Re:locate magazine | Employee Support | Property | Buying & Selling | HIPs

From 2007, anyone selling a property on a company relocation scheme will be required to have a Home Information Pack (HIP) before the property can be marketed. It’s estimated that this could add £600 - £1,000 to the cost of relocating an employee. Employers need to act now to ensure they are ready for the new regime when it becomes law in less than 18 months time. HIPs pose a unique set of challenges for the relocation industry and the main concerns centre on cost, delay, liability issues and the question of who is going to provide the pack.

What’s different?

So, why is selling a relocating employee’s property different from a normal house sale? First, a fair market value needs to be established prior to the sale, usually by means of two independent valuations. Once a price guarantee is given to the employee the employer is, in effect, underwriting that fair market value and needs to make sure that the property is sold quickly and at a realistic price. Any delay in selling a property can be extremely expensive.

The legal aspects of selling a relocation property are different from a normal house sale. The contract needs to have a tax efficient wrapper to avoid Stamp Duty Land Tax. Given that the employee has usually moved out of the property before it is eventually sold, a more extensive data capture that anticipates likely future queries is needed. Powers of Attorney also need to be granted so that the legal paperwork can be signed in the employees’ absence and on their behalf.

Contents and costs

Home Information Packs will comprise title deeds, search information, enquiry forms, planning details and the new Home Condition Report. As far as the cost of a Home Information Pack is concerned, estimates range from £600 to £1,000. A significant part of that cost is attributable to the new Home Condition Report. HCRs will be carried out by a new breed of surveyor, called a Home Inspector, who will be required to publish the findings on a central databank, which will be available to prospective buyers. Crucially, however, a Home Condition Report does not contain a valuation. Because the issue of valuation is central to relocation, employers need to avoid duplication of costs by making sure that when commissioning a Home Condition Report they use someone who is also a fully qualified valuer and can give a fair market value.

Delay

A HIP needs to be considered immediately a new relocation start is authorised. Any delay in gathering title or search information or capturing data from the seller could result in a delay in marketing the employee’s property. Similarly, a Home Condition Report needs to be requested at the outset. It is estimated that the demand for HCRs will mean that 7500 home inspectors will be required by 2007. Current indications are that there is going to be a serious shortage of qualified inspectors by that date. The good news, though, is that while the cost of Home Information Packs will add significantly to the cost of selling a property there could be compensating savings for an employee when buying a new property in the destination area. From 2007, employees will have the benefit of being able to look at a Home Condition Report on the property they are buying and make an informed judgment. Abortive costs should therefore be reduced and there should be savings on survey costs if employees are required, as part of the relocation policy, to rely on the Home Condition Report without a supplemental survey. As relocating employees are usually buying as well as selling the net effect of HIPs for employers could, if handled correctly, be cost neutral. Employers need to consider adjusting their relocation policies to take account of the changes brought about by HIPs.

Liability

From 2007 anyone preparing a Home Information Pack will have a legal liability, not only to the eventual buyer but also to prospective buyers who view the pack. For this reason it is vital that all information is complete and accurate. In recent months a number of companies have set up in the hope of becoming HIPs’ packagers. They will, for a fee, prepare a Home Information Pack to ensure that properties can be marketed without delay.

However, because of the special nature of relocation the ‘one size fits all’ approach does not fit easily with the sale of a relocating employee’s property. Inadequate data capture could mean that employees are dragged back to supply further information when it is needed at a later stage to satisfy the enquiries of a buyer. Given that much of the content of a HIP is legal information it seems sensible for solicitors to prepare the HIP in partnership with a reputable surveyor. Having professionals carry out this work also gives employers the comfort of knowing that they are protected if anything goes wrong.

The prospect of HIPs need not be a daunting one for the employers. The overall cost can be reduced substantially by ensuring that savings are made on the purchase transaction. Following a few simple rules can avoid costly delays and being held liable for inaccurate or incomplete information in a HIP. In summary:

• Use a specialist relocation lawyer to prepare your HIP
• Avoid duplication of costs on valuation
• Adjust policies to take account of HIPs
• Review supplier panels
• Ensure data capture is comprehensive
• Be prepared for 2007. Consider providing voluntary HIPs now.

Richard Atkins is a partner with Taylor Walton Solicitors specialising in relocation. He can be contacted on 01582 731161.

© 2005. Article taken from pages 10-11 of the Winter 2005 edition of Re:locate Magazine, published by Profile Locations, Spray Hill, Hastings Road, Lamberhurst, Kent TN3 8JB. All rights reserved. This publication (or any part thereof) may not be reproduced in any form without the prior written permission of Profile Locations. Profile Locations accepts no liability for the accuracy of the contents or any opinions expressed herein.