Shooting from the HIP(s)… learning the lessons and improving information

Published by GlobalX

Monday Mar 30 2020 Industry News

Sir Francis Bacon claimed ‘knowledge is power’ in 1597. Without knowledge, without adequate information on a particular subject, people lack confidence to make choices. The property sector is no exception here.

When making the largest purchase of their lives, buyers need to be confident that they are making the correct decision. Despite upfront information becoming mandatory in 2007 through home information packs (HIP), the coalition government suspended then less than four years later.

Why did the government permanently abolish home information packs in 2010? Why were they introduced in the first place? What lessons have we learned and what, if any will future iterations of property information look like in the future and how will they help instil consumer confidence and improve the home buying and selling process?

HIP Replacement Waiting List

Since 2010, the UK property sector has been on the proverbial NHS waiting list for a replacement hip. Home Information Packs were introduced to the Housing Act 2004 in 2007 under sections 155 to 159 with sellers having a duty to have a home information pack and provide one upon request.

The rationale behind HIPs was sound – provide buyers with the information they need in the property prior to sale and they will feel empowered and confident in the purchase which would reduce the number of abortive sales and help lower gazumping and gazundering.

The information on offer was also really important for the prospective buyer. Energy Performance Certificates, property information questionnaires, title documents, Local Authority and drainage searches and leasehold information are vital information a buyer should have.

However, in reality the reports were deemed to be expensive, prohibitive and restrictive with many sellers unable to finance the documents which could cost over £300. The fact that each report was time sensitive, valid only for each transaction was also a clear flaw when providing this important information to the consumer.

At a time when the housing market was on the precipice of its worst crisis in 2008, the barriers to entry HIPs created were viewed as unacceptable, discouraging home movement instead of acting as a stimulus.

Thus, on 21st May 2010, the then Communities Secretary, Eric Pickles, suspended HIPs and claimed the removal of an unnecessary level of regulation would save consumers £870 million over the next ten years.

However, the issue of providing this property information in a sustainable way has always been at the back of both sector and governmental thinking. In 2017, Michael Gove intimated that home information should be embraced in order to reduce fall through rates.

This is still an issue for the property sector in England and Wales. According to research from Quick Move Now, 28.21 per cent of all home sales in England and Wales fell through in 2019. Home buyers and sellers cited buyers changing their mind, slow progress, breaking chains, mortgage issues, gazumping and issues following a survey as the main reasons for failed transactions.

Although legislation is yet to come into effect, as technology improves and society increasingly demands instant information, the need to meet consumer expectations becomes increasingly important.

Property Logbooks Learning From HIP Mistakes

The Council for Licensed Conveyancer’s (CLC) recent whitepaper suggested that ‘reliable, trusted data will be the cornerstone of the digital property market and will be integral to the e-conveyancing process.’

Currently, new build homes are being encouraged to create a digital logbook with the wider market looking to embrace this technology in the future.

Whilst HIPs were designed to support the sales process of a single transaction, a digital logbook has a life beyond this, constantly updating as the home evolved and develops. Whilst the HIP helped provide information to the buyer, it was a mere snapshot in time. One major lesson to be learned from HIPs is that the information we harvest on a property needs to have longevity and serve a function beyond helping a sale.

Some providers of property logbooks are already providing a joined-up service by creating an important everyday function for the service. A London Borough, where all residential housing stock has a useable property logbook, has synced local authority services to the system. Here, homeowners are able to access council services, make payments such as council tax and even organise bin collections. In essence, if more information providers sign up to a holistic data source, the homeowner is able to use the system as a management tool for running a home.

It is this thinking that has prompted a sub-group of the Home Buying and Selling Group to identify a need for Buying and Selling Property Information (BASPI). The intent of the group is to develop a holistic data source which will aim to provide ‘one source of truth’ in the home buying and selling process.

The group believe that around a third of authoritative data is already available electronically and the seller will be able to simply confirm the information’s accuracy. It is hoped that the data will be shared with buyers and lenders to help establish whether the property adheres to its lending policies. Other stakeholders could also access the data to help improve efficiency. The use of biometric data authentication could also reduce seller impersonation and create a safer environment. It is thought that this could reduce insurance premiums which have increased in recent years as providers leave the market.

Conveyancing – The Future is Data Driven

The CLC whitepaper suggests that live data streams and blockchain technology could allow logbooks and a holistic data source to become dynamic, with changes to a property automatically updating in real time.

During this time, the role of the legal professional is likely to evolve. Instead of waiting for information from other stakeholders in the process, the open-nature of the shared system will enable them to interrogate and analyse the data in order to provide stronger and more valuable advice to the client. The CLC claim conveyancers will become data scientists.

As we have already discussed in a previous article, Australia’s continent-wide use of the e-conveyancing Property Exchange Australia (PEXA) system which offers a blanket policy use of e-conveyancing and uses an online secure workspace to ensure all key stakeholders have a place to share information. All property related documents are made in the workspace and signed and lodged online. Conveyancers confirm details with the buyer’s bank, complete title searches, transfer funds, pay all disbursements and complete land registry registrations all within the same system.

Unfortunately, for the time being, we look to be some way off ‘a single source of truth.’ The CLC believe that stakeholders need to trust the data and the sector needs to ascertain who will validate the information and become accountable for its maintenance and accuracy. Regulators will also need to create a shared set of standards before the data is accepted by all stakeholders in property.

Whilst questions remain, HIPs have left a legacy. In addition to the bitter taste people remember, there remains a desire to provide information and data to help the home buying and selling process.

As a leading provider of conveyancing searches in England and Wales, GlobalX can help provide efficient, fast and trusted search information. For draining and water searches, environmental searches, land registry searches, mining searches, miscellaneous searches and flood reports, our thorough and fast service will ensure the home buying and selling process is fully informed whilst avoiding harmful delays.