Hello!  Have you come in for an update on HIPs?

Yes, I hope you don’t mind.  I find it much easier to talk to you rather than reading leaflets and adverts.

Of course, just ask your questions.

Are all homes included in HIPs now?  Even small room flats like mine?

Basically yes.  From 14 December last 2007 all homes, except those that come within certain excluded categories, must have a HIP.  The exclusions won’t affect most home sellers – they are for buildings being converted to commercial use; derelict properties or properties to be demolished; properties that are not just residential use like a flat over a shop where it is all sold together as one unit.  Also, if you are a property investor and are selling a group of properties in one lot.  None of those affect you and as you have not already put your property on the market it is too late now to take advantage of the other exemptions.

Why not?

The exemption is for properties that were already on the market before the HIP start date for their type of property – 1 August for 4 bedrooms; 10 September for 3 bedrooms and 14 December for the rest.

Do you remember I did have the flat on the market but took it off when I went to visit my son in Australia?  These changes came in while I was away so I didn’t put it back on.  Does that mean I don’t need a HIP after all?

I’m afraid you can’t take advantage of this exemption.  As well as the property having to be on the market it has to have been actively marketed with a view to selling it during the period before the start date so you couldn’t avoid a HIP just by putting it up for sale the day before the deadline or, as in your case, use a previous attempt to sell as a way out of needing a HIP.

So, I need a HIP.  How will that affect the sale?  Will it cause delay in getting the flat marketed and advertised.

Not at the moment.  Up until 31 May 2008 marketing can start as soon as you or your agent has started to get a pack prepared.  And you don’t have to provide a copy of the pack until the EPC has been received.

The EPC - is that the one that’s going to say my flat is a bad buy?

Not at all - as I mentioned the last time we spoke, it will probably be new properties and those that have recently been refurbished that will get one of the top grades for energy performance.  Most homes in the UK will be in the middling grades and even if yours came in with one of the lowest grades, it probably wouldn’t put a buyer off.  If they were looking to buy a flat like yours – in a mansion block with big windows and high ceilings most similar flats would have the same rating.

It seems strange to rate homes for energy efficiency.

It follows on from a directive by the EU.  We have got to do something about energy use all over the world and so this , it is hoped will encourage people to be more aware of the energy they are using and also give them help in making improvements.  The EPC will have a recommendation report telling owners and buyers what could be done to save energy and reduce energy bills. 

Who has to make these changes?  Is it me or the buyer?

No - one has to –it’s just telling you what the position is and what could be done about it if you wanted to but you don’t have to do anything about it at all.

Seems rather a waste of time and money – how much will it cost me?

There is no fixed cost for the EPC – it will depend on where you live and how big your home is.  The DEA –Domestic Energy assessor –has to come to your home to check things like the boiler, double glazing, cavity wall and loft insulation so he has to spend some time at your home and then prepare the report and certificate.

He doesn’t take up carpets or anything like that does he?

Not at all – it’s a non-invasive inspection.  DEA’s are qualified and accredited professionals.  We are recommending that clients have an informal inspection first because the formal EPC and recommendation report goes onto a central register before you get to see it.  If you have an informal one done to you can decide if it would help to have some work done before the property is put on the market.

So you can’t say how much the EPC will actually cost and that’s only part of the HIP isn’t it?

The EPC will probably cost between £100 -130 and the HIP as a whole around £350.  Remember that some of the parts carry a charge to VAT.
Like most estate agents, we offer a number of choices so you can include all the costs in our commission rather than pay at the outset.

I like the idea of it being included in your fees – any other reason to sell my flat now or should I wait of the market to stabilise?

Of course, we do not know if the market will decline further but it the current correction may have further to go.  However there is another short term advantage that might make you decide to put your property on the market sooner rather than later.  Until the latest change on HIP legislation last November sellers of leasehold properties had to include in the pack additional information over and above that for freehold homes...

Such as?

You had to provide information about the landlord and the managing agents, about service charge, ground rent and insurance and also about any anticipated works to the building as a whole that the flat owner would have to pay towards.  That’s now gone –you only have to include a copy of the lease.

Why have they changed it?

Concerns about costs and delay because, if the seller didn’t have the necessary information, we would have to go to the managing agents to ask for copies.  And they could charge as much as they liked for copies and take as long as they wanted –there is nothing in the law to make them behave reasonably either as to time taken or costs charged.   

So, is a copy of the lease all I need to produce for you?

