October 2007

HIPs — it's the helpful ones who cause all the
trouble...

ALREADY, 60 per cent of the market requires a Home Information Pack and, contrary to many expectations, I gather that most sellers seem resigned to this ‘helpful’ Government initiative.

Anecdotally, I have only heard of one owner deciding not to put his property on the market solely because of the requirement to commission a HIP. Surely no great loss?

Clearly the heat has gone out of the issue. I recently came across an anti-HIP article in a national paper hidden away at the foot of page umpteen. Two months ago, the tabloid would have run it under a page one banner headline!

Most HIP providers sound to be meeting their initial aim of preparing a HIP within five days although, in some areas, this timing is only possible with the regular use of personal search agents.

That said, one silly case has just crossed my ken where the local authority is rationing access for searchers. Time slots have to be booked days ahead.

The agent reports a lost sale as a direct consequence and adds that “such problems are not an exception by any means, particularly in here in North Wales, where we have a lot of unregistered property, many being estate sales.” He insists more must be done. With that we all agree.

Experience with the HIP trials had warned the Government about such search delays which is why the Regulations make provision for personal searches, but what the Government appears not to have foreseen is a similar problem arising with some water companies.

This is potentially a worse problem as, presently, only official drainage searches from the water companies are allowed in a HIP.

I am told of one water company in particular taking over four weeks and with no evidence that they are trying to reduce the backlog.

If this problem is widespread, the HIP Regulations may need to be amended to authorise personal drainage searches as well.

Time pressure on search returns is less critical while first-day marketing is allowed. One may publish a HIP provided it includes a note in the HIP Index about the missing searches and an indication of when they are expected to join the Pack.

However, this sort of delay will become a real nuisance after Christmas if, as presently intended, the Regulations are tightened up and the mandatory 14-day delay introduced postponing marketing unnecessarily.

What I have not found is a case where the unacceptability of a personal search has led to the proposed mortgagees refusing to confirm the funds without sight of an official search. The lost sale mentioned above was due to the buyer backing out, not withheld funding.

Some mortgagees can be fussy and difficult, as I know from first-hand experience.

Personally, I would like to have seen far greater thought given to this whole aspect in the Regulations instead of virtually anything masquerading as a search being allowed under the cover-all provision of an ‘authorised’ document that might be ‘helpful’ to a prospective buyer.

That comment applies particularly to the difficult question of environmental searches.

A true story – my father bought a new flat built on the site of the old tannery in Abingdon. It was on a large scheme by a major developer. We all knew it had been a tannery and I was happy that it had been properly cleared up.

A few years later, my father came to sell it and the agents eventually turned up first-time buyers who had a survey which remarked: “As this was a brownfield site, we advise you to get an environmental report”.

This they did. It said: “… dangerous chemicals may have drained into the sub-soil, and could inter-react and leach out ... blah, blah, blah … creating gases. You could walk out of your front door one day and drop down dead!” Could – yes. Chances of it happening? Nil, or somewhat less than being hit by a passing asteroid.

The good news was that the estate agents talked the couple into accepting that this report was nonsense and that the flats in question were safe, etc. They decided to go ahead.

However, the bad news was that their solicitor, being a ‘helpful’ individual, sent a copy of the report to the couple’s building society which immediately withdrew the mortgage offer!

The agents offered to find them an alternative mortgage source but by this time the couple were frightened away. So my father lost his sale anyway.

In fact there are several searches listed as ‘authorised’ in the HIPs Regulations dealing with mining, underground and overground railways, the location of services, and the like, many of which could also be double-edged.

Where obtaining these is an established procedure followed by all the local conveyancers there is some logic in continuing the practice.

But in many cases it could stir up trouble unnecessarily – unless, like that ‘helpful’ solicitor, you think the young couple were well advised to back out of buying a modern, convenient, town-centre flat.

However, more data on numerous subjects is becoming available in the public arena and many internet-based search companies pull together these statistics in an almost random fashion.

