Fidlers Blog

There’s been a surprising amount of hype this week concerning a story that the government in the shape of the new housing minister Grant Schapps has scrapped HIPs. What was reported was that he  had signed an order suspending HIPs last Friday and that HIPs would be history within a week. However it’s now come out that this is not actually true (so who said it then?) and that although Schapps wanted to suspend it he’s got problem – if he suspends HIPs that means suspending the energy performance certificate which is required under european legislation.

On top of that a number of groups (The HIP reform group, and AHIPP) are looking at launching a legal challenge if the government does try and scrap them

The only thing that is clear is that a shedload of rumours are being put out, reported and re-reported and at the moment no-one knows for certain what is happening. This is good for no-one as uncertainty causes people to site tight and do nothing which is the last thing the housing market needs.

Why should HIPs be scrapped?

We’ve just had a bit of a brainstorm in the office and we reckon these are the main ’scrap HIPs’ arguments:-

Barrier to market

- The argument goes that having to stump up £300 or so in order to put your property on the market is a barrier.

- The counter-argument to this is that the market used to contain loads of people who were selling speculatively with a consequence that we used to have an appalling rate of jobs falling through ( about 3 in 10 of every conveyancing job we took on fell through) – if you start with people who aren’t entirely sure that they want to sell then they are just the sort of people that turn round at the last minute and realise they actually wanted to stay put. the plus side of making people put money up before selling their house is that most people selling were serious about it – we saw our fall-through rates drop from around 30% to nearer 13%.

- The second consequence of this is on house prices – the housing market has been steadily recovering (in terms of volumes of transactions) since falling to the bottom of the abyss in August 2008. This comes in fits and starts. People think they won’t sell their house so they don’t put it on the market; there is under-supply – prices rise because of this – people see prices rising and think that it is a good time to sell so they put their house on the market (record number put their properties on the market in March) – this leads to slight over-supply so prices don’t rise so quickly. Removing the barrier to selling your house could dramatically increase the number of properties on the market – but if the effect is to create severe over-supply then there is the potential for it to stop house price rises when people find they have to drop their price to get a sale. No-one knows that this will happen but this is not a market that anyone should be taking risks with.

Unnecessary cost for the public

- The argument is that people are now paying out £300 that they weren’t having to spend this before.

- This argument doesn’t actually hold up too well – the HIP consists of the Energy performance certificate (or EPC), copies of the deeds, and searches. The  EPC is an additional cost but it’s a requirement of european legislation – in order for the UK to reduce the emissions of it’s housing stock it has to measure them first – EPC’s is about measuring our emissions. The proposals to do away with HIPs specifically exclude EPCs – they are going to stay. The deeds – as a seller you’ve always had to pay for them, and as for the searches because you’re paying for them on the sale you don’t have to pay for them on the purchase.  This especially favours first time buyers – who we need more of to give the market a shot in the arm.

HIP doesn’t do anything – no-one reads them

Yep, I’ll go along with that one. However if the documents are needed by your solicitor then it’s always helpful to have them up front – it cuts out time spent waiting for them

The Searches are out of date

The searches with the HIP only have a realistic shelf-life of around 6 months. In ‘normal’ property times if your house is put on the market at the correct sort of price you’d expect to sell within 6 months. In spite of the ups and downs of the property market over the last few years this still holds true. If they go beyond that and are out of date – this doesn’t cost the seller any more though, but the buyer will have to pay for a fresh set (which admittedly does add to the overall cost)

No-one acts on the EPC recommendations

Again I’ll agree on that one – and if you fall in love with a house you aren’t going to not buy it because it’s energy rating is an E instead of a D. However as the longer term aim of the EPC is to reduce our housing stock emissions it can’t be too long before we start to see green taxes based on this information. At that stage it will become a relevant factor and mean that people do start looking at the EPC (whether it will stop them buying the house is another matter)

PIQ is not a legal document – answer those and have to answer more when you sell it

Yes I’ll agree on this one – it’s an almighty pain that you have to fill out one questionnaire when you put the house on the market and then another one when you sell it. I would say this is more of an argument for sorting the damn thing out though rather than scrapping the whole thing.

Why Shouldn’t HIPs be scrapped?

All the interested parties agree on the basic principal of HIPs – get the information you need to buy a house out there up front as it saves time and gives transparency. They all disagree on how exactly that should be done.  Given that the basic principal is agreed, wouldn’t it be better to nail the problems and turn them into something that helps them to achieve their potential rather than go back to a system that everyone used to moan about?

If enough heads were banged together we could get a system where you only fill out one questionnaire at the start of a transaction; when the survey on the property can be used by the buyers mortgage company as a valuation; where all the relevant information on the property is available straight away. The Torydems could have done this – they could have called it something else and claimed it as their own, and actually make an improvement to the house buying process.

Instead of this we seem to be getting a dogmatic MUST…..BAN….HIPs without logical reasons to back it up. HIPs are a crap system. However they are not as crap as what was there before (high praise indeed!), but it would make more sense to fix them than scrap them.

Thanks for reading

Mark

When you’re buying a house for the first time you come across a couple of words that you’ve probably never heard before –  ’Searches’ and ‘Survey’. I don’t know if it’s because both words start with an ‘S’ or both sound like some sort of investigation is involved but we find it’s quite common for people to get the two things confused. I thought I’d just do a short blog that explain what each of these things are.

