COMMENT: the cost of suspending HIPs

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Your clients will see increased costs from the suspension of HIPs, warns Harpal Singh, managing director, Conveyancing Alliance Ltd

When the new coalition Government announced the immediate suspension of Home Information Packs (HIPs) it was widely welcomed by most within the housing market, with the notable exception of the HIP providers. Already we have heard from a number of sources, most recently the Royal Institute of Chartered Surveyors (RICS), who suggest that the decision to ‘suspend’ HIPs has already provided a boost to the housing market. For example, RICS members claim to have seen an 11% increase in new instructions in May up from April, and put this down to the Government’s decision.

So, HIPs are no more – but is that good news all round? What does this actually mean for your client who is purchasing a property? Clearly, there will be large numbers of properties which still have an accompanying HIP, however as we move forward more and more properties won’t have a pack and this has repercussions for buyers in particular.

The vendor now has no need to provide a HIP however they must still ensure their property has an Energy Performance Certificate (EPC), which can be purchased for approximately £50 to £60 and is valid for 10 years. The chances are that the property will have sold well before that goes out of date.

Previously, with the HIP in place, the vendor was responsible for the provision of all searches within the pack – this included the Local Land Charge Search and the Water & Drainage Search. The vendor had to ensure that these were included within the HIP while the HIP was technically valid for as long as the property was on the market, in reality the search documents were only valid for six months because lenders will only accept searches if they have been completed within this timescale. In most cases this meant the buyer only had to order an Environmental Search at a cost of around £50.

Today however the onus regarding searches is no longer with the vendor and therefore if the property doesn’t have a pack or if the searches within the pack are more than six months old, the responsibility lies with the purchaser to ensure the searches are completed and up to date. The cost of doing this has therefore been transferred back to the purchaser – the broker’s client – and they can typically expect to spend up to £300 getting these searches completed.

This means there is now going to be a not insignificant extra cost for the purchaser that HIPs had previously put with the vendor. The cost of purchasing a property therefore continues to increase and no doubt brokers will have clients querying what they need to produce and how they can keep the costs down in this area. We should also not forget that once the searches have been completed, if for whatever reason the purchase doesn’t complete, the purchaser will not get this money back. In fact they will have to pay out even more money for new searches on a new property. Cost could certainly add up in this regard and as yet there is no protection or safety net for purchase clients who unfortunately have to go through this. As I write this article Conveyancing Alliance is looking closely at this area and we are hopeful we will be in a position to make a product announcement in the very near future.

So, while many have welcomed the suspension of HIPs, brokers should be aware that their purchase clients will be faced with increased costs because of it. At the moment some clients will be lucky and will be purchasing properties with valid HIPs which include valid searches, however as time moves on – essentially over the next few months – fewer and fewer purchasers will be presented with this luxury. At this point the responsibility and the cost will shift and therefore brokers should ensure they have the necessary information and relationships to offer their clients access, cost-savings and protection in this area.

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