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

Re:locate’s recent networking forum event, Getting Up To Speed with HIPs and Property, proved an ideal opportunity for questions to be raised and opinions aired. Jemma Brett reports.

The spring Re:locate networking forum brought together experts from across the property sector. Presentations came from Richard Atkins, relocation legal specialist, who provided an enlightening overview of the HIPs story to date, Ray Boulger, well-known property-market expert from John Charcol, who told the inside story on property prices for 2006, Barry Hall of Ekins Surveyors and the RICS, de-mystifying Home Condition Reports, and David Smith, legal rental expert of Pain Smith, completing the picture regarding the forthcoming changes brought about with the Housing Act of 2004.

Knowing that lively debate was a given, we asked Annie Panton of Quintus Consultants, with her wealth of relocation experience, to facilitate the discussion. She was also well able to ensure an informative question time, thanks to the participation of delegates from bluechip organisations: NATs, Rank Group, Ordnance Survey, Land Registry, GlaxoSmithKline, E.ON, ING, Unilever, GCHQ, The DTI and the BBC and members of the relocation industry.

Top of our agenda at the Institute of Directors was discussion of the relocation implications of Home Information Packs, or HIPs. The Office of the Deputy Prime Minister, we were told, envisages HIPs will have a positive effect on a buying and selling process that it believes is currently too slow, ineffective and stressful. It is thought that one in four transactions fail between the acceptance of an offer and exchange of contracts because of a lack of information provided up-front.

The HIPs scheme is due to be introduced in June 2007; however, at the Re:locate event, we learned that some scepticism has been expressed as to the likelihood of this target date being met, given the shortage of surveyors with the qualification required to carry out the Home Condition Report (HCR). We were to learn much more about HCRs during the course of the morning.

As Richard Atkins, relocation partner from Taylor Walton Solicitors, pointed out: ‘the theory behind HIPs is sound… buyers will not be confronted with an alarming survey or become aware of a boundary dispute after spending a considerable amount of time and money reaching the negotiation stage, but delays will still be present, namely because a property cannot be marketed before a HIP has been produced and sales will fall through regardless of how much transparency is injected as the legislation will not prevent buyers from simply changing their minds!’.

Additionally, one of the biggest concerns raised by delegates was the likelihood of there being a serious duplication of the costs associated with home surveys, further straining the £8,000 tax threshold that many believe is inadequate in 2006. Currently for Guaranteed Sale Price Schemes (GSPs), two valuation surveys are normally required. The HIPs requirement is for an additional condition survey, known as a Home Condition Report or HCR, for every secondhand property offered with vacant possession. The aim of this survey is to protect buyers from being hit with unexpected repair costs after completion, however it’s a mid-range survey, many believe it has little ‘backbone’ as it offers no valuation of the property and therefore will not be accepted by mortgage companies. A HIP is not required should a company wish to purchase a house at Guaranteed Sales Price from an employee, but one will be required at the later date when that same house is sold by the company.

The HCR will flag up whether a property has any defects or problems requiring further investigation. The seller can either decide to deal with anything that’s thrown up, or to proceed with a sale with defects unresolved. For information on how to remedy any problems, the costs involved and their impact upon the property’s value, it would be necessary to commission a more detailed building survey. As Barry Hall from Ekins Surveyors points out: “an HCR will provide prospective purchasers with impartial and professional advice on condition, and although it may not tell everybody everything they need to know, if problems are detected, people will not be entering into negotiations blind”.

Delegates considered the point that there may be a cost saving for companies in combing a GSP survey with an HCP survey – an issue to be further researched (watch this space!) Another issue of concern was the fact that a HIP may only be valid for a period of, say, three months, meaning that – in a slow market – additional costs could be incurred through the need to update HIPs data.

The ball park figure for a HIP is estimated at between £500-£1000, and delegates were encouraged to contact existing suppliers to obtain firmer estimates. Whereas arranging a HIP survey requires time, thereby meaning a property can’t just go ‘straight onto the market’ as it does today, an important point made at the event was that a HIP would probably speed up the time between agreeing a price and the actual closing sale (currently 11.2 weeks). This would save on finance costs for companies funding GSPs, thereby possibly offsetting the cost of the HIP itself.

As was made clear by David Smith from rental specialists Pain Smith Solicitors, it is not just the sales market that will feel the wind of change. Houses of Multiple Occupation (HMOs) will soon need to obtain a licence. The definition of an HMO will cover any property occupied by more than one household who share bathroom and kitchen facilities; a property occupied by more than one household which is a converted building even if the flats are not self contained; and a converted building of self contained flats which does not comply with the 1991 building regulations and some of the flats are let out on an AST. For tenants this could mean increased rental costs as landlords are forced to bring their properties up to a set standard and try to recoup the licencing costs. However, the Housing Act does provide one saving grace for tenants. From October 2006, all deposits must be held by an independent stakeholder, a move that is intended to help protect the tenant from losing his or her deposit to a rogue landlord. However, as David Smith explained, just as is the case with HIPs, the act is still in skeleton form and needs to be ‘fleshed out’.

Ray Boulger from the independent mortgage advisor John Charcol believes, “Property prices will be sustained in 2006, and could even increase by seven per cent in Greater London and the South, with buyers bullish enough to take on bigger debts.” He noted the differing bases of house price inflation used by the Land Registry, HBOS and Nationwide and cautioned against using monthly house price inflation figures in isolation as an accurate guide to the state of the property market. Instead, he recommended taking an overview of the inflation trend by comparing figures over a series of months.

Despite the issues raised at the conference and areas of uncertainty that the Government has yet to clarify, delegates to our event were left in no doubt that the HIPs change is going to happen, and that corporate plans and budgets will have to be made and relocation policies amended accordingly. All those present agreed that regular reviews of the situation would be necessary, and thus another HIPs event would be welcome within the next twelve months.

© 2006. Article taken from pages 14-15 of the Spring 2006 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.