HIPs Explained
WHAT IS A HIP?
HIP is an acronym for Home Information Pack. Changes in the law mean that it will soon be necessary for all home-sellers to provide this documentation. The HIP contains information about a property’s energy efficiency, boundary ownership and planning permissions.
WHY HAVE HIPS BEEN INTRODUCED?
The Government introduced Home Information Packs to ensure consumers making the big decision to buy a home have access to all the relevant information before they make that decision. Until now much of this information has only been available to buyers after an offer has been accepted, and this has often resulted in sales falling through or having to be renegotiated.
The Government also hopes that the focus on energy efficiency in the HIP will encourage home-owners to reduce the carbon emissions from their homes.
WHAT'S THE LAW?
Since 14th December 2007 HIPS have been extended to 1 and 2 bedroom properties meaning that all properties now require a HIP.
The marketing of a property can begin as soon as the HIP has been ordered until 1st June 2008.
From 1st June 2008 marketing will not be able to start until certain elements of the HIP are available to potential buyers.
WHAT DO HIPS CONTAIN?
Compulsory:
• Index (listing the contents of the HIP)
• Energy Performance Certificate (or EPC, see below)
• Evidence of Title
• Sale Statement (summarising terms of sale)
• Searches (local authority enquiries and a drainage and water search)
Plus, if the property is leasehold:
• A copy of the lease
• Name and address of Landlord & Managing Agents
• Service Charge statements over last 36 months
• Financial requests made by Landlord over last 12 months
• Regulations or rules made under the lease
• Proposed amendments to the lease
• Summary of proposed building works
Optional:
• Home Condition Report
• Home Use Document
• Home Contents Form
• Copies of any planning, listed building, and building regulation consents
• Warranties & Guarantees
WHAT IS AN ENERGY PERFORMANCE CERTIFICATE?
The Energy Performance Certificate is a document that tells how energy efficient a home is. To do this it uses a scale of A-G where A is the most efficient homes (which should have the lowest fuel bills), and G the least.
The Certificate also tells you, on a scale of A-G, about the impact the home has on the environment. Better rated homes should have less impact through lower carbon dioxide (CO2) emissions.
The most important part of the EPC is these two graphs - rating energy performance and CO2.
If the property marketer provides written property particulars, they must include the EPC graphs.
A domestic energy assessor carries out an energy inspection on the property and produces the energy performance certificate (EPC).
WHAT IS A HOME CONDITION REPORT?
The Home Condition Report will broadly cover the condition of the property. The report will draw attention to anything that needs to be taken into consideration.
In essence, the Home Condition Report will be similar to a 'mid range' survey comparable in specifications to the current Homebuyers' Survey and Valuation Report, but without the valuation. However it should, be noted that there is no guarantee lenders will accept this in lieu of a survey and this will need to be taken into account.
WHO'S RESPONSIBILITY IS IT TO PRODUCE THE HIP?
The Home Information Pack is the responsibility of the person or company responsible for marketing the property – so this will usually be an estate agent.
Remember however that “marketing” in this case legally means promoting a property to more than one person. So as well as an estate agents advertising, that would also include putting the details in the local post office, advertising in a newspaper or promoting the sale of a home on the internet, even if the person doing so is not the estate agent.
WHO OWNS THE HIP?
Whoever pays for the HIP, owns the HIP. This is important to know because where several parties are involved in the sale, if the party who has paid for the HIP ceases to be involved in the sale the HIP will need either to be sold to a new party or a new HIP commissioned. This would affect homeowners who decide to change estate agents during a marketing period.
But, it is still the marketer who needs to make sure the home owner has one if they don’t want to break the law.
EXEMPTIONS FROM HIPS
• Properties where there is no marketing (e.g. sale to member of your family)
• Non-residential properties
• Seasonal and holiday accommodation
• Mixed sales (e.g. shop with flat)
• Right to buy purchases
• Sales of portfolios of properties
• Properties not being sold with vacant possession
• Unsafe properties and properties to be demolished
HOW SOON CAN A PROPERTY BE MARKETED?
With the initial law regarding HIPs having come in on 1st August 2007 marketers are currently able to begin marketing properties requiring a HIP as soon as they have ordered the HIP. However from 1st June 2008, the marketer will need to have received certain elements of the HIP before marketing can begin. Those elements are:
• The index
• The EPC
• The sale statement
• The evidence of title
The marketer will also need to prove they have commissioned the searches, and can get them within 28 days.
ARE THERE PENALTIES FOR NOT PRODUCING A HIP?
As of 1st August 2007, for every day they’ve been marketing a property without a HIP, marketers will be fined £200 a day. This will be enforced by Trading Standards.