September 2007

HIPs: raising as many queries as they answer!

WELL, they may have been a long time coming but, during August, you have all had a chance to get used to Home Information Packs.

I doubt anybody is completely happy but it could have been far worse.

Certainly, from where I sit, matters seem to have gone fairly smoothly. As I am sure you all know, I run a consultancy service dealing with regulatory and compliance aspects generally.

When most new initiatives come along I get an increased number of calls as people who have not so far taken an interest ‘catch up’.

Estate agents tend to think and react on a very short-term basis. I think the professional motto is: “Don’t get involved unless you have to. Most things left well alone will go away. Only worry about them if they don’t.”

A smooth landing

But that is not what has happened with HIPs. I expected many last-minute calls but have actually had very few.

The main one has been whether you need to commission a HIP when taking over instructions on a property already on the market with another agent.

Assuming there is no break in marketing, and no other significant changes, the answer is ‘no’.

Overall, though more by luck than judgement, the arrangements have worked out rather favourably.

Firstly, the introduction only applied to larger homes with four bedrooms or more, and, generally speaking, the owners of these properties are likely to be more aware of the HIPs initiative and able to understand the logic in the proposals. And there is some logic in the proposals!

Secondly, this meant that only a small minority of instructions actually required HIPs, which gave you an opportunity to sort out your systems and lines of supply without any great pressure.

And thirdly, talking of pressure, at least until the end of the year, there is no unnecessary rush to obtain every HIP as quickly as possible.

Providing the client has agreed with you the contents of their HIP, and you have placed the appropriate order, there is then nothing to stop you going ahead with the marketing and producing normal sales particulars

The only other point to bear in mind is that the two colourful bar graphs from the Energy Performance Certificates (EPC) will need to be included in the sales particulars as soon as they are to hand at which point you should start assembling the Pack and getting the show on the road.

Why the rush?

All of which raises the question over why this sudden rush to include three-bedroomed property when it has taken nine years to get this far?

We all now know that HIPs are here, so why not allow the system to bed in first before moving from under 20 per cent of the market to just over 60 per cent?

Well, for what it is worth, I am not overly surprised by the move. The former Secretary of State, Ruth Kelly, was distinctly unamused at the ludicrous statement she was forced to read to Parliament, or about the almighty mess which had necessitated the unwelcome delay in launching HIPs.

When Kelly got transported elsewhere and Yvette Cooper got promoted to Cabinet rank, she said: “I have spoken to Gordon about HIPs and his instructions are to get them brought in quickly” and that, to my mind, was that! The fight was over — estate agents had lost.

I doubt that the HIPs Implementation Team was overly happy either. If heads did not actually roll, jobs got swapped and Ministerial orders were clearly: “Get the rest of these wretched things sorted as quickly as possible, giving the least notice possible to reduce room for any further argument”.

As the minimum notice could be as short as three weeks, my guesstimate was that HIPs would be brought in for all three-bedroomed homes by the end of September.

As they are to come in on Monday, September 10, I assume the supply of Domestic Energy Assessors is speeding up.

Reporting for duty

That makes sense. Now that would-be DEAs know HIPs really are happening there is no reason to delay their training and risk losing the best jobs so numbers were bound to increase sharply.

The next question is what about one and two-bedroomed homes? Well, for what it is worth, my money is on the end of November, by which time all the heat will have gone out of the situation and HIPs will be a normal aspect of estate agency.

Let’s give a little leeway and say that by Christmas you will all be preparing HIPs as though it were the most natural thing in the world. Quite simply because buyers will expect them.

In fact I am quite sure that your serious buyers, looking for larger properties, already know pretty well all they need to know about HIPs, to the extent that if they come across a home without one, they immediately realise it has been for sale for over a month!

What a waste

A quick side point – you may remember that last month I mentioned that the Department was offering a CD as an introduction to HIP material. Not as a free gift – it was meant to be useful.

Rashly, I suggested it might be worth getting one. Well forget it. I requested one as soon as they were being promoted and it arrived this weekend – that took nine weeks!

And was it worth waiting for? Well there’s a Guide to HIPs prepared by the Association of HIP Providers which is dated October 2006.

There are also samples of some of the Required Documents (more recent copies) but they are all available on-line anyway.

The pièce de résistance, however, is a sub-directory devoted solely to a full-page colour photograph of two plastic paper clips!

Back to basics

Estate agency has few hard and fast rules. Correction: until last month estate agency had few hard and fast rules.

However, one that remains says that, as an agent, you have no discretion whatsoever: you take your clients’ instructions and then do what you are told.

With the basic HIPs as presently constituted – and therefore without the contentious Home Condition Reports – there is no real challenge to your professional duty of care for the best interests of your clients, as all the new disclosures will be covered by the recent legislation and statutory authority.

However, while HCRs remain voluntary, you do have a degree of choice in how you advise and guide your potential clients over this expensive added extra.

If you were to recommend preparation of a HCR and this comes back with various adverse disclosures, what do you do?

Of course, were HCRs mandatory you would have no problem – regardless of your personal opinion, or any adverse disclosure and negativity – you would be under a statutory obligation to include them regardless.

Help or hindrance

Obviously, a clean Report should help sell a property. Even a mediocre Report should reassure buyers that what they see is what they will get.

So we are left to assess the likely reaction to a poor Report but even here they may well avoid a last minute ‘killer’ survey hinting at all sorts of nasties and blackmailing your harassed client into conceding a last minute and unfair price reduction to hold the chain together.

On that argument, most homes could well have a Report in the HIP documentation and therefore, when there is no HCR, people may soon come to suspect the worst.

Explanations

Finally, on to some practical aspects. Not surprisingly, few home-owners know much about the Packs. Those who do may well have based their perception on such reliable sources as the Daily Mail or Daily Express.

The Departmental publicity budget has gone nowhere: it may have sold some colourful paint. Or bought in some plastic paper clips. So in most cases a degree of explanation is required — in simple terms and usually starting from scratch!

Perhaps the first point to make is that HIPs are not optional. And you could stress that comment would apply were they to attempt a private sale or consider instructing any other agency.

HIPs are now a universal legal obligation and the extra expense when selling is largely translated into cost savings when buying.

Yes, the Energy Performance Certificate is an extra charge but overall the preparation of most HIPs, being virtually automated, will be somewhat less than solicitors’ bills used to be.
Getting HIP-shape.

Some estate agencies have tried to integrate the various provisions relating to HIPs into their main agency Terms of Business but these are usually complicated enough already.

My advice has been to use an entire separate HIPs Agreement listing the mandatory items, the various optional extras such as the HCRs, before repeating from the Terms of Business the alternative payment options you have decided to offer.

Early indications are that this approach is working well. One firm is leaving their new clients with a simple 12 point card headed ‘Getting your home HIP-shape’. (For a copy go to http://tinyurl.com/2yvbre)

The next day, they go through my new draft HIP Agreement which includes two useful check-lists, the first outlining the purpose of the ‘Required’ items of documentation and the second dealing with the relevant items from the extensive ‘Authorised’ list with a note of any extra charges.

And, as just remarked, these ideas seem to work, indeed another experienced estate agent has called them (the HIP Agreement and a revised format for a solicitor’s mandate which comes with it) “word perfect”.

Even if the client still opts for a basic HIP – as most will – their signatures will help to show that the decisions were your client’s informed choice.

It is back to that earlier point — as an agent, you have no discretion whatsoever.

Basically, you take your clients’ instructions and then do what you are told.