New season, new HIPs

New HIP regulations, introduced on 6 April 2009, are set to turn the world of property search information upside down. These latest changes come as a further response by the government to reform both the completeness and accuracy of the information contained in a HIP. In addition to the Property Information Questionnaire (PIQ) and the requirement for an agent to obtain a HIP before marketing a property, it will be the search content in HIPs that gets the biggest shake up under these new regulations.

To begin with, 'incomplete answer insurance', which has thus far allowed private search companies to insure against data that was 'not available', will be removed from personal searches in the HIP. As a result, the practice of relying on data from derived sources that cannot be proven to be current '“ nor directly applicable to that address or geography '“ will no longer be possible.

At the same time, local authorities must also give access to private search companies for all relevant data, so that a complete personal search can contain the same information as the CON29 official search that is favoured by solicitors, especially when acting for the buyer.

On the face of it, this mandate sounds like good news, since it will go some way to ensuring that there is fuller search content included in HIPs '“ but that's only true if this area is policed effectively by Trading Standards officers and the Property Codes Compliance Board.

If both fail to show real teeth, compliance may be slow and some personal search companies may continue to rely on incomplete and/or inadequate information '“ albeit without the 'safety net' of incomplete answer insurance '“ thereby leaving consumers at risk of discovering something on completion that will affect their enjoyment and/or value of their new home.

For solicitors in particular, this is an important change, because sub-standard search information can clearly cause a number of serious problems down the road.

New pricing model

The second big change facing solicitors is the new pricing model for obtaining search information. Since December last year, local authorities have been able to charge for property search information on a cost recovery basis (i.e. not profit-making). Many local authorities are still making their final arrangements for these charges, but they are certain to be highly variable nationwide, as each local authority will be setting its own budget, based on its own individual cost of operation.

The Ministry of Justice, meanwhile, has announced a rise in the fees that local authorities can charge personal search companies to access their data. These new fees, combined with a variable charge across the country for the additional information required by the new regulations (such as Environmental Health and Building Control answers), means that the traditional price and operating models of the personal search businesses will have to change forever. Gone will be the days of the national single price for searches in a HIP, and so any companies that are not charging on a variable basis by local authority are probably not compliant, and quite possibly cutting corners when it comes to gathering full information.

Although personal searches may have once offered a certain level of cost savings, any benefit may be eroded by these variations in pricing, especially if it does not prove cost effective to obtain via the traditional method versus obtaining a CON29 either electronically or even via the post.

Of course, without a national set fee for searches in a HIP, the days of the national fixed-price HIP are over too. It may be possible to have a fixed-price HIP in a specific local authority area, as it will be determined by what the local authority charges, but this fixed fee cannot be extended nationwide. So again, as with the search information, law firms should be wary of a HIP provider that is somehow managing to offer a national fixed-price fee. It will have to be determined by the local and regional geographies of how the local authorities have set their pricing and access arrangements.

Silver lining

Fortunately, there is a silver lining to all of this: the legislation that took effect on 6 April '“ if policed correctly '“ has the potential to improve the quality of a HIP by ensuring that it contains more comprehensive and reliable information, which means that they will be more useful and offer better protection for the buyer.

Not only that, but with more reliable information contained in a HIP, a lot of duplication will be eliminated as well, since the majority of solicitors '“ 60 per cent of those questioned, according to our most recent survey '“ still conduct an official local authority search even when a personal search has been completed.

Even more importantly perhaps, this new legislation will spark a renewed interest in how we, as an industry, can work together to get important property information through the system more effectively. This renewed focus, combined with the recognition that property search and HIP information must be at a standard that is acceptable to all parties in the chain, will help to get house sales moving more quickly, which is an objective that surely we'd all like to achieve.