Home information packs: happy birthday?

‘If ever a government needs a salutary lesson in what happens when you ignore what the stakeholders say, I introduce to you the home information pack,’ reflects Richard Barnett, chairman of the Law Society’s conveyancing and land law committee.

There was never going to be much of a party to celebrate the first birthday of what has been described as the worst piece of consumer legislation in the last 30 years. However, that downbeat anniversary has been dramatically overshadowed by a dismal property market.

As senior partner at a national volume conveyancing firm, Richard Barnett is well placed to attest to the devastating impact of the credit crunch. Instructions at his Southport-based firm Barnetts are down by ‘probably two-thirds’ on sale and purchase – remortgaging transactions are ‘just about holding up’. The firm has made 40% of its staff redundant. ‘It’s a bloodbath out there,’ reports Barnett.

A survey released in September by search provider SearchFlow revealed that four in ten conveyancing firms have been forced to cut their headcounts. Some commentators, and some in the Conservative Party, have gone so far as to call for a suspension of HIPs to ease the current miseries.

But Barnett is keen to put one of the government’s most controversial initiatives into perspective. ‘The HIP is a complete red herring,’ he says, pausing to apologise for mixing metaphors. ‘Frankly, we’ve got bigger fish to fry.’

Most of the disparate players in the property industry, including property lawyers, report that the implementation of the pack last year has proved the kind of exercise in futility that was widely predicted.

That point was emphasised by the results last month of an investigation by Birmingham Trading Standards, which randomly selected six of the 15 local estate agents and subjected the local searches contained in the HIPs to inspection. The inspectors classed the packs from five out of the six agencies as unsatisfactory. It also accused private search companies of ‘short-circuiting the system to save money’. There were major inaccuracies in the documents – for example, one property was said to be located in Worcestershire (wrong – it was in Birmingham) and another property was deemed free of planning restrictions (wrong again – there was a restriction on permitted development). There were also no planning histories on properties when they were ‘readily available’ and wrong dates were recorded for planning proposals.

Councillor Neil Eustace, chairman of the public protection committee at Birmingham City Council, declared the results ‘shocking’. ‘Some of this inaccurate or missing information could result in someone buying a house they would otherwise think twice about,’ he said at the time. The searches were ‘simply not worth the paper they are written on’, he added.

Law Society President Paul Marsh agrees. Marsh, a consultant at Surrey-based conveyancing practice Downs, reckons the Birmingham trading officers’ findings ‘confirm very starkly’ concerns expressed by Chancery Lane that ‘cheap packs put together by unqualified and unregulated HIP providers’ [are] ‘a complete waste of consumers’ money’.

‘Unregulated providers have not the slightest understanding of the meaning, let alone the importance of the documents that are going to these packs,’ he says. ‘Their only concern is to make as much money as possible from the consumer.’

Other practitioners report similar experiences. Hilary Brown, an associate in Ward Hadaway’s conveyancing department, offers a cautionary tale of a would-be buyer who received the results of a personal search recording that the rear lane of the property had not been adopted. HIPs must contain a personal search, less expensive than a local authority search. But the accuracy of these varies depending on the ability and diligence of the searcher.

‘I carried out my own search with the local authority as a matter of course,’ Brown recounts. ‘I told my client I wasn’t relying on the original finding because it was a personal search. But I also said: "Just to warn you, there might be no legal right of access down the back lane." He went away panic-stricken.’ She made a search with the local authority, which came back clear, confirming that there was no problem.

Chancery Lane has also heard from practitioners that some estate agents are being paid undisclosed kickbacks by search companies to include poor-quality searches. ‘Anyone who buys a HIP from an unregulated estate agent or HIP provider might as well throw their money away,’ Marsh says.

‘HIPs don’t do what they were set up to do,’ Brown says. ‘That was to allow the buyer to take an informed view of the property. Because of the slowing market, a lot of the documents, particularly the local searches, are out-of-date by the time the buyer gets to look at them.’

