It's the hip thing to do

Home Information Packs were proposed by the government in 1997, partly to address the relatively low levels of housing sales that reach completion. Some elements of the property industry may not like them, but the sector has to take some responsibility for the lack of an acceptable alternative.

New home buyers generally don't suffer from gazumping, nasty structural surprises or delays caused by surveys and searches. They will nonetheless receive a modified version of the Home Information Pack when they buy a new home marketed after 1 June 2007. This applies to off-plan sales as well as sales of completed homes.

The Home Condition Report - a significant part of the standard Home Information Pack - will not be required for most new-build properties. It is needed only for homes that are complete and ack an approved new homes warranty, such as the one provided by the NHBC. A separate form is proposed for homes that are not complete.

Some of the most obvious short-cuts are ruled out by draft regulations. A global HIP for all the properties on a development is not allowed. Separate HIPs will be required for each plot and this will require considerable administration.

Ignore the onset of the housing packs and you could find yourself at a real and intractable disadvantage. June 2007 may seem a long way off, but if you make your preparations in spring 2006, you could put yourself at a competitive advantage next year.

Prepare ‘smart' marketing

If the Council of Mortgage Lenders is right in its analysis, there will be a significant increase in resales in the three months preceding the introduction of the packs.

The most direct competition for developers would come from investors looking to sell contracts off-plan or stock apartments in uncompleted developments before June.

Oversupply could have a serious - albeit short term - impact on the market. The stamp duty holiday in the early 1990s illustrates how a relatively small amendment to the future cost of buying or selling a home can affect transactional levels before the change.

Another effect predicted by the CML is the temporary weakening of interest from first-time buyers, who will postpone their purchase until they have the added certainty of a HIP.

Support your off-plan investors

Off-plan investors - unless they have a tenant in place when they sell - will have to prepare HIPs when they take a property to market. Competition for tenants, high initial capital values and the rental yields on offer are discouraging some residential property investors from entering regional markets because they are not getting the returns they need.

Investors, unless persuaded otherwise, could be further discouraged by the increased paperwork and the costs of a HIP (anywhere between £650 and £1200 depending on the source).

Address nervousness about off-site construction

Both the Home Condition Report and the alternative "Report on a Home not Physically Complete" will inform buyers of the construction methods used to build a home. Bricks and mortar are no longer prerequisites for a new home, but many buyers and lenders are not entirely confident of the durability of other technologies. Marketing solutions for building types such as off-site modular build, for example, may highlight the energy-efficiency and other benefits offered by these "new" methods and materials. Public perceptions, unless well informed, may not keep pace with modern requirements.

Make a virtue of the HIPs

Predicted energy performance is included in the "Report on a Home not Physically Complete" and comparisons between schemes will be unavoidable. The government wants to use HIPs to educate consumers on energy efficiency and is likely to draw attention to this aspect of the scheme.

Redesign your sales pack

The content of the HIP partially overlaps with that of the housebuilder's traditional sales pack, but the required content of the HIP is inflexible and other information cannot be added. Developers will have to supply two documents: the HIP and the sales pack. A redesign of your sales pack to complement - or incorporate - the HIP is the only practical option.

Review staff training

Vendors and their agents will have the right to refuse to supply a HIP where they believe that the buyer does not have the means or desire to proceed. It is hard to see the circumstances in which a developer might want to refuse to supply a HIP, but an inappropriate refusal could cause embarrassment.

When to introduce HIPs

The property industry is tentatively working towards 1 June 2007 as the introduction date. There have been calls for a postponement until a quieter period in the market, say towards the end of 2007. Some commentators doubt whether HIPs will ever be introduced. In the absence of any clear evidence to the contrary, it seems sensible to prepare for June 2007.

In practice developers might choose to offer HIPs from an earlier date. An early introduction will meet likely consumer demand and could be used as a marketing tool, to advertise the developer's openness and concern for customer service. It would also make phases marketed in the first half of the year consistent with those marketed after 1 June.

Who will pay for the HIP?

The question of who produces the HIP is quite straightforward. It will almost certainly be assembled by a solicitor, a conveyancer or a specialist HIP provider.

The answer to the question of who pays for it might not be so obvious.

Despite the HIP being known as the "seller's pack", estate agents are already starting to acknowledge that it might well be produced at the agent's expense and risk. Searches must not be more than three months old to be included in a HIP and may need to be renewed several times. The result is that the cost of the HIP will depend on the speed with which the agent finds a buyer.

We could see the equivalent of the lawyer's "no win, no fee" introduced to property marketing.

The implication for new-build property is that developers need not pay for their HIPs themselves - they could pass the cost and risk onto their agents.

Should you wait?

Those waiting for clearer guidance before they address the issue will wait in vain, since much of the detail is already established.

Those who advocate alternatives for making the conveyancing process more efficient have missed the boat. In many respects, HIPs are now almost upon us and we should not let foreseeable problems catch us unprepared.