No – you have to provide the estate agent and, through them, any interested buyer with the basic pack plus the lease.  The basic pack is a sale statement giving details of what you are selling, title information – usually official copies of the entries at the Land Registry, the results of local authority search and enquiries and of drainage and water enquiries plus an index of what’s in the pack and, of course , the EPC with its recommendation report.  And, to stress the importance of the EPC, this must be placed in the pack immediately after the index.

And who puts the pack together, once the EPC is received?  Who organises the inspection for the EPC?

If you instruct us to market your flat we will do it all for you.  Some estate agents are using commercial companies to prepare packs for them but we are using a local firm of solicitors.  They know the area and, having been in business here for over twenty years, know about the properties in most of the local roads.  They can also point out any potential problems to our sellers and help put them right before the property goes on the market and a canny buyer tries to knock the price down because of a so called problem. 

What sort of problem?

Our very first HIP instruction threw up a problem on a flat.  The managing agents hadn’t been handling service charge in the way the lease said they should so the solicitors contacted the landlord and got it all put right straight away and at no cost to the seller.  If it had been discovered by a buyer after an offer had been made and accepted it may well have been different.  The buyer might have tried to negotiate the price down because of it and the seller would have been under pressure to get it sorted out which might have tempted the landlord to make a charge for it!  A stitch in time as they say.

I hope my lease is okay.

Well we hope it is, but your solicitors should take a look at it as the requirements of lenders have become stricter over recent years.  We have sold flats in your block in the past and there have never been any problems with the lease or the managing agents but your lease is now shorter and the block may becoming up for major redecoration or repair works.

So, I instruct you to sell my flat and you organise the HIP and the EPC and I don’t have to pay for it straight away?  Or may be not until I have sold.  But what if it does not sell or I change my plans?

We can offer you two options -one wher you pay deposit now and nothing further and the other where you pay for HIP after 12 weeks or when you withdraw form the market.

How long does all this take?  What if it takes a long time to sell my flat?  The property news is pretty gloomy at the moment.

As I said we can start marketing as soon as we have asked for a pack to be prepared.  The solicitors will arrange for a DEA to call when convenient for you.   If you don’t want to be there when he or she calls we can either let the DEA borrow the key, if you agree or we can go to your flat with the DEA.  It’s up to you.  If the property is priced in line with the current market then you will be able to see the response to our marketing and viewings.
Once you have HIP it does not matter how long it takes to sell your property.

Why?

The crucial date for a HIP is the First Point of Marketing - the FPM –the date when a property is first marketed to the public.  Documents in the HIP are dated from the FPM so even if it takes a year to sell your flat you don’t need to renew the HIP you had at the FPM.  Certain items must not be older than three months such as title documents and searches.  The EPC must be less than twelve months old.

So you can prepare a HIP now and I won’t have to change it at all?

That’s more or less right.  But if say there was a change to your lease you would have to include the update in the pack.  Only the compulsory elements I’ve described as the basic pack must be updated.  So, once it’s prepared it can gather dust! 

But what if I accept an offer and the sale falls through will I then need a new pack?

That’s a point on which we would want your specific instructions – do you want to take the property off the market if you accept a buyer’s offer?  If you do take it off the market and the sale falls through you will not need to replace or update the pack provided that you put the property back on the market within 28 days of the sale falling through.  So there is no disadvantage if a buyer asks you to take the flat off the market while the legal matters are dealt with.

That’s good news.

Yes it is, and what’s more if you take your property off the market for any other reason you don’t need a new pack if it goes back on the market within twelve months of the original FPM.  So, if you put your flat on the market on say 15 March to catch the Easter market but don’t get any acceptable offers because of market conditions you could take it off the market in say October and, provided it went back on the market by 14 March the following year you could rely on the old pack.

Is there anything else I need to know about HIPs?

I think we have covered everything in our previous chats and this update.  Some of the relaxations such as marketing once you’ve asked for a pack come to an end on 31 May although some people think the government will extend that date further.  There’s also the chance the date for relaxed rules on Searches could also be extended beyond 31 March.

Relaxed rules on Searches – what are they?

Basically there are two types of Search reports that you can get – official and unofficial.  Official searches are obtained from the local authority and drainage and water authority direct.  Unofficial searches are obtained from personal search companies who go to the relevant authority and search the registers to provide a search report.  Until recently the authorities were the only source of search reports and could charge more or less what they wanted and some were very slow to produce an official search certificate.  That is when the private search companies started to offer services to solicitors and others –they went along and did a personal search and so were quicker and often cheaper.  The downside was that they could not get access to all of the registers held by these local and other authorities.  Therefore their search reports were often incomplete and might contain mistakes.  With HIPs legislation came detailed requirements for search reports.  This could have caused difficulties for the personal search companies. As the government wants to bring competition into the search market to bring cost down and speed up the process they allowed some relaxation in the general rule.  If you choose a private unofficial search and some of the information can’t be obtained the search company must have insurance in place to cover the risk of the missing information being crucial in some way to the seller or buyer. 