They could cover details of the local political scene, names and allegiances of the parish and district councillors, the various local schools with their OFSTED ratings, examination performance tables, and rates of truancy, etc.

Then, for good measure, whether the property is covered by a Neighbourhood Watch scheme, plus the percentage rates of increase in car thefts, personal assaults; risk of flooding, subsidence, and deteriorating air quality levels.

In other words, some of these optional searches could carry a very mixed message with real risks attached to commissioning any of them.

There is one small safeguard which I urge you to bear in mind – being optional documents there is no need to track their progress in the HIP Index and, of course, there is then no need to include them.

That gives you an opportunity to look cautiously through the resulting search for any detrimental commentary when the client could be warned to leave the documents out.

Two items the Department was keen to see included were the standard home-contents and home-use forms for completion by the seller.

As lawyers advised these forms could be left blank, the civil servants realised that could look silly and hence these forms were removed from the ‘required’ into the ‘authorised’ category making the documents themselves optional.

Sellers will still be asked to complete these forms once a prospective buyer has been found and so Ministers hope they will realise that completing these forms for inclusion in their HIP will save time later.

These two forms were intended to replace the Standard Enquiries before Contracts and the equivalent Replies – both technically Law Society copyright.

However, the Law Society will shortly be issuing a new form of Enquiries before Contract better geared towards HIPs and part of a revision TransAction protocol.

Sellers are recommended to include copies of any relevant guarantees and warranties for equipment being sold with the house and these may be included as ‘authorised’ documents.

Where any property is less than 10 years old sellers ought to supply the National House-Building Council, Foundation 15, Zurich warranty, or an equivalent form of structural guarantee.

This is another requirement which was originally going to be mandatory but for some reason later slipped into the ‘authorised’ section.

Having made the suggestion, many clients will need some advice and assistance in answering the questions and here we are talking about work which always used to be part of the seller’s conveyancer’s responsibility.

Best advice is to raise the point and if the client decides they would like to complete the documents, ask them to contact their legal adviser for assistance.

Since both of those documents are only ‘authorised’ in status there is no urgency about their inclusion in the Pack: they may be added at any stage.

This raises the question of whether, or when, to suggest the seller makes contact with their conveyancer. In the past when seller-clients were advised to contact their solicitor and organise a draft contract, they would rarely do so.

However, with the introduction of HIPs, the professional relationships and varying responsibilities are changing with the role of the lawyers much reduced.

Accordingly, I suggest producing a pro-forma letter for the client(s) to complete which can be sent to the seller’s solicitor or conveyancer at the outset. My draft is designed to avoid any confusion over who is handling what aspects of the sales process.

Where the owners do not have a solicitor or licensed conveyancer, they really need to appoint one as soon as possible.

Where, though, the property has a straightforward registered title, this appointment could wait until an offer has been accepted since drafting a single-page contract is neither complicated nor time-consuming and could be probably entrusted to the HIP provider’s associated conveyancing company.

However where the property is leasehold, unregistered, or worse, both, the HIP provider will need to call on the conveyancer for professional assistance at the outset.

Best advice will then be for your seller-client to instruct an experienced conveyancing solicitor, as both aspects can be troublesome.

Even with this clearly-worded mandate, many solicitors will immediately want to talk to their mutual clients before doing anything.

They will claim they are merely being ‘helpful’ but more likely will want to recommend use of their own HIP.

In my experience, few conveyancers actually check that the estate agent’s Terms of Business comply with the legal requirements, although strictly speaking I think they should.

However now estate agents are, in effect, competing for this aspect of the business, I do not see that the conveyancers need to know about the costs or charges you have agreed.

Hence I have included this critical paragraph in my model letter: “We confirm having received all of the information specified in Section 18 of the Estate Agents Act 1979, the Estate Agents (Provision of Information) Regulations 1991, and the Ombudsman for Estate Agents’ Code of Practice 2006.”

As that covers any concerns a conveyancer may have in that connection, the client’s instructions should be followed.