With the property market at virtual standstill, this is an appropriate time to look back over the progress of HIPs and consider where matters now stand.
Michael Garson
Michael Garson is the author of "Home Information Packs - A Guide to the New Law" published by the Law Society. Click here for the Government's Home Information Pack website which has a great deal of information and many useful links.
Overview
2007: HIPs - modifications to the 2006 and 2007 HIP Regulations.
2008: Additional changes - Sustainability certificates; EPC’s; CML Incentive forms; CEAR and enforcement and extension of various relaxations
2009: Proposals for new additions - PIQ; leasehold summary sheet; local search pricing legislation; marketing concessions
Regulations in force
The 2006 regulations and first set of 2007 regulations were abandoned. The current regulations are the Home Information Packs -The Home Information Pack (No 2) Regulations 2007 SI No 1667 – (the “HIP No 2 Regulations”).
These make the production of a pack a necessary requirement for sellers and estate agents of residential properties in England or Wales that are subject to one of the following commencement orders:- The Housing Act 2004 (Commencement No 8) (England and Wales) Order 2007 SI No 1668 – 4 and more bedroom properties from 1 August 2007
- The Housing Act 2004 (Commencement No. 9) (England and Wales) Order 2007 SI No 2471 -3 bedroom properties from 10 September 2007
- The Housing Act 2004 (Commencement No. 10) (England and Wales) Order 2007 SI No 3308 - less than 3 bedroom properties from 14 December 2007
The pack must be compliant at and after the date when the qualifying property is marketed for sale subject to the transitional provisions, the first day marketing relaxation and the provisions for incomplete packs.
The Home Information Pack (Amendment) Regulations 2007 No 3301 (the “HIP Amendment Regulations”) gave a temporary relaxation to the requirement to include information and documents in a pack in relation to leasehold property - the lease is the only required document. This relaxation is due to expire on 31 December 2008.
So far in 2008:- The Housing Act 2004 (Commencement No. 11) (England & Wales) Order 2008 No. 898 that from 6 April requires all homes (save excepted properties) including all new builds to have a pack.
- The Home Information Pack (Amendment) Regulations 2008 No. 572 extends the temporary relaxations for search insurance and introduces as a new required document - a Sustainability Certificate - to follow the EPC in the pack for all new homes.
Energy Performance Certificates
As the Opposition Housing spokesman eloquently put it, the EPC was the fig leaf that saved government embarrassment over the climbdown surrounding the introduction of HIPs. The regulations for the EPC have also gone through changes, though not quite so many as for the pack itself. Currently in force are:- The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 No 991 - (EPBD regulations)
- The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment) Regulations 2007 No 1669 – (EPBD Amendment regulations)
- The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment No 2) Regulations 2007 No 3302 - (EPBD No 2 Amendment regulations)
- The Energy Performance of Buildings (Certificates & Inspections) (England and Wales) (Amendment) Regulations 2008 No. 647 relate to the introduction of EPCs for non residential property and contains transitional relaxations for properties on the market at the relevant commencement dates and take account of a shortage of qualified assessors.
- The Energy Performance of Buildings (Certificates & Inspections) (England and Wales) (No2) Regulations 2008 No. 2363 extend the validity for the EPC of a residential property to 3 years and extend the provisions concerning access to the registers.
More detail
A closer examination of the 2008 changes follows:
The Housing Act 2004 (Commencement No. 11) (England & Wales) Order 2008 No. 898 applies the HIP Regulations so as to include properties excluded from the previous commencement orders namely buildings where construction was controlled by the 2006 amendments made to Part L of the Building Regulations (BR) 2000 by regulation 17(C) of the Building Regulations 2006 (SI 2006 652). It therefore affects buildings where application for BR consent was made after 6 April 2006. If made before that date, then the first marketing of the property for sale was caught by earlier orders and a HIP with a predicted energy assessment (PEA) was required. For developments within this latest commencement order, but where marketing started before 6 April, then regulation 33 of the HIP No 2 Regulations applies so no HIP is needed. As yet there is no ‘drop dead date’ for this exemption.
The effect of this commencement order is that certain new homes will now, for the first time, need to have a HIP and this must include an EPC and (bizarrely) a recommendation report. Where at the First Point of Marketing (FPM) the dwelling is not ‘physically complete’ then a PEA is necessary. (See Schedule 2 of the HIP No 2 Regulations.) You do not need to be a DEA to prepare a PEA.
