House Information Packs: What were they, why did they disappear and were they good or bad?

In the UK each country has its own rules on property transactions with Scotland being the most different. In an attempt to improve the housing market and property transactions, the last labour government back in 2007 introduced what were known as House Information Packs usually abbreviated to HIPs. Perhaps they did but they probably didn’t expect the amount of controversy and debate that House Information Packs (HIPs) created at the time.

Introduced with the promise of transparency and efficiency, something at Moove we seek, HIPs ultimately became a polarizing topic, sparking both praise and criticism. To understand whether HIPs were an improvement or disaster, we need to delve into their origins, their implementation, and their eventual demise.

Also, should they be brought back to help bring more transparency and speed to the process of property transactions? What is clear is that the speed from listing to completion has increased over the last decade which is a move in the wrong direction.

The Birth of House Information Packs

The concept of HIPs was born out of a desire to streamline the home-buying process in the UK. Prior to their introduction, prospective buyers often faced uncertainty and delays due to the lack of standardised property information. This often led to transactions falling through, causing financial losses and emotional stress for all parties involved.

To address these issues, the Labour government, led by Prime Minister Tony Blair, introduced HIPs as part of the Housing Act 2004. The idea was to provide a mandatory set of documents to potential buyers upfront, thereby reducing the likelihood of failed transactions and making the home-buying process more transparent and efficient.

What Did House Information Packs Include?

A typical HIP included several key documents:

• Energy Performance Certificate (EPC): Assessing the energy efficiency of the property.

• Sale Statement: Basic information about the property, including its tenure.

• Evidence of Title: Proving the seller’s ownership of the property.

• Standard Searches: Local authority and environmental searches.

• Leasehold Information (if applicable): Details about the lease.

The aim was to ensure that all relevant information was available at the start of the buying process, thus empowering buyers to make informed decisions quickly and highlight any issues likely to come up deeper in the transaction.

The Reality of Implementation

HIPs were introduced in phases, starting with larger properties in August 2007, and eventually encompassing all homes by December of the same year. However, from the outset, HIPs faced significant criticism. Critics argued that the packs added unnecessary costs and administrative burdens to sellers. The requirement for sellers to commission these documents before even marketing their properties was seen as a financial barrier, particularly during the economic downturn of 2008. Sellers had enjoyed these fees being paid by the buyer and were reluctant to pay them and eat into their equity.

Real estate professionals also pointed out that the information contained in HIPs was often already obtained during the standard conveyancing process. Thus, HIPs were viewed as redundant, adding little value while increasing the bureaucratic load. What was missed from this criticism was the fact that often things that come to light in the conveyancing process could have been identified much sooner or even before any work had started.

The way of buying and selling property had seen little change for decades and therefore there was a natural reluctance to embrace anything new, especially something that felt like speculative work on the part of the seller and agent.

The Fall of House Information Packs

The Conservative-Liberal Democrat coalition government, led by Prime Minister David Cameron, wasted no time in addressing the concerns surrounding HIPs. In May 2010, just two days after taking office, the new government announced the suspension of HIPs, citing them as an unnecessary burden on the housing market. The only component retained was the Energy Performance Certificate, which remained a mandatory requirement for sellers and still does today.

This swift action was met with relief by many in the property sector. The abolition of HIPs was seen as a move towards reducing red tape and stimulating a struggling housing market. Or more importantly it removed a barrier for many potential sellers to put their property on the market which created an artificial boost to the market.

Were HIPs a Good Thing or a Bad Thing?

So the fact that their removal was celebrated seems to suggest House Information Packs were a bad thing. Well I guess with most things there are positives and negatives and each most be looked at objectively.

The Good:

Transparency: HIPs aimed to provide comprehensive property information upfront, this could potentially reduce any surprises down the process at conveyancing and therefore mean a higher competition percentage. Properties with skeletons in the closet would need to remedy the situation or reflect this in the asking price.

Efficiency: By standardizing the information available, HIPs sought to make the home-buying process quicker and less stressful once started. The more information available at the start of the process would potentially mean less time lost answering queries further down the process.

The Bad:

Cost: The financial burden of preparing a HIP, especially in a sluggish market, was significant for many sellers and they had been used to the buyer paying for the searches. Sellers would rather take the risk and fail at conveyancing than pay to list.

Redundancy: Much of the information in HIPs was already acquired during conveyancing, rendering the packs somewhat superfluous. An issue which would still stand today is there is no link between what the seller had produced and the buyers conveyancing solicitors meaning they would run all the same searches again.

Implementation Issues: The roll-out was seen as rushed and poorly executed, leading to widespread confusion and frustration, especially against a back drop of reluctance from the industry.

The Moove Verdict

The story of House Information Packs is a classic example of a well-intentioned policy marred by practical execution challenges. With the Property Market so fragmented it can be hard to drive any sort of change, whether that be good or bad. True change needs to be shown to be for the greater good which seldom comes from political initiatives by politicians seeking headlines rather than positive change.

While the vision of a more transparent and efficient property market was commendable and even required, the reality of added costs and administrative complexity became too big an psychological hurdle in the minds of agents and sellers. This meant the potential benefits were lost in the noise and it never stood a chance, creating an easy positive action for a new government to take to show they are different from the last. HIPs serve as a reminder that even the best ideas need careful planning and consideration of real-world impacts to succeed.

One other new method which blends the old system with the new are property auctions where this documentation must be compiled and made available to all auction participants in advance of bids. This creates a fairer auction and reduces the chance of post auction collapses which carry large penalties with some auction houses.

The biggest flaw which stands in the way of the revival of a similar document is the fact that the conveyancing industry is also very fragmented and adversarial. With more thought a system could have been created to ensure documents could be compiled once and used by all parties. Definitely an opportunity for the future.

As the UK property market continues to evolve, the lessons learned from the rise and fall of HIPs remain relevant for future reforms but as advancements in digital documentation have evolved perhaps there is a way of bringing elements of them back to drive speed, transparency and fairness into a market which is so lacking in all three. We need to reduce the trend of time in property transactions and HIP v2.0 could be the answer.