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25th January 2009

HIPS - The Albatross Around the Neck of the Market.

By Nick Salmon FNAEA (Honoured)

This article first appeared in the November 2008 edition of The Estate Agents, the journal of the National Association of Estate Agents.

The soap opera that is HIPs has now been running for a decade and regrettably shows no sign of running out of story lines. The extraordinary fact is that after all the thousands of hours of consultations, debates, forums, seminars, and the miles of column inches of articles and media comment, the Home Information Pack has ended up as an abject failure. Has there ever been a piece of legislation that promised so much and delivered so little? I cannot think of any.

The irony of the HIP is that during its tortured gestation those who attacked the pack proposal were branded 'vested interests' against all change, maintaining the status quo, and 'profiting' from the failures of the home buying process. Now that it is born, New Labour's bastard love-child, sired by a succession of dogmatic Housing Ministers, is supported by other 'vested interests' which profit from the pack. The 'antis' always had businesses if the pack failed to materialise but today's vested interests will be out of a job if the pack disappears; as it will when the Conservatives win the next election. No wonder there is a note of desperation in their 'bigging up' of the HIP and its supposed benefits. The reality is that the HIP in practice is daily failing to deliver on its promises.

Let us remember what the pack was supposed to achieve. In 1998 the Government's stated targets for home buying were to speed up the process, give greater transparency, and increase certainty. By reducing the fall-through rate, abortive transaction costs would fall and the whole experience of home buying would become less stressful. How is it that such laudable and simple goals have been so spectacularly missed? Part of the answer lies in the failure of Government to properly engage with the property industry to develop the proposals. Ministers would deny it but it was clear to anyone closely involved in dealing with the HIP proposals that Government policy would override practicality and that 'consultation' was a fig leaf to cover what had already been decided. The louder the criticism of the pack became, the deeper the Government dug its defences. I formed an irreverent vision of Yvette Cooper with hands clamped over her ears, stamping her feet and shouting,I'm not listening, I'm not listening' as her civil servants tried to tell her the pack wouldn't work.

The nature of the HIPs debate dramatically altered when the pack was chosen as the vehicle for delivering Energy Performance Certificates. To criticise the proposals was now to be not only a 'vested interest' but also to be against measures to combat climate change. EPC's muddied the waters and conveniently diverted attention away from improving the buying process. Constrained by the E.U. Directive requiring EPC's to be implemented and in the absence of any other viable delivery mechanism the Home Information Pack had to be introduced; and never mind whether or not it actually improved the home buying process. In effect the HIP had been hijacked by Brussels bureaucrats.

Fast forward to the present day. So far as I am aware there have been only two claims for the success of HIPs to date. One is that search fees have been reduced in some areas. The other is that the pack is responsible for reducing transaction times by a few days. Forgive the sarcasm if I say I am underwhelmed. Forcing sellers to pay several hundred pounds for a pack in order that some search fees are shaved by a few tens of pounds doesn't make economic sense and as for the alleged reduced transaction times, where is the robust statistical evidence,preferably from an independent source rather than the pack providers?

There are those who would like to think that the pack has revolutionised the marketplace. I deal with sellers and buyers every working day and can say with total certainty that after all the fireworks of the last ten years the pack amounts to a damp squib. Vendors shrug their shoulders when told they have to pay for the HIP, seeing it as little more than a stealth tax; applicants never ask to see it before going to view properties; and solicitors, after an offer is accepted, if they ask for it at all, largely ignore it and get on with taking up enquiries and commissioning Official searches. The Home Information Pack simply hangs as a useless and expensive albatross around the neck of the property market contributing nothing to transparency, speed or certainty in the home buying process and failing to alleviate any of the stresses. I know that some agents are now treating HIPs as a revenue stream but if anyone is having a better experience of the practical effects of the pack on buyers and sellers I'd be fascinated to hear from them.

The recent consultation by CLG on the proposal to include a Property Information Questionnaire and Leasehold Summary in the HIP suggests that they have recognised that the pack has failed. In principle the PIQ is a good idea and drawing together leasehold information early in the selling process is sensible but would it not make more sense to let the PIQ take the place of the HIP and go back to having buyers commission the searches after acceptance of offer? SPLINTA has proposed this in their response to the consultation but has also restated that a root and branch reform of home buying is required if we are to obtain substantial and cost-effective beneficial change. The PIQ, like HIPs, merely tinkers at the edges of the process.

Leaving EPC's out of the equation, if there was an opportunity to go back to the drawing board we should be considering:

· A coherent databank of Land Registry, Local Authority, Utility Company and Environmental Agency information that can be accessed by a purchaser or their legal advisor at the touch of a button.

· A Review of the current adversarial system of conveyancing leading to a simplification of the process, to the point of removing 'caveat emptor' and introducing a notarial system of property transfer.

· The development and introduction of e-conveyancing.

· A national protocol for pre-contract deposits to be put down by sellers and purchasers at the time an offer is accepted; such monies to be applied to abortive costs of either party if one withdraws from the transaction before exchange of contracts.

· A national protocol for binding pre-contract 'lock-out' agreements that restrict a seller's ability to treat with another buyer after an offer is accepted.

· Buyers to be required to make full disclosure of their finances for purchase at the time an offer is made.


It is worth recalling the words of the 1998 Government research document that spawned the Home Information Pack. It said: 'There is a need to better balance the risks of the transaction between buyer and seller'. I venture to suggest that following through on the suggestions outlined above would go a long way further in meeting this need than HIPs alone will ever achieve.

SPLINTA - Sellers' Pack Law Is Not The Answer

Every consumer would like the home buying and selling process to be a certain, open and stress free process. The HIP will not achieve that end because: it cannot deal with human nature; it does not impose any obligation on a buyer to have their finances in order or be in a position to exchange a contract when an offer is accepted; it does not bar a seller from accepting a different offer whilst the sale to the first buyer is in progress.

SPLINTA is campaigning for the HIP to be dropped entirely and for government to go back to the drawing board with industry to create properly beneficial changes to the home buying system. If this is not achieved then we call for the removal of the restriction on First Day Marketing and for the Energy Performance Certificate to be made a voluntary document up to the point of exchange of contracts.