Home Information Pack (Amendment) Regulations 2007

My Lords, the last time we debated HIPs, I began by saying how grateful I was for the opportunity to tell the House what progress we have been making. That was greeted by hollow laughter around the Chamber, but I can honestly say this evening that I am grateful for the opportunity that the noble Lord, Lord Dixon-Smith, has created. We have a good story to tell and I want to bring the House up to date and to welcome members of a new cast. It is nice to see the noble Lord, Lord Greaves, on the Front Bench—I am grateful for his kind words—and the noble Lord, Lord Dixon-Smith. I am also grateful for the support of my own Back-Benchers and for the welcome of other noble Lords, including the noble Lord, Lord Elystan-Morgan. We have, over the past 18 months to two years, had an extended debate on home information packs. It has sometimes not been easy for the Government, but we have listened closely to what has been said. Noble Lords will know the unfolding narrative. We debated HIPs on a number of occasions last year, and noble Lords rightly asked us to keep their introduction and operation under close review. We have done just that. We particularly took into account the number of energy inspectors and how HIPs have been operating in the market. I will address some of those issues a little later. I shall give a little chronology and say where we are. HIPs started to be rolled out on 1 August 2007, when we rolled them out to properties with four or more bedrooms. That was closely followed by the roll-out to properties with three bedrooms. On 14 December, we rolled them out to the remaining sizes of property, thus completing the process. Over the past months, as HIPs have been introduced, we have been conscious at each stage of the need to take account of the responses of stakeholders. On the last occasion we debated HIPs, my noble friend asked specifically that the dialogue with stakeholders should be kept open, especially while the scheme is being implemented. We have done just that, and indeed the very sensible transitional measures we are now bringing forward are informed by and reflect what stakeholders have said about how to improve the experience for the consumer and the industry operating in the marketplace. The measures do two things. They further extend the temporary first day marketing period until 1 June 2008 and remove the requirement to obtain leasehold documents except the lease itself until the same date. During this period, we have commissioned further work to assess how leasehold documents can be most effectively provided. I shall come back to that point in the light of what has been said by the noble Earl, Lord Caithness. We believe that these measures will help consumers as HIPs continue to bed in. The first measure means that for the next five months, until June, anyone looking to sell their home can do so immediately, provided that they have commissioned a home information pack and they expect it to arrive within 28 days. Why did we extend the transitional arrangement? We did so because of a later than expected commencement of the final stages of HIPs and in light of the need to produce guidance for local authorities dealing with access to and charging for search information. I can tell the House that the access and search guidance will be published this Friday, which will be helpful to everyone involved. Of course there have been unexpected changes in the market, and I shall say more about that later, but we also received strong representations from stakeholders who have emphasised that an extension would greatly assist our joint objective of a smooth implementation. We have listened to what they had to say. We believe that this extra time benefits buyers, sellers, estate agents and solicitors as HIPs bed in and become part of the familiar landscape of buying and selling. The second decision has been to remove the requirement to provide leasehold information other than the lease until June was also driven by what the industry told us would help, if HIPs are to be delivered smoothly and effectively. We had previously made changes to allow 28 days for the provision of leasehold documents, and that was based on earlier evidence from the area trials. But let me say that it has never been the case that we have been waiting for a final, cliffhanging result from those area trials. We have tried to use the information coming in to us over the past months to inform what we can as we change the processes, and thus the leasehold documents were given the extended period of 28 days. However, uncertainty remains in the ability of the system to cope with the requirement for additional leasehold information upfront—the sort of leasehold information set out in Schedule 5 to the original regulations. It became apparent that more information on the leasehold system was necessary if we were going to make it a more useful process. Early feedback from the industry showed us that while the lease could be produced at low cost without too much difficulty, providing additional documents containing information about, for example, major works on the property was more likely to cause delays and hold up production of the packs. However, we have turned this into an opportunity. Having discovered that—and to be frank, we were working on the basis of anecdotal evidence because there were virtually no systematic accounts in the field about this—we have taken the opportunity to establish not just how we can overcome the problem, but what else we can do to provide leasehold information in other ways. To that end, we have commissioned Ted Beardsall, deputy chief executive of the Land Registry, who is a member of our Home Buying and Selling Stakeholder Panel—which I am sure noble Lords will be delighted to know exists—to advise