Packed off

The first few weeks of the new coalition government have demonstrated that we continue to live in interesting times.

Most stakeholders in the residential property sector had long criticised home information packs. The only exceptions to the denouncers were those organisations that had invested in the business of HIP creation or those estate agents who had benefited from the commission income derived from pack promotion. Both interest groups were tainted with inevitable commercial bias in seeking to sustain this protocol, arguably doomed from launch in August 1997, coinciding with the time that Northern Rock ran out of cash which turned out to be only the start of the banking crisis. This is not to suggest that these events were in any way interrelated, only that the timing of the launch of HIPs at the tipping point of an over-exposed property market with the banking crisis just starting to emit toxic fumes from its over-heated core really couldn't have been worse.

Yet, it is staggering to reflect on the history of HIPs: first surfacing among New Labour's late '90s pre-election manifesto commitments, taking an astounding 11 housing ministers to develop '“ with a yet to be quantified but no doubt colossal development cost '“ and ultimately taking just over two and a half years to finally sink. While the Labour government phased their implementation over an

18-month period, the coalition suspended them at a single stroke with no notice to the sector or those businesses whose existence was dependent on their production.

Some estate agents had blamed the packs for removing 'toe-dippers' from the market where an estimated ten per cent of property sales came about as a result of prospective sellers testing their property for sale, compounding the shortage of properties coming to market in these tougher economic times. This resale shortage has combined with the recession causing stagnation in the creation of new housing '“ 2009 was the year of the lowest number of new homes built since the end of the Second World War '“ and contributing to the accelerated rise in property values over the last 12 months. It is expected that a greater volume of new sales will come through where there is no longer upfront financial commitment for the seller. This upswing in supply could in turn have a corresponding adverse impact on property prices which have recovered well over the last 12 months, to the surprise of an otherwise flat market.

It is clear in early commentary from the new housing minister, Grant Shapps, that the government has no intention of returning to tinkering with the customary process, leaving any innovation in the process and documentation to the market and business within it.

Residential lawyers are now entering into the transition phase of HIPs' departure with most properties currently selling still with the benefit of a pack created before their suspension. But over the summer months conveyancers will increasingly return to face contract papers without pre-ordered searches where they will have to order what they consider appropriate for the buyer and at the buyer's cost. There are already signs of estate agents failing to provide details of the packs even when previously ordered as they do not understand that the components may still be of value to the transaction.

The ins and outs of HIPs

Despite all of the negative connotations connected with HIPs, there are arguments that they did bring advantages to the market. For example, they forced all but the most Luddite conveyancers to embrace e-commerce, as most packs were most easily distributed as PDF files or weblinks. They also created fierce competition between personal search providers and local authorities, and this appears to have led to more competitive service delivery from local land charges departments and at reduced cost. It is hoped that these enhancements to performance can be sustained in light of the forthcoming rounds of public sector cuts as the government seeks to reduce its budget deficit.

HIPs also resulted in the Law Society reviewing its TransAction Protocol forms twice in short succession. The first set of forms released in the autumn of 2007 struggled to meet the challenges of the HIPs implementation phase and the problems of trying to keep up with a fast-changing playing field as to what in the pack was mandatory and what was voluntary. The second revision of the forms, which were rolled out in April 2009, brought the forms back on track with enquiries embracing many of the newly favoured additional enquiries which had been adopted voluntarily by lawyers. This appears to have dramatically cut down on the number of 'standard' additional enquiries now being raised by buyer's conveyancers after receipt of contract papers, although there remain a minority of conveyancers still intent on raising their 'pet' enquiries. If only this time-wasting minority would look at the content of the pack first to decide what is relevant to ask.

The final word here on HIPs is that during their evolution there was concern among conveyancers that the value of their role was being 'dumbed down' with portrayal of conveyancing as an unnecessarily wieldy process capable of dramatic simplification. One example is the much talked about 'exchange ready' contract pack, suggesting that the conveyancing bundle could be wrapped up like a takeaway meal for quick consumption by the interested purchaser. In reality, the lack of awareness or interest by buyers throughout the HIPs era was undoubtedly as a result of consumers being unable to read for themselves the content of Land Registry official copies and conveyancing searches never designed to be easily read by the lay consumer.