Here’s a quick answer in a few words:-

Searches are a list of questions that are sent to other organisations, asking them questions about the property – they check their records and let us have a response. That response is known as a search (yes I know technically it should be an ‘answer’ but this is legal stuff here – the terms used are seldom logical)

A Survey is a report on the physical state of the property that will be carried out by a surveyor – he/she visits the property and writes a report on it.

Now for a bit more detail….

It used to be that the searches would be carried out (i.e. sent off) by the buyers solicitors on the property you are buying. Then HIPs came along in 2007, and changed things – so that now (at the time of writing) the seller has to do some searches on the property as part of the Home Information Pack (or HIP), and make them available free of charge to the buyer. However the seller is only legally obliged to carry out Local Authority and water board searches – there may be other searches that need to be done on this property and chances are the seller won’t have done them (because they’d have to pay for them). So this means it’s a bit of a mix – the buyers solicitor will get some of the searches from teh HIP and any that are also needed will have to be ordered afresh.

There are actually quite a number of fairly exotic (yes I should probably get out more) searches available for specific problems in specific areas. However here is a list of the main ones that we come across:-

“Local” or “Local Authority” Search – we send this request to the Local Authority. It will confirm a number of things including the planning history for the property, whether the roads fronting the property are adopted (i.e. down to the council to look after or are they private), if it is a listed building, whether there are any proposals for a motorway at the bottom of your garden, etc. If any entries are revealed on the search your solicitor will need to ask more questions – either getting the sellers solicitor to sort it out or by going direct to the council. This should be included in any HIP.

“Water” or “Drainage” Search – this is sent to the local water authority. It answers a number of standard questions about water flowing to and from the property, covering things like whether the property is connected to the main drains, whether the water supply is direct from the water or via someone else’s land, and whether the property is on a water meter or not. This should be included in any HIP.

Environmental Search – These started to appear about 10 years ago, and suddenly gave people a whole new load of things to worry about! The search reveals the history of the site on which the property has been built, letting you know any material factors such as whether it has been built on a waste or landfill site, or if the property is within a flood plain. This search doesn’t have to be in the HIP, and so it almost never is.

Mining Search – If the property is within a mining area we will also carry out a coal authority search, which will check when the last workings were in the area, whether there has been been a claim for compensation for subsidence damage on the property, and if so how the claim was settled. If a claim is revealed we may request the sellers Solicitors to provide a Schedule of Repairs from the Coal Authority so that we can provide you details of whether the claim was settled by repairs or compensation, and if compensation, how much was received. This search doesn’t have to be in the HIP, and so it almost never is, even if the property is in a mining area.

How much do they cost? the problem here is that there are actually 400 Local Authorities,  20 water authorities, and probably about the same number of private organisations providing the same information. The cost for a Local and Water search together can be anything from £120 to £300, depending on the council, and where you order them from.

One last point on searches… As the Local and Water search will have been done by the seller, there can often be a gap between carrying out the search and a buyer being found. It then becomes relevant to ask how long the search will last. Technically (i.e. with a lawyer hat on) a search is out of date the day after it is produced – for example in the case of a Local search the council could decide to put a motorway through your house the day after the search is produced. In reality you have to use a rule of thumb for  deciding whether a search can still be relied upon. Searches are generally considered to be good for about 6 months – if they are near or over that age then it is sensible to carry out new searches (which will cost more money and also delay things slightly while you wait for them to come back) – at the point at which you exchange contracts you should have a reliable set of searches available.

You can actually keep Local and Water searches alive by paying for an insurance policy (costs about £30 – £40 which is considerably cheaper than the cost of new searches) – to do this your mortgage company has to be OK with this (almost all of them are though).

That’s enough about searches to last you a lifetime. Now let’s move onto surveys….

As I said above, a survey is a report on the physical state of the property you are buying, so to prepare a survey someone (usually a surveyor) will need to visit the property and have a look around.

There are basically 3 different types of survey available – a basic valuation, a house buyers report and inspection, and a full structural survey.

This is really what it says on the tin – a report that sets out what the valuer thinks the house is worth. It will usually also make some comment about the physical state of the property and should cover any obvious defects. The Valuer/Surveyor will probably be in the house for 20 minutes to half an hour.

This is quite a bit more involved – the surveyor will spend several hours in the house, and the report that is produced will run to many pages and make the house sound like it is about to  fall down. The report can be useful as a guide to what maintenance you’ll need to carry out over the next few years.  This costs quite a bit more than a valuation.

This moves things on again – it’s even more involved than the house buyers report. Normally this will be for examining a specific issue relating to the property such as a sagging roof. This will normally cost quite a bit more than a house buyers report.

If you’re buying with a mortgage then your mortgage company will insist that you have at least a valuation report carried out (You have to pay for this). Although you are paying for the valuation it is being carried out on behalf of the mortgage company – not you! the result of this is that you can’t generally sue the valuer for comments/statements made in a valuation report unless he has missed something totally obvious (such as a chimney breast removed but the chimney stack still in place above with no strengthening). You can still move up to one of the more in-depth reports and they surveyor will normally fill out the mortgage company’s valuation form as part of the fee.

If you are not having a Mortgage you can still arrange any of the surveys mentioned above independently with a valuer.

Hope this helps – if you have any questions arising from this then please don’t hesitate to ask in the form below

Cheers

Mark