In the latest of his series of property and risk related articles, Malcolm Edwards of SGH LLP examines the latest changes in Home Information Packs (HIPs) and comments on how he believes they could be further improved
Having bought and sold property on a volume basis for over 24 years, I would like to think that I am well versed in the shortcomings of our present conveyancing system. I certainly viewed the implementation of HIPs with some cynicism: although anything that could speed up the process and lessen the amount of abortive transactions (particularly in leasehold matters) had to be welcomed.
Let me first give you a brief summary of the HIP. Only available in
Presently, you don’t need a HIP for any of the following:
Next, let me briefly take you through the components.
HIP Index
This lists the documents included in the HIP and provides a useful checklist. If a document is unavailable, the index must say so, give the reason for this and list the steps that are being taken to obtain it. It must also be updated whenever documents are added or removed.
Property Information Questionnaire (PIQ)
This is a general questionnaire completed by the seller and provides useful information about the property. Please see later in my article as to my suggestion for this to be combined with the property information forms that already form part of the conveyancing process, to produce one comprehensive source of information and thereby avoiding duplication and saving time.
Energy Performance Certificate (EPC) or Predicted Energy Assessment (PEA)
These set out an energy efficiency rating for the property (EPCs for built properties and PEAs for those that have yet to be finished) and will certainly become more popular, as we strive to save energy resources and generally become greener.
Sustainability information
This is only required for newly built properties and goes hand in hand with the PEA.
This confirms basic information about the property to include the following:
Evidence of Title
If a property has already been registered at the Land Registry, this will consist of a copy of the land register and a plan showing the extent of its boundaries (often referred to as office copies). These provide an official record of who owns the property and detail the rights, easements, covenants and conditions affecting it.
If the property is unregistered (that is to say the Land Registry has yet to have sight of the original title deeds and turn these into a computerised record), it will be necessary to have the various conveyances (freehold land), or lease and assignments (leasehold land) copied and put into date order, to form what is called an abstract of title, or epitome. These will also need to cover a period of at least the last 15 years to prove ownership.
Searches
A search of the local land charges register needs to be included. This will confirm details of any planning, or building regulations affecting the property. It will also confirm whether the road fronting the property is maintainable by the council, or the property owner. Additionally, it will confirm whether the property is subject to a compulsory purchase order by the council, or if it is due to be knocked down, and is normally carried out by the council or personal search company.
It is also necessary to include a drainage search. This confirms whether the drains and sewers are connected to the public drainage system. In addition, it confirms if the property is connected to the public water supply.
Leasehold Properties
In leasehold cases, it is also necessary to include a copy of the lease.
In addition to the above, there are also a number of optional items.
Home Condition Report
This confirms information about the physical condition of the property and has to be prepared by a certified home inspector. The idea is to give the buyers comprehensive information on the work/repairs required to the property at the outset, to try and avoid this being a stumbling block later in the process.
Guarantees and Warranties
Copies of any guarantees or warranties (such as a damp course or wood rot guarantees) can be included, to arguably make the property more attractive to would be buyers.
Additional Searches
A number of additional searches can be included. For example, an environmental search which confirms if the property is situated close to any suspected contaminated land.
Another example would be a flood search, which, given the recent serious flooding in certain parts of the country, would certainly be a plus.
Additionally, sellers could include a mining search (in areas which have been subject to previous mining), or a commons search, should the property abut upon a village green, for example.
Comment
The latest round of changes (and there have been many since implementation) resulted in a HIP having to be completed before a property could be marketed (prior to this, it was sufficient for a HIP to have been merely ordered). How this latest change could further speed things up (as it had been mooted) is questionable. What it did do, was prevent people from promising that a HIP would follow and it never materialising (previously the fine for this standing at a mere £200 and action having to be taken by the local Trading Standards).
Those of us who buy and sell property for a living, will know that much of the HIP is presently worthless in conveyancing terms.
Let us take the searches for example. When buying a property, the principle of “caveat emptor” (“buyer beware”) applies. In other words, once contracts have been exchanged and the transaction is legally binding, any defects in the property, or title for that matter, become the buyer’s problem (the only exception being in cases of misrepresentation prior to the date of the contract). The difficulty is that, the quality of searches can vary significantly, added to the fact that some lenders are still reluctant to accept personal searches (regardless of the level of indemnity insurance that they are backed up with). Searches really do become a double edged sword (when selling, the cheapest/easiest to obtain tend to be used, whereas, when buying, these are often seen as not thorough enough and have to be redone). An easy solution would be to standardise searches (so that it is not possible to produce below par ones) and to then “iron out” any lender difficulties. This would certainly save duplication, time and money.
Next, let us turn to the title/copy documents, particularly in relation to leasehold properties. Knowing the length of the term still left on a lease in advance of making an offer is certainly a plus. But just as important, is knowing the present yearly service charge payable for the property and confirmation as to whether there are any major works about to be undertaken which, in the absence of any reserve fund, would have a dramatic effect on the amount payable. How many times has a leasehold transaction got underway, only for it to fail because of such matters? If we were to make such information compulsory, then this would surely help.
Similarly, the recently introduced PIQ could be combined with the property information forms that presently form part of the conveyancing process (resulting in one standardised form, to cover all the necessary information). This would certainly save duplication and time (I have lost count of the number of times I have had to cross refer information on the various present forms, only to have to raise an additional enquiry of the seller’s solicitors because the information is either unclear or contradictory). To further compliment this, and some of you may see this as a somewhat radical step, I would also revert to the previous way of conveying such information, i.e. we do away with the tick boxes and insist that the seller’s legal advisors run through the questions with their clients before setting out their replies. This would certainly make the information more acceptable and avoid the scenario, “I ticked the wrong box” or “I wasn’t aware of the implications”. From a risk management perspective, this would also tighten things up, particularly in relation to misrepresentation.
Many of us are waiting with baited breath for the result of the forthcoming election (the Conservatives having promised to scrap HIPs if they get back into power, albeit they will probably retain EPCs). Whether I am a fan of HIPs or not, I will let you decide. What I would say, is that anything that improves the certainty and reduces the delay in property transactions certainly has my vote and if you can think of anything else to add to this please feel free to email me on malcolm.edwards@sghlaw.com.
Malcolm Edwards is manager of possession sales at Sprecher Grier Halberstam LLP
Date: 5th, March, 2010
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