This relaxation was supposed to end on 31 March as the government hoped that they would have persuaded all authorities to give full access to personal searchers by then.  This has not happened so the relaxation may well be extended.  The solicitor will ask if you want an official or unofficial search in your pack.  It probably won’t make any difference to you but it might to the buyer or the buyer’s lender.  Some lenders are not prepared to accept the unofficial searches and there is talk that some of these search companies are not reliable especially if they do not actually search the registers each time they are asked for a search report but use their own compiled ‘shadow’ registers.

No problem for you as seller so far as your HIP is concerned but the buyer wants accurate and complete information.  I think that’s the position but ask the solicitors if you are concerned about this.  If you are planning to buy a property you will want an official search I think and your lender may well direct your solicitors that they want one.

So, if I ask you to market my flat you ask the solicitors for a pack and they will contact me?

Yes.  Although we don’t need the extra leasehold information for the pack I would suggest you get it all together as any buyer is bound to ask questions about service charge etc.  If they didn’t I wouldn’t see them as serious buyers.  And on that point you also need to let me know if there is anyone or any group of people who should not be given a pack.  No unlawful discrimination though.  We would not give a pack to someone we did not think could afford your flat or someone we thought was not really serious but are there any others who should be excluded?
One more thing I can tell you that the solicitors we recommend do not pay us any commission for the introduction of this business.  I simply mention that as there are many differing types of arrangement in the market and you should be told if there is any financial arrangement in case it affects the way your interests are handled.

Thanks for that I had no idea how these arrangements  worked or why some non local firms of solicitors become involved. 
I do want a quick sale as I am planning to move nearer my daughter.  The plan is to sell my flat, move in with her for a while to look around without being rushed into moving from one to the other on the same day.  I am too old for all that stress.

So, we would be looking for a cash buyer or someone who had already sold their present home? 

Yes, no long chains or people who are not really determined to move.  My daughter calls them property tourists.

That’s very helpful.  We will only give a copy pack to people who meet that criteria –you can always change your mind alter of course.

Oh, and don’t give a copy pack to any of my neighbours in the block.  Some of them are so nosy they would come in and ask for a pack as soon as they knew my flat was on the market.

We can charge for a copy pack so I don’t think many will want to pay just out of curiosity.

Is that how you manage to provide the pack for free – you charge the buyers?

No, we are not allowed to charge the buyers for the cost of preparing the pack only for providing them with a copy and then only if it is a paper copy.  If we offer a buyer a copy by email and he accepts we can’t make any charge at all.  Effectively we can only charge the copying cost and any postage.

What if you ask for a pack to be prepared and I find a buyer before it has been prepared?

That is happening at the moment.  You will still be committed to getting the pack and we will have to add the EPC rating to our property particulars and give the buyer a free copy of the EPC.  Where a property needs a pack you can’t exchange contracts without first giving the buyer a free copy of the EPC and recommendation report.  From 1 October 2008 all buyers will have to be given a free copy of the EPC and report before entering into an agreement to buy even if the property did not need a HIP because the property was marketed privately and not through agent.

This still sounds very complicated.  What happens if I don’t bother with a pack?
 
Not something we would recommend if you want to sell your home through an estate agent.  Under these new rules the estate agent is called the ‘responsible person’ and must have a pack.  Estate Agents run the risk of being served with a penalty charge notice for £200 and being reported to the Office of Fair Trading that has power to stop the agent trading – not a risk a reputable agent will want to take.   It’s not really that complicated –the documents are ones your solicitor would send to a buyer’s solicitor once you had accepted an offer -except for the EPC of course which is a new requirement.  Just leave it to the professionals who have acted before and we will as always do our best to make the sale progress smoothly.

You said put it on the market sooner rather than later – are there more complications coming?

We don’t know.  To date there have been lots of changes to the new system and not all of them have been announced well in advance of their effective date.  With certain relaxations coming to an end on 31 May there is a chance the government could make another announcement of further changes around Easter time.  And we don’t know whether these will make it easier or more difficult to market property.  

I should also mention that the HIP as it now stands will not necessarily save you time or money in the sales process once a buyer is found.

There are still many reasons for delays up to exchange of contract but the more information that is readily available the more likely that delays on these aspects will be reduced or eliminated.

So, what do you think?  Happy for this to go on our website?

Yes, I am.  I don’t have a computer so perhaps you could send me a written copy to show my friends.