Once ‘physically complete’ a full EPC and recommendation report must be prepared by a DEA and be included under regulation 22 of the HIP No 2 Regulations.
A property will be ‘physically complete’ where it ‘is wind and weather proof, safe and sanitary, has facilities for heating, hot and cold water and electricity, and has washing and drainage facilities’.
The Energy Performance of Buildings (Certificates & Inspections) (England and Wales) (Amendment) Regulations 2008 No. 647 provide interim arrangements for non residential buildings that potentially require an EPC from 6 April 2008 or 1 July 2008. In these cases, no EPC needs to be made available at the initial stages mentioned above if the property is on the market before 6 April or 1 July as the case may be. In those cases the building must be continuously marketed. If it is taken off the market and put back on the market within twenty-eight days following withdrawal or rejection of an offer then the exemption will continue to apply.
From 1 October 2008 the transitional arrangements came to an end and an EPC has to be made available. Where the seller or landlord has benefited from the transitional arrangements and enters into a contract before 1 October 2008 and inspection has not already taken place, a request for an EPC must be made and all reasonable efforts made to obtain an EPC as soon as practically available. A copy must then be given free of charge to the person who has bought or rented the property.
Under regulation 11 of the EPBD regulations, the certificate must be issued no more than ten years before the date on which it is being made available. This applies to all property including rented property but did not apply to residential property under the HIP legislation where the life of an EPC was just 12 months. The consultation ‘EPC for private marketed sales of dwellings: Validity of Period of Certificates’ has now resulted in the change to three years for the life of an EPC encompassed in The Energy Performance of Buildings (Certificates & Inspections) (England and Wales) (Amendment) Regulations 2008 No. 2363.
The House of Lords Merits Committee found the rationalisation for change in the Impact Assessment prepared by the CLG and said:"We are left with the impression that the decision to extend the validity period of the EPC from twelve months to three years is founded as much on administrative convenience (since it ties in with the timetable for reviewing the Directive) as on considerations of the effectiveness of the mechanism itself. We are aware that views among interested parties continue to be divided on the appropriate length of the period, and that, while some favour frequent updating of EPCs to maximise their relevance, others see this as an undesirable complication in the process of buying and selling homes. We believe that the House will be interested to see the decision taken by the Department on this issue, while keeping the position under review." Sustainability Certificates
These were introduced by The Home Information Pack (Amendment) Regulations 2008 as a required document in Regulation 8(c) of the HIP No. 2 Regulations for new homes.
Where a property is ‘finished’ (as defined) before the FPM and is marketed as a new home then a Sustainability Certificate or a Nil Rated Certificate must be provided. If such a home is marketed before it is finished then it must have an Interim Sustainability Certificate or a Nil Rated Certificate.
The regulations say that a property is ‘finished’ when it reaches a stage in the construction when it is sufficiently advanced to make a post construction assessment possible. A “new home” is defined as one which is being designed, being constructed or which has been constructed and has never been occupied.
A Sustainability Certificate must comply with certain requirements and will confirm that there has been a post construction assessment of the property. It will contain a star rating system from zero to six stars awarded by a code assessor and an explanation of the rating. There will be a percentage rating against various categories of sustainable design principles. A qualified Code Assessor must prepare the certificate based upon a post construction assessment of the property.
An Interim Sustainability Certificate must confirm that there has been a design stage assessment of the designs for the property and will likewise contain a six star rating system with an explanation.
The assessment must be made under the Code for Sustainable Homes by a Code Assessor who is a person registered with the Building Research Establishment Limited. A design stage assessment can be based on an inspection of the plans and specification, whereas a post construction assessment requires an assessment based on a visit to the property. As an alternative, a Nil Rated Certificate in the form prescribed can be prepared by any person.
The concept of sustainability relates to the materials used in the property, other aspects of the design and construction and services, fittings and equipment provided in connection with the property.
Furthering sustainable design principles involves sustainable design principles which (a-g) reflect the provisions of the Sustainable Buildings Act 2004 – ensuring health and safety; furthering efficient management of the property in its construction; energy efficiency; efficiency of use of water and waste and minimising flood; efficient waste management; protection of the environment and detection of crime.
Regulation 13 of the HIP No 2 Regulations is amended so that the sustainability documents are in third place in the pack after the Index and EPC.
Regulation 22A provides that where an Interim Sustainability Certificate is included in the pack and the property is then finished it must be replaced with a Sustainability Certificate (or a Nil Rated Certificate if no post construction assessment has taken place).