Dramatic changes

Over the last ten years, the nature of conveyancing and the challenges within it have continued to change dramatically. The number of unregistered transactions continues to diminish with over 85 per cent of property now registered (and a much greater percentage of traditionally tradable property if church, charity, college, agricultural or similar typically steady forms of ownership are excluded). In contrast, the nature of transactions has in many respects become increasingly complex, including growth in the shared or retirement ownership sectors. Internet development has been among the major stories of the last decade and conveyancing has benefited, leading to a much greater resource of information for search ordering and review, property data with quite amazing mapping tools and the success of e-commerce at the Land Registry, most significantly the portal with its ease of access to property data.

The planning process and issues arising from it has become an increasingly complex area. Development of the Building Regulations in particular has led to ever greater checks needing to be carried out to ensure that qualifying alterations to property, promoted by the fashionable growth in televison home improvement programmes, have been independently approved, monitored and signed off by approved inspectors while closer attention also has to be applied to factors such as electrical, glazing and heating system upgrades.

Where issues arise, practitioners have an increasing variety of options to consider from seeking to fully resolve issues to covering calculated risks with legal indemnity insurance, the cost and application process for which has continued to reduce and improve as internet solutions are further refined.

The hangover from the hedonistic property era is quickly being detoxified by tightly constrained mortgage lending and appropriate regulation to seek to avoid a return to the previous period when lending appeared, on reflection, to have become out of control. First-time buyers are at an all-time low. One national newspaper suggested their average age was now 38 and, even then, they have increasingly sought the help of parents and relatives to help them fund the shortfall between loan allowed and property value. This has brought a new problem for conveyancers who as a result of the Money

Laundering Regulations have increased responsibilities to satisfy themselves as to the source of funds. Awkward questions are now asked of buyers as to how they came to have the deposit available and to establish whether the contributing parent is actually donating the money as a gift or providing a loan to their relation '“ the latter, if identified, then causing conflicts with the position of mortgage lenders who appear only interested in allowing the inter-family payment if it is clearly stated to be a non-returnable gift.

A new era

The next era which may be concerning the more forward-thinking conveyancer arises from the dawn of alternative business structures, currently forecast to come into existence from October 2011, cynically dubbed by some as 'Tesco law' '“ suggesting an influx of new corporate entrants to compete for conveyancing and other related business at a time where volumes are barely adequate to provide enough work for those already competing for business. The Ministry of Justice has claimed that rumours that the future of ABSs may be in doubt as a result of the new government's review of excessive regulation were overstated.

Another significant forthcoming development is the Land Registry's e-conveyancing system. E-charges are already now a practical reality, although to date it is understood that the take up among lenders has been disappointing, perhaps reflecting the dramatic downturn in the remortgage market and lenders' current attitudes of aversion to risk.

Participating conveyancers have also commented that the process of obtaining clients' e-signatures to documents has been somewhat cumbersome, which the Land Registry is acknowledging by extending authorised signature powers to the retained conveyancer. Notwithstanding these challenges, the Land Registry is determinedly continuing with their phased implementation of e-conveyancing presently concluding their third consultation into the process and legislative change needed to support the initiative and development of e-transfers.

The process of e-signatures to e-transfers and e-charges proposes that the clients' conveyancers will apply for e-signature authorities in the form of a unique transaction pin card to be sent by the Land Registry to the participating citizens. They will then in turn either sign the transfer and mortgage document online or authorise their conveyancer to sign for them. It is not yet clear as to how this will really reduce the stress experienced by citizens in the home transfer process or speed up transaction times. Also, how the removal of the emotional commitment of wet signatures to documents is perceived both by the participants and the lender who will be seeking to rely on that commitment from time to time to enforce their security.

Finally, the Law Society continue to develop their conveyancing portal, intended to provide a platform for integration with the Land Registry, HM Revenue and Customs, search providers and stakeholders within the process.

We are living in fast-changing times and it is essential that practitioners keep apace with the rate of change. This will enable them to be best placed to compete with new market entrants for customer business, while acknowledging that ease of relationship, convenience and communication is just as important to clients as our traditional values of trust and integrity when they engage with professional service providers.

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