Oven-ready chips? Exchange-ready HIPs!

In an earlier post, I commented that the latest "improvements" to HIPs would not in fact make them more useful. What is needed (IMO) is a cultural change, so that sellers, agents and solicitors accepted that, however badly-thought-out (by civil servants and poloticians) HIPs are, the property professionals can make them work and use them to benefit buyers and sellers

If, instead of going for the cheapest HIP - which probably adds alsost nothing to the efficiancy of the conveyancing process - sellers could be persuaded to commission a HIP that would contain everything that a buyer could reasonably want before exchanging contracts, the only things that would prevent immediate exchange of contracts (and certainty) would be (a) the buyer getting a mortgage offer, (b) the buyer selling his or her own home (if needed) and (c) the seller having somewhere to move to

Exchange-ready HIPs would have -

• official search results, not personal ones which are not acceptable to all lenders
• a comprehensive set of property information, not the half-baked pointlessness that is the Property Information Questionnaire
• even a seller's survey by a real surveyor

If done properly, that would cut out delays, removing the opportunities for gazumping and gazundering, and actually achieve the objective the government said it had when it originally introduced HIPs

Will it happen? Only if enough people insist on quality work rather than the cheapest possible price

Uh-oh! Here comes trouble! (With added acronyms)

6 April 2009 is coming – the date from which house (and flat) sellers must have a complete Home Information Pack (HIP) in place before their property can be marketed

The HIP must contain –

• an index
• an Energy Performance Certificate (EPC) – or, for newbuilds, a Predicted Energy Assessment (PEA) - though marketing can start without these documents 14 days after their request if they are not yet available but are expected to be available within 28 days of the original request
• a Sale Statement
• a Property Information Questionnaire (PIQ)
• for registered properties, official copy registers and title plan; for unregistered properties, a Search of the Index Map (SIM) and an Epitome of Title or Abstract of Title
• for leasehold properties, a copy of the lease, or confirmation that it has been requested and is expected within 28 days
• searches: a local search and a drainage and water search or confirmation that those documents have been ordered and are expected within 28 days

There are two new elements. The first is the requirement to have a HIP in place, not just commissioned, before marketing begins. The other is that the HIP must include a PIQ.

There are different versions of the PIQ for existing homes and for new homes - a new home for these purposes is a home that is being designed or constructed or which has never been occupied. – and different versions for freehold and for leasehold properties.

The forms produced by the government do not have to be used; so long as the same information is collected. This gives those who want to prepare a more comprehensive HIP an opportunity to make the PIQ more useful than the minimal form would be, but the current trend with HIPs is to do as little as possible to comply with the legal requirements, rather than as much as possible to expedite the sale process, so I will not expect anyone to try very hard to improve on the “basic” PIQ.

It should take most sellers less than ten minutes to complete the basic PIQ for freehold properties, but completing even the basic PIQ for leasehold property will be a longer, more daunting process.

The PIQ says, “The Property Misdescriptions Act 1991 (PMA) does not apply where the form has been completed solely by the seller.” There is, therefore, a clear implication that an agent who helps a seller complete the PIQ could be liable for property misdescription if the PIQ contains errors. Accordingly, it would be best for the estate agent to get the seller to complete the PIQ alone, or to get the HIP provider to deal with it or to enlist the assistance of a local solicitor or conveyancer.

Most sellers will, after some initial grumblings, complete the freehold part of the PIQ without too much resistance. However, the leasehold part is another matter completely and I anticipate that many sellers may feel the need to speak to the solicitor or conveyancer who acted when they bought the property. Be prepared for this.

(My thanks to Rob Hailstone, CEO of HIPAG – excellent HIP providers – for his assistance to me in producing this note. Any errors are mine!)

Home Information Packs

Setting to one side (for now) the inept way in which Home Information Packs (HIPs) have been introduced, and assuming (for the sake of this post) that they are, if properly implemented, a Good Thing, the changes that will take effect on 6 April 2009 are likely to have a significant impact for sellers, buyers, estate agents and lawyers. To take a couple of points -

1: The HIP will need to include a Property Information Questionnaire (PIQ). This must contain some information about the property, but it is not clear why the specified information has been selected, and the PIQ will not remove the need for the seller also to supply full, relevant information about the property. It is therefore hard to see how the requirement for a PIQ improves the HIP system. However, it can make the system worse, simply because there will be yet another document needed to complete the HIP and (from 6 April) the agent cannot start marketing the property until the HIP is complete

2: OK, so the PIQ is not difficult to complete, but I anticipate that a lot of sellers will put it to one side, if allowed to, and then complain that the marketing of the property has been delayed! To avoid that, the agent may decide to help the seller complete the PIQ - thereby risking a complaint under the Property Misdescriptions Act if any details are wrong. So, the agent risks delaying the start of marketing or risks a misdescription complaint - what a choice! The solution is (in my biassed view) to pass the responsibility on to the seller's conveyancer: if the seller uses a local conveyancer, the agent can encourage them to pop in to their office to complete the form, minimising the delay and the risk of liability

Or am I wrong? Are HIPs a great improvement, made still better by the PIQ?