June 2008

HIPs — if only they were succeeding!

Withdrawal not an option — so dispensations are extended for six further months

ALTHOUGH there remains a goodly share of gloom and despondency, it is not totally universal despite the media-generated impressions.

I have been speaking to a few estate agents who are still doing some useful business, so conditions clearly vary.

Clearly, the Government must be worried now Housing Minister, Caroline Flint, has decided to warn us all that she at least is expecting house prices to fall further.

Presumably, her departmental public relations team was reluctant to release this dire prediction in a more formal press release – hence she allowed the press to read her notes.

Where she has been well advised, and more helpful, is in deciding to allow the interim relaxations to the Home Information Pack procedures to continue at least until the end of the year.

Admittedly, many people — and professional organisations — were advising this move and it was strongly advocated in an e-petition, organised by Nick Salmon of the anti-Packs pressure group SPLINTA (Sellers Pack Law Is Not The Answer), drawing around 10,000 signatures.

But with the market so fragile – in Flint’s widely-reported assessment – the Government had little option.

HIPs have clearly proved unhelpful at best, disruptive at worst, and any further changes could only make matters worse.

Nevertheless, the news of further delay drew mixed reactions. Almost universally, estate agents welcomed the decision but several HIP providers, keen to end the ‘first-day marketing’ exemption and bring the full system into play, saw this as a further setback.

At the outset of the HIP debates, Housing Ministers strongly encouraged the launch of a new quasi-legal profession.

At that, several organisations started to make a substantial multi-million investment in the necessary communications technology. But whatever the rights and wrongs of HIPs, the subsequent implementation has been disastrous with delay after delay.

First to go were Home Condition Reports seen as potentially the main profit element. This was due to an inadequate number of qualified Home Condition Inspectors.

The reintroduction of HCRs is now a vague, far distant possibility while emphasis swung to proposals for carrying out energy efficiency assessments of buildings.

For domestic property, that led to the development of Energy Performance Certificates with Displayed Energy Certificates for large commercial and public buildings.

Meanwhile, HIP implementation dates were delayed and then staggered over several months as the housing market itself began to decline in volume and momentum.

Some pessimistic market projections now suggest that sales volumes this year could be nearly half those in 2007.

However, interest rates have started to rise. The Governor of the Bank of England gets away with a letter of contrition to the Exchequer but for the HIP providers, their interest payments could escalate while intense competition is pushing HIP rates down still further. This new profession struggles to survive.

For estate agents operating in the high street, there are many techniques and ideas for generating more business but there is little the HIP providers can do to drum up new business: they must largely rely on their estate agency contacts. And if these are close to giving up, then further mergers and closures are inevitable.

Clearly spurred on by Government enthusiasm, there were too many HIP providers from the start making this pressure all the stronger. Their numbers will drop further.

So what is the Government doing with HIPs? Even if the new Minister realises that HIPs were a mistake from the outset, the Government is presently in so much opprobrium that withdrawal is not an option.

So the present dispensations are being extended by another six months. That means property marketing may still commence at the outset as soon as you have ordered a HIP.

The main concern is over EPCs, which must be obtained as quickly as possible and the two coloured graphs immediately included in the sales particulars.

Initially, every HIP must contain the Index, a Sale Statement, and the appropriate Evidence of Title (or a copy of the SIM search from Land Registry to show the registration status).

There is then a period of up to 28 days to obtain the Searches and, if necessary, the rest of the leasehold documentation.

These items must be commissioned immediately but a property may be marketed without them, providing your HIP provider is using its best efforts to obtain the documents.

As to EPCs – here every property, including all new builds, must now have an EPC when they come to market as the various exemptions were withdrawn at the beginning of April.

What the Government has not mentioned is any final date for all long-running instructions to have a HIP — so with the first anniversary of HIPs approaching, this aspect is likely to be quietly forgotten.

Meanwhile, the Working Group looking at the problems with searches and leasehold information, led by the Land Registry’s Ted Beardsall, is making slow progress.

It acknowledges these are real factors and not just estate agents’ whinging about HIPs which was how a former Secretary of State for Communites and Local Government, Ruth Kelly, had dismissed the point contemptuously.

For Beardsall, the difficult stage still lies ahead — coming up with workable solutions. As there is no such thing as a standard lease, it is unlikely his Group will devise anything truly revolutionary.

At the outset, every lease started life as a contractual agreement freely entered into between a willing leaser and a willing leaseholder, so Parliament will be very hesitant to intervene.

But it is not just leaseholds that can cause problems. In one case, a seller had opted for a low-cost personal local authority search which failed to carry the vital insurance to protect against errors and omissions.

The search, mistakenly, stated that the property was not in a conservation area, when in reality it was! That caused real problems and concern arguably defeating the whole object of the exercise.

Arguably HIPs started off as a good idea – helping to improve the market by speeding matters up. Presently, we all wish they were succeeding!