UK landlords put up with pointless red tape

PUBLISHED : Wednesday, 28 February, 2007, 12:00am
UPDATED : Wednesday, 28 February, 2007, 12:00am

Home Information Packs would mean additional costs and extend by at least another month the already long process of selling property

Thinking of selling your property in Britain this year?

If so, you will face an additional bill of several hundred pounds when Home Information Packs (HIPs) become a legal requirement.

The amount may not be large, but many in the property industry have criticised HIPs as a pointless piece of red tape.

Even worse, it is feared, HIPs could add another delay to the process of selling a property - something that can already be quite protracted because of England's 'subject to contract' procedures.

A recent survey by the Mori polling organisation revealed that the typical English transaction time from marketing to completion is six months - among the longest in Europe. Initial trials of the new system suggest that it could add at least another month to the process.

HIPs become a requirement after June 1 this year. They must include information on the terms of sale, evidence of title, copies of any planning, listed building and building regulations consents, copies of warranties and guarantees for new homes, guarantees for any work carried out on the property and replies to local searches.

As if this were not enough, after June 1 estate agents must be able to produce an Energy Performance Certificate (EPC) as soon as they market the property. This will grade the energy efficiency of the property in various categories, and was introduced by the government as one of its initiatives aimed at showing its 'green' credentials.

When HIPs were first proposed, they were to have included a mandatory Home Condition Report - a property survey, in effect. This would have been the most costly element of the plan, paid for by the seller. This caused an immediate wave of resistance among property professionals who argued that it would add significantly to the cost of a transaction without providing any tangible benefits.

The government has since backed down on this element, partly out of fear that there would not be enough trained surveyors to meet the demand, and partly in response to the clamour.

The Home Condition Report has not disappeared entirely from the scene, but - for the moment at least - it is to be voluntary. As it is difficult to imagine many sellers paying substantial sums for something that is not required, critics have described the whole exercise as worthless.

Meanwhile, the National Association of Estate Agents has said that 'because a property cannot be marketed without an HIP, this will have a major impact on the market, despite the government's concessions'. Only time will tell if this turns out to be true, but it is hard to find many commentators who think the HIP is a good idea.

Moreover, it is not the only new requirement that landlords must be aware of. From April 6, landlords or agents can take a deposit from a tenant only if that deposit is protected by a Tenancy Deposit Scheme.

If readers of this article have never heard of the idea, it is hardly surprising. I expect that very few landlords based abroad are aware of the rule.

For that matter, there is a good deal of uncertainty about it even among British property owners. A recent survey by the Association of Residential Letting Agents revealed that nearly a quarter of Britain-based landlords also knew nothing of the new obligation. About half had vaguely heard of it but knew none of the details. There are two types of Tenancy Deposit Scheme: a custodial scheme, whereby the deposit is held by the scheme during the tenancy and during any legal dispute, and an insurance scheme, under which the landlord or agent keeps the deposit, but it is insured in the case of any dispute.

As well as choosing one of these two schemes, landlords will have to advise tenants, within 14 days of receiving the funds, of how the deposit is protected.

If these obligations are not met, landlords will not be able to serve possession notices and could be obliged to pay tenants three times the value of their deposits.

Needless to say, these requirements have not gone down well with everyone. The National Landlords Association complains: 'Landlords have been bombarded with regulations. No sooner have they digested one than another comes along.'

Alan Lester is a partner at HW Fisher & Co