select Committee noted some properties could be required to have updated EPCs more frequently than every 10 years, going beyond the requirements of the relevant European Directive.

In the period since the government announced its policy change, the Lords said concerns have been raised by a variety of interested parties about the impact and effectiveness of HIPs as they are now proposed.

As a result the Select Committee took evidence, including from the Department for Communities and Local Government, on whether HIPs would “make the home buying process significantly easier or more transparent”, which had, of course, been the policy objective underpinning Part 5 of the 2004 Act.

In the preamble to its report, the Lords said that they recognised it is for government to determine “the final shape of the implementation of legislation, after listening to relevant views expressed, and subject of course to the appropriate processes of Parliamentary scrutiny and approval”.

In a surprising departure from protocol, however, the Lords thought fit to add the following caveat to its statement of the government’s implementation power: “We see it as inherent in our role of informing the House about the statutory instruments that we should refer to significant expressions of concern, such as have been made in relation to these Regulations.”

The government, the Lords said, has been roundly criticised by respondents to the Select Committee particularly regarding its approach to consultation on the post-July 2006 proposals.

Proposed changes

The Lords recognised that the criticism came from organisations which “represent members who are involved in current arrangements for property transactions and may therefore be expected to take a cautious view of proposed changes”.

But, they said, those organisations had been brought in by the government as its partners in the initial development of the HIP proposals. Implicitly, therefore, they suggest, the criticism was warranted.

The Law Society agreed that the decision to remove the mandatory HCR had undermined the whole purpose of HIPs. Additionally it told the Select Committee that linking EPCs to HIPs was inappropriate and the proposed measures “will, in fact, make the process more difficult, much more expensive and remove existing transparency from the marketplace”.

The government’s own evidence to the Select Committee was that, whilst it hoped to see significant voluntary take-up of HCRs, it acknowledged voluntary change is not powerful enough to bring about real improvements in the housing market.

The Lords said: “The comments on these proposals which we have received from interested parties show at best scepticism, and at worst hostility. The government has not been able to convince the principal stakeholders in the housing market that their proposals as they now stand are sensible or worthwhile, or are likely to be effective for their declared purposes; and they need to do more if the market is to respond positively to this intervention.”

Overdue process

There is no doubt that reform of the home buying and selling process is long overdue and HIPs will remain at the heart of that reform, in one form or another.

For consumers, HIPs will reduce transaction times and the number of transactions that fall through between offer and exchange. Additionally, they offer the propensity for greater efficiency, reducing abortive costs and should ameliorate the stress that currently plagues most transactions.

HIPs also offer benefits for all aspects of the domestic conveyancing ‘industry’, in particular speeding up transaction time and therefore reducing payment times.

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