Peter Bolton King, chief executive of the National Association of Estate Agents, stresses that the Birmingham Trading Standards report does not suggest that it was estate agents compiling the HIPs. ‘This is all about the quality of the local search, regardless of who actually put it together in the first place,’ he says. ‘The fact is, there are numerous providers out there and a lot of estate agents work with the local solicitors to put these packs together, and a lot of them do not. We encourage our members to use providers who are covered by codes of conduct that are in place for providers, which are not compulsory.’

Paul Broadhead, deputy director general of the Association of HIP Providers, agrees with criticism insofar as it relates to unregulated providers. His group has 110 members who subscribe to ‘the HIP code’ to ensure a quality of provision as well as protection for consumers (a third of the members are lawyers or from ‘a legal background’). ‘We’ve seen this proliferation of one-man-band providers,’ he says – in particular, domestic energy assessors, who grade a property’s energy efficiency for the Energy Performance Certificate required under a HIP, who ‘haven't got enough work and failed to set themselves up as HIP providers’.

‘The problem is not the HIP providers but the personal search providers, who are cutting corners and using insurance or not putting in clear information,’ says Broadhead. ‘That's not acceptable.’

In the beginningHIPs started life as a promise in New Labour’s 1997 manifesto to streamline the protracted and uncertain home-buying process. There was a long and torturous 10-year gestation before, via the Housing Act in 2004, the regime began with a phased introduction in September 2007. So what do conveyancing solicitors make of the HIPs now they are 12 months into the new regime?

‘The short answer is that they aren’t working at all, as currently structured,’ replies Marsh. ‘We know that there are a lot of very poor-quality packs floating around and in a very, very slow market the HIP becomes pretty useless. There are a lot of people out there who put their house on the market five months ago, they did a HIP and the searches are now out of date.’

Showing an industry-wide approach to the deficiencies of the new regime, the Law Society, the Royal Institution of Chartered Surveyors (RICS) and the National Association of Estate Agents drew up their own consumer-focused HIP as a response to a slowing market and the prospect of searches having to be paid twice.

Under those plans, the legal information in HIPs would be removed, with buyers obtaining searches at the appropriate stage in transactions. ‘Everybody who has looked at improving the house-buying process now accepts that the more you can get the paperwork done at an early stage the better it must be from the seller’s perspective,’ Marsh argues. ‘If you can get the contract and all the supporting papers out to the buyer as soon as the deal is struck, subject to contract, that must necessarily mean that the transaction can go more smoothly because you’re cutting out delays.’

As Bolton King indicates, HIP reform is ‘an ongoing process’ and ministers have ‘some very urgent decisions to make’. He points out temporary arrangements on local searches, leasehold information and first-day marketing are all due to run out by the end of the year. ‘The government is going to have to act very quickly to get regulations in place by the end of the year and, of course, we now have another housing minister.’ That’s the third in a year. Margaret Beckett took over from Caroline Flint, and Flint took the post from Yvette Cooper at the start of the year.

The Law Society/RICS/NAEA proposals called for ministers to scrap the ‘unnecessary and inflexible’ rules on ‘first-day marketing’, requiring a HIP to be in place before the property is put on the market. ‘The government has had to accept the fact that local searches aren’t available quickly enough and there are going to be no quick answers to that, because local authorities haven’t yet managed to sort themselves out,’ he says. The HIP is also supposed to contain leasehold information such as information about maintenance charges, ongoing repairs and insurance. ‘Again, there is no quick fix on providing that kind of information because you are totally reliant on third-party people,’ he adds.

Bolton King believes HIPs are contributing to the market’s woes. ‘They have an adverse effect on the market, despite what the government say,’ he says. ‘We have clear evidence from our members that people are frightened to put their properties on the market because they do not want to have the risk of having to spend more money, and that gets worse as the economy tightens.’ He has reports of ‘dozens of properties being withdrawn because people don’t even want to pay the relatively small amount of money for an energy performance certificate’ – usually between £50 and £100.

But SearchFlow's survey revealed that ‘for the first time’ the majority of respondents (58%) felt scrapping HIPs would be detrimental to the house-buying process. It also found that law firms were embracing HIP production because it was an additional source of revenue and half of the respondents reported they were assembling their own packs.

