HIPs in new farce

Home Information Packs (HIPs) are in trouble again. Some are being regarded as worthless after some major mortgage lenders, including Barclays and HSBC, appeared unwilling to trust local authority searches within the packs. The message is that buyers should pay for their own searches through their solicitor and not rely on those in the pack as provided by the vendor. Searches include information on drainage, planning applications and building consents. The result is that many thousands of homeowners in a chain – it’s about 80% of the market – will have to fork out twice: once for their own HIP to sell their own property, and a second time to pay a solicitor to carry out searches on the property they want to buy, because their mortgage lender doesn’t trust the HIP they’ve been given – at a cost of around £500 to each vendor. That will be a total of around £1,000 for both searches.

The packs – having seen a two month delay from the original date for introduction of 1 June – were introduced at the beginning of August for properties with four bedrooms or more. A date of 10 September has been set for an extension of HIPs to cover properties with three bedrooms, which will then account for over 60% of the housing market, and it is expected to be widened to cover another 6.4 million smaller homes by the end of the year.

Each pack includes an energy performance certificate and title deeds as well as planning searches. One of the objectives of the scheme was to speed up the selling process as buyers would receive all the information they needed about a home without needing to employ solicitors to carry out any searches. All the jobs would be done once – by the vendor.

There has been some resistance to the scheme and experts warned that it would add to the cost of selling a property, which would result in a slowdown for the housing market. The new set of problems surrounding untrustworthy searches only add to the malaise. Sellers, of course, want searches to show up no problems with their property which must have led to the distrust.

Each year there are over 1.5 million local authority searches carried out on properties in the UK. Before HIPs, around four in every ten searches were performed by buyers themselves, without a solicitor. This is known as a personal search. Now, with HIPs, almost all are expected to be personal searches carried out by companies providing HIPs – without using a solicitor. The mortgage lenders are uncomfortable with this trend, and some have said they will only offer mortgages to those where searches have been carried out by the buyer’s solicitor.

A spokesman for HSBC said: “If someone wants to buy a house from someone who has a HIP containing a personal local search, we would tell their solicitor we would not lend to them unless they commissioned their own search.”

In other cases the mortgage company will only accept a search carried out by the HIP company if the solicitor accepts financial responsibility if anything comes to light that could affect the future saleability of the property, such as new developments nearby. Many solicitors acting for homebuyers, therefore, are no longer trusting the searches in the HIPs and are insisting on carrying out their own searches.

Splinta is an anti-HIPs group. A survey it carried out suggested that 57% of solicitors were not accepting packs that contained personal searches.

Peter Ambrose, director of the Partnership, a HIPs provider, said: “Most HIP providers are using personal local authority searches to try to ensure a consistent low price, but several major mortgage lenders do not accept these without guarantees from solicitors. This means solicitors representing those lenders are rejecting the local authority search contents of the HIP and will charge their buyers for recommissioning new searches. This will result in buyers demanding that sellers reimburse them for the additional costs incurred in commissioning new searches.”

A spokesman for the Royal Institution of Chartered Surveyors said: “This is further evidence of the Government’s flawed implementation of HIPs. We need home buying reform, but the Government needs to step back and consider any evidence it has about implementation so far, in cooperation with the industry and other interested groups. The residential property market is far too important to the economy to take any risks in the current climate.”

Grant Shapps, Tory housing spokesman said: “This is yet more proof that HIPs are almost completely and utterly worthless. Gordon Brown cannot claim to be on the side of homeowners unless he scraps this disastrous scheme.”

According to Paul Holmes, the Liberal Democrats’ housing spokesman, the situation proved the HIPs scheme was ‘a shambles’. “It is unbelievable that the Government did not foresee these problems,” he said. “The packs are clearly not worth the paper they are written on.”