us on what else can be done to improve the provision of leasehold information alongside further consideration of the search process. So this amendment allows time for that work to be undertaken and to inform the way that leasehold information is included in the pack. That is, I think, a very prudent step. Over the past six months we have been looking at a sensible, pragmatic and responsive process. What has happened is that between 1 August 2007 and 10 January 2008, we have seen 260,740 EPCs and 188,899 HIPs launched. I think that that is a very creditable result. The difference between the two figures is simply that in the beginning, because we were conscious that we had energy inspectors without work, local authorities got them to do EPCs for some council social housing. The noble Lord, Lord Dixon-Smith, who I know is very committed to the energy and carbon reduction agenda, asked why we cannot go faster. From 1 October 2008, EPCs will be required, in addition to all residential property sales, for private and social rented properties upon a change of tenancy; and commencing 6 April this year, for the sale, lease and construction of commercial property. DEAs who already have their core skills will have the option of acquiring the extra skills needed to carry out non-domestic EPC work if they wish to do so. We are looking at an expansion of the volume of work into these other areas. I am afraid that I cannot answer the question raised by the noble Earl, Lord Caithness, about leasehold in relation to EPCs, but I am happy to make a commitment to write to him. We will discuss it in the department. We know that the pragmatic approach has worked, not least because of our own monitoring, which is done in many different ways from regional monitoring to spot checks with estate agents at the local level. Information is coming to us from all directions. The sort of thing we have noted as it comes to the office is as follows; I quote from estate agent Tim Barton at Dreweatt Neate: "““I can quote two cases already where the registered title element has revealed what could have caused major difficulties later on. In one the registered boundaries were significantly different from those told to us by the vendor and in the other the property was covered by restrictions the vendor was not aware of. HIPs are already proving their usefulness and two sales that might have hit the buffers later on have been put on the right track from the start””." That is exactly the sort of thing that we discussed in the abstract when trying to anticipate problems which can and do frustrate sales, generating much wastage in the system. Conveyancer Lisa Shenton of Irwin Mitchell said: "““The packs are designed to help people looking to purchase a property, and this latest announcement by the government brings more certainty for the market””." That underlines how we are being asked for clarity and certainty all the time. Obviously I have to address the comments of the Merits Committee. The noble Lord pointed out that there are still divergent views on HIPs, and the Merits Committee has rightly pointed to them. But I have to say that there is now far more understanding of and confidence in HIPs and the process around them that there was the last time we debated this issue. It is a measure of the fact that they are becoming a familiar part of the landscape and are bedding in. Let me take this opportunity to address the issue raised by the area trials, because again it is something that the Merits Committee referred to. It is not true that the area trials have not been used to inform the development of HIPs, and I have to take issue with the noble Lord because it is not a question of not having dared to come forward with the evidence. We have always said that we will use the evidence wherever possible. But it was a measure of the protracted nature of the system that the average time needed for a home sale is over six months, and sometimes much longer. It was not until the end of last year that we had gathered a sufficient set of transactions to study in order to make proper judgments about it. Those are now with the independent researchers who are compiling the evidence. Believe me, we will bring it forward as soon as possible. The noble Earl, Lord Caithness, is quite right: one of the issues we face is that we have discovered that many buyers are not seeing HIPs, and that this may come out at the area trials as well. There is no justification for it and I do not think it should be up to the buyer to have to prod and push and search for their HIP; it is for the estate agent to do so. He should be saying, ““Here is the HIP. This is what we may be able to make use of because it contains important and valuable information””. I say that particularly because the regulations provide buyers with a legal right to rely on the information provided in the pack. We are therefore discussing with the National Association of Estate Agents what more can be done to increase awareness of the energy certificate. We have also responded to that discovery by committing to a systematic communications strategy, which is aimed at all of the people who should be making sure that HIPs are at the front of their mind, because of the valuable information that they bring forward. We want to start that campaign quickly; its essential message will be, ““If you’re buying a home, make sure that you see the information pack””. I cannot resist saying that my noble friend has already done a magnificent job in looking at the evidence that has been brought forward that deals with some of the unproven and dire predictions. Many of those, which we heard not least in this House before HIPs were introduced, have simply evaporated. I hope that this smooth rollout, given the volume of HIPs and EPCs, will help to put many minds at