Stepping up

Home Information Packs (HIPs) have become something of a cause célèbre since they were first introduced in August 2007. On 6 April 2009, the rules governing HIPs were tightened so that all houses must have a pack as soon as they are marketed. Previously, sellers needed to have already commissioned a HIP but had up to 28 days to make it available after putting their property on sale.

The National Association of Estate Agents has been widely quoted as stating that 89 per cent of agents whom it questioned did not think that the new arrangements would benefit buyers. It added that government statistics showed that 77 per cent of people paid no attention to the packs when deciding whether to buy a property. In a similar vein, the Conservatives have vowed to abolish HIPs if they come to power; the proposal was contained in the party's recent housing policy Green Paper. Clearly public opinion of the new regulations is decidedly negative.

At least for now, HIPs are here to stay and so it falls on solicitors to consider how best to accommodate the new and unpopular requirements and how to manage their relationships with all those involved.

A proactive approach

Within a standard conveyancing transaction, a HIP will most commonly be produced by an estate agent, a HIP provider or a solicitor. The solicitor will normally be the last person on that list to be informed of a proposed transaction. Often the HIP has already been initiated prior to the solicitor's involvement, or the solicitor is only asked to provide the final pieces of the jigsaw. Many solicitors will be content with that arrangement but there are good arguments for them to take a more proactive approach from the start and to consider taking over the process entirely. This can be seen by looking at the compulsory documents in more detail and who is best placed to produce them.

Under the new regulations, the compulsory documents for inclusion in a HIP are:

• Home Information Pack Index:

This is a short document which can be easily completed in a matter of minutes.

• Property Information Questionnaire:

The government had suggested that these forms would be completed by sellers without input from their solicitor. Some information, however, will not be known to the average seller or estate agent, such as leasehold information on service charge costs, whether or not the property is in a conservation area, local flood risks etc. Solicitors are best placed to assist the client in answering these enquiries and ensuring accurate responses. It is easy for sellers and their agents to underestimate the importance of the information given in these replies, and a buyer's reliance on negligent misstatements can cause significant problems both prior to and after completion.

• Energy Performance Certificate (EPC):

Estate agents can be unclear as to situations in which EPCs are required and often take a common sense approach to development sites or complicated properties thinking, erroneously, that a certificate is not needed. Unfortunately, the requirements are not necessarily based on common sense, so solicitors are better placed to decide what is required and to ensure future delays are avoided. Certificates can normally be obtained within approximately three days and forging links with local EPC Officers can be mutually advantageous.

• Sale statement:

This is a straightforward document for a solicitor to produce. It requires information about the property such as whether it is freehold, leasehold or commonhold and details of vacant possession etc. '“ and it can be completed in a matter of minutes.

• Evidence of title:

Ordering office copy entries is now instantaneous with Land Registry Direct.

• Local authority search and drainage and water search:

Solicitors are, of course, well versed in obtaining search results quickly. Most water searches are now returned within a matter of a few days. Local authority searches can take longer but there are provisions in the new regulations allowing sellers 28 days to produce searches (evidence of them having been ordered should be included in the HIP). Personal searches which rely on an element of indemnity insurance are no longer permitted, and solicitors are best placed to explain this to the parties and ensure compliance. Many estate agents will place personal searches in a HIP only for a buyer's solicitor to have to re-order a full search to comply with a mortgagee's requirements, thus causing further delays.

• Copy of the lease:

Solicitors will often be in possession of the deeds packet already or can order a certified copy of the lease from Land Registry Direct; and are best placed to ensure that any leases of part, garage leases, overriding leases etc. are included in the pack, therefore giving a full picture from the outset.

• Sustainability information:

This is only required for newly built homes.

The government had initially suggested that detailed leasehold information would also be compulsory but this has not formed part of the final regulations. HIPs are not required to include management and service charge information which surely would be of keen interest to any buyer.

Building bridges

A solicitor is best placed to provide all of the above documents. By liaising with estate agents to make clear that this is the case, important bridges can be built and developed. Estate agents, from the figures quoted above, are clearly frustrated with the whole process and solicitors offering increased assistance will undoubtedly be well received. In the current market, estate agents' main concern is avoiding delays and solicitors who highlight their ability to speed up this process will put agents at ease and open lines of communication at an earlier stage of the transaction; surely a positive thing.

In terms of compliance, there are also strong arguments for solicitors being in control. Most high street lenders, for example, require searches not to be more than three months old at the point of exchange and not to be more than six months old at completion. In the current market, it is entirely feasible that such delays will take place before a buyer is found and it is essential that solicitors diarise and are conscious of searches which are approaching their use by date. That is more likely to happen with HIPs they have produced themselves rather than relying on estate agents who might not be so aware of the requirements of the Council of Mortgage Lenders.

In addition to the compulsory documents, HIPs can also contain any other documents which are of relevance to the property. As a seller's solicitor will best understand what a buyer's solicitor will be looking for, they can pre-empt enquiries and include at the outset documents such as management information and planning documents etc. which, inevitably, will be required in the run up to an exchange.

One word of warning, however, relates to relationships between solicitors and estate agents for the provision of HIPs where an arrangement has been established so that the solicitor is obliged to fund the HIP with no charge to the agent or seller until the property is sold and introductions are made on this basis. The concern is that this may constitute a referral fee.

Rule 9 of the Solicitors' Code of Conduct imposes controls on those who enter into a referral fee arrangement and the Solicitors Regulation Authority has threatened to crack down on those who do not comply. Logically this is 'a financial arrangement with an introducer' within 9.02 of the new rules. This problem must be considered when solicitors are making more formal arrangements with estate agents.

Michael Garson, the chairman of the Law Society's Property Section Executive Committee argued at the end of last year that 'the market has ground to a standstill because of lending constraints. After a long period of low turnover, prices are falling, and this will result in widespread negative equity. The HIP will not perform well in these conditions. The suspension option looms large and the government should grasp it.'

While this call to arms might sound seductive, HIPs continue to survive a tumult of public criticism and negative press attention. Rather than continuing to fight them, perhaps solicitors should concentrate on where they can add value. Providing sellers and estate agents with a fast and high-quality service which takes some of the stress out of being a seller, in this difficult market, can only be a fillip to improved relations with clients, estate agents and the wider property market.

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