UK and Overseas Mortgages

Understanding Hips

Home Information Packs (HIPs) will have a major impact on the lending industry and will open the doors to increased competition from estate agents for brokers' mortgage business.

The Government’s stated aim is to make the buying and selling of residential property faster, easier and with fewer pitfalls than the current system - seen as one of the slowest and most complicated in Europe.

Deputy prime minister John Prescott's HIPs scheme was thrown into disarray after housing minister Yvette Cooper said the most controversial element - the home condition report (HCR)- would not be introduced in June 2007 as planned.

The move is seen as a climbdown for the Government and comes less than 24 hours before the Conservatives hold an opposition day debate on the packs.

Ms Cooper said as part of information gathered in the dry run there would be "significant risks and potential disadvantages to consumers from a mandatory "big bang" introduction of full HCRs in June 2007."

HIPs will be introduced with searches and other key documents from 1 June 2007, along with Energy Performance Certificates.

But after weeks of speculation Ms Cooper confirmed that the remaining aspects of HCRs will not be made mandatory but that the reports will be authorised documents that sellers will be able to include in their pack.

When will it happen?

She stressed mandatory HCRs would "remain on the table if the industry fails to make a success of the roll out of HCRs."

She said: "We will work with the industry to facilitate market-led take-up of full HCRs. As part of this approach, we will explore with the sector a wide range of options to enable a successful and innovative market for HCRs, including options for supporting the provision of necessary systems, effective demonstration projects for HCRs, and will consider the case for pump-priming funding."

Further testing was needed to ensure that HCRs were beneficial for consumers and results would not be achieved by the roll out date in June, she added.

what will it contain?

While the absolute detail of what will be in a HIP has still to be confirmed it could include:

Terms of sale
Evidence of title
Standard searches
Planning consents, agreements, building control certificates
Seller’s Property Information Form
Warranties and guarantees that relate to the property itself
Home Condition Report (HCR)
Energy Efficiency Report (EER)

It is quite likely that a ‘standard’ HIP like this will run to more than 100 pages for a freehold property.

If the property is leasehold the pack will need to include other documents (for example management company reports and leasehold documentation) as well as a full copy of the lease, so the HIP could be as big as 250 pages!

With an estimated two million HIPs required each year some of the key issues facing anyone providing packs include compiling, printing, managing, transporting, storing and archiving these hefty documents in both paper and electronic formats - definitely something to be considering with your HIP supplier, along with Data Protection.