rest. Before we rolled out, many said that there would be delays in putting packs together and that the process would come to a standstill. However, we have found exactly what my noble friend quoted in her figures. On average, HIPs are taking seven to 10 days to prepare; the majority of property, drainage and water searches are being delivered promptly within five days, while EPCs are being prepared on average within two to four days. The cost of a pack is not around £1,000, as was hazarded previously; the average cost is £300 to £350. I should spend a little more time on the impact on the market, given what was found in the research that we commissioned. I know that the noble Lord, Lord Dixon-Smith, has rightly focused on our now being in a different situation with the housing market than we were six months ago, let alone a year ago. Early on, in spring 2007, we commissioned authoritative and independent modelling from Europe Economics to show the likely impact of HIPs on the market. That research concluded that there was no evidence that there would be any impact on transactions or prices, although there was—as my noble friend said—a predicted short-term impact on new listings, as sellers changed the timings of their listings. The report concluded that this predicted impact on listings would be short-lived and that the impact would be marginal compared to the wider factors. We therefore rolled out to around 18 per cent of the market on 1 August, as I said, going up to 60 per cent of the market on 10 September. By that time, however, as noble Lords know full well, market conditions had changed for a variety of reasons: the credit crunch, Northern Rock and so on. We decided that we then had to seek expert advice about the likely impact of roll-out, and therefore asked Europe Economics to look again at its research in the light of changing conditions—in the knowledge that we had already started the process, and that there was evidence from real-time market conditions. We asked them to collaborate on that with Dr Peter Williams, of the National Housing and Planning Advice Unit—a former deputy- general of the Council of Mortgage Lenders, and a man with extremely practical and wide experience of the market—to consider whether changing housing market conditions meant we should delay the roll-out. Its advice was that HIPs had had no impact on prices or transactions, and that changed market conditions would make no difference to that. It also said that there were strong arguments for rolling out as planned, and that further delay could cause greater uncertainty, which would be extremely unwelcome. This was clearly consistent with the advice that we were getting from others. Indeed, all of the sensible commentators who know the housing market well were clear that interest rates, house prices, stock market uncertainty and concerns about sub-prime lending are the significant factors determining behaviour in the housing market. The impact of HIPs is very minor compared with those. All of that was in our minds when we decided to roll out on 14 December. I am coming to consider the benefits but, before I do so, I will answer the important question asked by the noble Lord, Lord Greaves: ““What happens now?”” We have these transitional arrangements in place; the noble Earl, Lord Caithness, also raised a question there. We are guided by the realities, and we have tried to be extremely responsive. We certainly have better relationships with stakeholders than at the beginning. We are keeping them alongside us and all of the evidence points to a smooth rollout. We must continue to monitor the market and to look closely at how the processes are working; we will make decisions on the back of the evidence. When I talk of clarity and certainty that is what we will aim for. We cannot, therefore, be categorical in predicting the future, but I do not expect any more transitional arrangements and we will be guided by what we find. I turn, finally, to the benefits. HIPs have already cast a spotlight on areas of the home-buying and selling process that were in need of change. We have also seen knock-on benefits, including over 80 local authorities reducing their search costs by an average of £30. From the feedback that we are getting, we have certainly seen consumers beginning to benefit from getting early information. I quoted just one example, but that is exactly why we want to make sure that buyers see the HIPs. With the EPC being produced quickly, it means that consumers have access to important energy efficiency information, and the Energy Saving Trust has calculated that up to £300 per year on energy bills can be saved. The next step is to ensure that consumers are aware of the assistance available to them for increasing the energy efficiency of their home. This is, of course, not a panacea, but it will take us toward a much more realistic understanding of what fuel costs and its impact. I will conclude by reflecting a little on the comments made by the noble Earl, Lord Caithness, about speed. Estate agent Sam Chivers, of Barons Property Services, said: "““The HIP has provided me with a great sales tool and without a shadow of doubt enabled purchasers to move much quicker to the point of exchange; now all they require is a mortgage offer and answers to any enquiries that their solicitor should raise, then they are ready! Gone are the days of eight, twelve or sixteen week transactions, welcome to the new era of four week exchange, it’s real and it’s here””." We want that to be the experience of every estate agent, and everybody who buys and sells a home in future. I am grateful for the patience of your Lordships, since I have taken a long time to go through the details. I hope that noble Lords will feel fully informed about what we know; that is where we are with this policy now.