The updating must take place in the case of an interim certificate within twenty-one days of the post construction assessment or in the case of a Nil Rated Certificate then within seven days of the date when the property is finished.
The responsible person can at any time replace a Nil Rated Certificate with a Sustainability Certificate.
Regulation 34 of the HIP No 2 Regulations is amended so that the new requirements do not apply for new homes where application for BR consent was made under the appropriate provisions of the Building Regulations before 1 May 2008.
The Code for Sustainable Homes was published on the 27 February and is available on line only.
The Code measures the sustainability of a home against nine design categories, rating the ‘whole home’ as a complete package. The design categories are:- Energy and CO2 Emissions
- Pollution
- Water
- Heath and Wellbeing
- Materials
- Management
- Surface Water Run-off
- Ecology
- Waste
Each category includes a number of environmental issues that have a potential impact on the environment. The issues can be assessed against a performance target and awarded one or more credits. Performance targets are more demanding than the minimum standard needed to satisfy Building Regulations or other legislation. They represent good or best practice, are technically feasible, and can be delivered by the building industry.
On some categories there are minimum standards and for others credits are awarded that are then aggregated and weighted
Enforcement
Certain properties are still being marketed without a pack and, provided regulation 33 is complied with, this is allowed. However, if enforcement is given a boost then enquiries will be made as to the dates when property has been placed on the market and taken off.
Part 3 of The Consumers, Estate Agents and Redress Act 2007 ss 53 -58 affecting all estate agents was brought into effect from 1 October 2008. This requires all estate agents to belong to an approved redress scheme not just for HIPs but in relation to all their work. There are two approved schemes - the OEA and SOS (run for the RICS but to be opened to non-members).
Estate agents will be required in future to:- Keep accurate records of all transactions with actual potential sellers and buyer of property.
- Operate a structure for in-house complaints handling. The procedure must be in writing and available to actual potential sellers and buyers.
- Publicise membership of an approved redress scheme and that disputes may be referred to The Ombudsman for Estate Agents.
- Observe higher standards of fairness, integrity and good practice.
- Have appropriate terms of business including clear arrangements as to fees.
- Ensure that all members of staff are conversant with legal responsibilities and have good working knowledge of the relevant law.
When is a HIP needed?
Under regulation 34 of the HIP No2 Regulations the pack must be available once the EPC has been delivered. This relaxation has now been extended to 31 December 2008. If the relaxation is not further extended then regulation 14 of the HIP No 2 Regulations prevents the marketing of a property before certain basic elements of a pack have been compiled. These are the Index, EPC, sustainability certificate (for new homes) Sale Statement, Registered Entries and Filed Plan or Index Map Search for unregistered titles. The remaining required documents must however have been requested. If the EPC is not available, marketing must be delayed until 14 days after a request has been made. Proof of requests for missing documents would need to be included in the pack.
Regulation 5 of the EPBD Regulations requires the relevant person (seller/landlord) to make a free copy of an EPC available at the earliest opportunity - meaning upon enquiry or viewing. Under Regulation 5 an EPC must be provided before entering into a contract for sale. This requirement applies to all dwellings from 1 October 2008 irrespective of whether a HIP is required.
From 1 October 2008 an EPC is also necessary in respect of all residential property that is let. Where buildings are to be sold or let, then the responsible person must ensure that an EPC with a recommendation report is available free of charge to prospective buyers and tenants at the earliest opportunity and no later than when a viewing is conducted or, in any event, before entering into a contract.
Exceptions
An EPC does not have to be made available if the seller or landlord has reasonable grounds to believe that the prospective buyer or tenant is unlikely to have sufficient funds or is not genuinely interested or the seller or landlord is unlikely to be prepared to sell or rent the property to the person.
EPC Specification - amendments are expected to the EPC so that it will technically apply in future also to cob walls and thatched roofs. Other changes may also be announced (HC 16 July).
2009 and beyond
By the end of this year and for introduction next year further changes are planned by the government:- The Property Information Questionnaire (PIQ);
- Leasehold property summary sheet;
- The reorganisation of pricing for local searches following a Property Search Consultation (July); and
- Policy decisions relating to the extension of Regulation 34 concerning first day marketing
Property information questionnaire
This reintroduces the Home Use Form, which originated as an authorised form for HIPs.
The Home Use Form was a lengthy form that corresponded to the relevant matters authorised under schedule 11 of the HIP No 2 Regulations.