‘Firms have realised the commercial opportunity of teaming up with local independent estate agents on the high street,’ comments David Kempster, marketing manager with SearchFlow. ‘Clearly, many independent agents have viewed HIPs with suspicion and derision whereas others have taken a more balanced view. The agents are making reasonable hay out of a HIP now compared to a year ago.’ Large estate agency chains are more likely to go through a HIP provider.

But, he adds: ‘If it is a small independent agent with a very good high street relationship with their local solicitor, then they are packaging it themselves and keeping a little bit more margin to support them in these tight times.’

Lancashire firm Clifford Smith & Buchanan, which has offices in Burnley, Nelson and Colne, is that rather rare beast: a solicitors-cum-estate agency. ‘At worst, we are estate agents, and at best property lawyers,’ quips partner Alan Riley.

Given the bad press that HIPs have received, is it a good message for prospective clients that their HIPs are produced by regulated and qualified lawyers? ‘Certainly, and we pride ourselves that we can turn them around quickly,’ he says. The solicitor quickly adds that he is ‘no lover of HIPs’. ‘Quite honestly, I do not see the benefit. It is an unnecessary expense as far as the seller is concerned. From our point of view, the good aspect is there is a commitment from our client. They have to commit themselves at the expense of the package and so they’re not playing with somebody else’s money.’

The hybrid firm has had to make two fee-earners and eight support staff redundant, ‘30-40% of our whole staff’. ‘It hits you twice over when you are an estate agent, because you have estate agency staff not earning their corn and conveyancing staff not earning their corn,’ he says.

Keeping trade localThe Nationwide Solicitors Alliance is an initiative launched this month that aims to represent the interests of small firms and sole practitioners, as director Tracy Thompson puts it, ‘in the face of commoditisation and the Legal Services Act’. ‘Our ethos is basically about keeping trade local,’ she explains.

And do HIPs have a role to play in achieving that objective? ‘Absolutely,’ she says. 'Also, they are legal documents which have to be relied upon by the buyers’ solicitors [but] how can they be if they are being produced by ‘Joe Bloggs HIP providers’ in Sheffield, who aren’t legally trained and see it as an administration process?’ NSA has developed its own HIP and is calling on members to ‘pool their resources’ and develop local agreements to standardise documents.

Thompson, a licensed conveyancer with Liverpool firm Morecrofts, says the aim of the alliance is to give small firms ‘an alternative to panel management and our new HIP is part of our ambition to persuade estate agents, buyers and sellers to choose the faster, more reliable service offered by their local high street lawyer’.

Her firm has so far made no redundancies. Ironically, it is the old-fashioned mixed-economy high street firms with practices in family, wills and probate, and personal injury, that are better placed to weather the current storm.

So what about the consumer, for whose benefit the HIP was introduced? How often does a buyer ever want to see a pack? ‘In all the time that we have had HIPs available, you could count them on one hand – probably about two or three occasions,’ says Riley. ‘The purchaser doesn’t want to see them and, if they do, they don’t understand them. We have drawers full of the darn things downstairs, just occupying office space. From the purchaser’s point of view, it is a complete waste of time.’

Hip Hip Hooray? 1997: New Labour’s manifesto promises ‘stronger protection’ for homebuyers and the promotion of home energy efficiency schemes.2001: Labour’s election manifesto includes a promise that the government will make it ‘easier for people buying and selling homes through a new sellers’ pack’.2003: The Queen's Speech formally announces plans for legislation.2004: The Housing Act provides the legislative framework for HIPs and receives Royal Assent in November.2006: The government drops the plan for Home Condition Reports, a form of survey, as a compulsory part of the HIP. Selected HIPs trials are piloted in parts of the country.May 2007: A House of Lords committee finds that the government found that HIPs would not make buying a house quicker.August 2007: HIPs introduced for properties with four or more bedrooms, and three bedrooms from September.August 2008: Joint report from the Law Society, National Association of Estate Agents, and the Royal Institution of Chartered Surveyors called for fundamental changes.October 2008: Birmingham Trading Standards finds that five out of six packs produced are ‘unsatisfactory’.

Jon Robins is a freelance journalist