In 2006 it was conceived as a ‘required document’ and was aimed as a near equivalent to preliminary enquiries. It had to be included in the pack, but it did not need to be completed.
The Home Use Form was relegated to an authorised document along with any other document containing relevant information of the type set out in schedule 11. The Law Society produced its new TransAction Forms. The latter have received a certain amount of criticism because they are complicated - that being an unfortunate necessity in order to deal with alternative situations that can arise where a HIP may or may not exist. A property may be sold with a HIP or without and the TA6 was devised as a form that can be used to provide additional information at the same time as the pack. On the other hand, TA11 is a form suited to post-offer enquiries before contract.
The proposed Property Information Questionnaire is a new and compulsory form devised by the CLG - (AHIPP have announced that they intend to develop an alternative form and seek approval of it). It takes content and wording from the Seller’s Questionnaire to be introduced in Scotland from December 2008. However, in adapting the form for the English/ Welsh pack the government sets out a number of assumptions and propositions that look to be both impracticable and unsafe. They require the form to be filled in by sellers and suggest they do not need input or protection from their advisers.
Having decided that more ‘useful’ information must be provided to buyers earlier in the sales process, a balance has to be struck. This is between requiring too much information to be provided prior to the start of marketing, and providing too little information to be useful. Any balance will give rise to risks for both seller and buyer, and the type of information required will determine the cost of the process.
The consultation on the PIQ announced on 29 July closed on 30 September 2008.
One of the difficulties with the current proposal is that the government appears to require the form to be completed. The original Home Use Form could have been included in the pack but left blank. Clearly the word “completed” is intended to introduce an objective standard, but is likely to be subjective and begs a number of alternative interpretations.
Although the form contains matters that involve questions of mixed fact and law, the government suggests the form should be prepared by sellers without professional guidance. Clearly delay is seen as a consequence of professional involvement. It is inconceivable that buyers and/or lenders can safely place any reliance on any unsupervised disclosure form prepared by a seller.
Leaseholds
The Home Information Pack Amendment Regulations 2007 No 3301 changed from ‘required’ to ‘authorised’ detailed information and documents relating to leasehold property with the result that only a copy of the lease remains as an additional requirement for the pack. Following the Beardsall report in early 2008, it is proposed that there should be a Summary Sheet with some basic and some not so basic information about the lease and this is intended to inform buyers and replaces the technical information previously prescribed.
It is not clear how this form interrelates with the additional information set out in that part of the PIQ relating to leaseholds.
Local searches
The Beardsall Report also investigated and confirmed the unsatisfactory position in relation to local authority searches arising because of the HIP.
Consultation on a new pricing mechanism earlier in the year has now progressed to full proposals for legislation that will regulate the way in which prices are set by local authorities for the information they make available to private search companies.
Current uncertainty will continue until the issues raised concerning pricing policy have been determined. A fresh consultation was published in July concerning the pricing policy for changes to be made at the end of the year. The latest consultation proposes that local authorities will be required to set prices on a new statutory basis. It is intended that this will provide a level playing field in the market. It does not however address the difficulty that LA’s are not compelled to give access to all registers maintained by them.
The buyer will of course be concerned as to the date on which the search was carried out, who the person was who did the work and whether the search is complete and accurate. A number of searches have been identified that are unreliable and inaccurate. These may or may not give rise to complaints or claims.
A problem arises where search companies are not carrying out a search but simply providing the insurance policy required by Schedule 6 of the 2008 Regulations. The insurance for missing information is a temporary fix to overcome an access problem.
Since January 2008, there has been a new Code of Conduct issued by the government – ‘Good Practice Guidance for Local Authorities and Personal Searchers’. This can be downloaded from www.communities.gov.uk/publications/housing/personalsearchguide
In paragraph 4 of The Home Information Pack (Amendment) Regulations 2008 No. 572 the provision about searches and search reports contained in Schedule 6 has been amended so that an insurance policy can be provided where access is not available and this will apply until 1 January 2009 - rather than the concession expiring on 31 March 2008.
Conclusion
With the current downturn being followed by recession the government position is hardly sustainable. The market will not remain at a standstill for ever but after a long period of low turnover, prices are falling and giving rise to widespread negative equity. The HIP will not perform well in these conditions. Section 162 of the Housing Act 2004 gives another option, which is for the minister to suspend all or parts of the pack legislation leaving the EPC legislation unaffected.
© Michael Garson
Back to top
www.propertylawuk.net
|
|