energyreporter.co.uk

Email sent 25th January 2010

To all industry professionals involved with Home Information Packs and Energy Performance Certificates,

I have been working in the HIP/EPC industry for over two years. I was one of the first qualified for domestic energy certificates and have seen (and tried to keep up with) all the changes the industry has gone through for the last three years. I originally trained as one of the ill fated Home Condition Reporters (to deliver the structural survey for the HIP that was cancelled at the last moment). I have watched as training providers have mis-sold energy assessment courses as a ‘fantastic new opportunity’ to the point where there is over 4 times more people trained than there is work and that number keeps rising. I have held firm by providing quality (and relatively expensive) searches, while all around me other companies have cut every corner to make a quick buck. I have refused to pay estate agents referral fees of any sort while my competitors have been paying excessive (very often £200+ fees) that help them secure the business. I have fought the media dis-information and above all provided a quality service for all of my clients, - a service that really does help them sell their home. Despite all this adversity I have managed to build up a business and the reason I have continued to try is because I believed in the original concept of HIPs. Unfortunately, in current market, it is almost impossible to continue to do this as you either cut corners (to remain price competitive) or go under. Nobody is interested in quality information as the public perception of HIPs is that they are a waste of time and money and unfortunately in many circumstance this perception is correct. I believe a revised and pared down version of the HIP could achieve its original aim – to speed up the process of buying a home by making pre-sales information available.

The replacement for HIPs I have set out below would address the following three key factors:

a) What information would be useful to the purchaser and their solicitor?

b) Cost – the information should not cost the seller too much.

c) Above all, the information should not go out of date.

The new HIP, as I envisage it, would provide useful information to the buyer, it could be complete in 24 hours and would cost under £100 (including energy certificate). It would also protect consumers, empower solicitors and throw a life line to people in the industry.

The new HIP: What needs to change?

Remove the council & water searches. I would let the purchaser’s solicitor buy them when they are required and searches would no longer go out of date. Currently the Law Society and the Council of Mortgage Lenders will not accept searches that are over 3 – 6 months old. Furthermore, if the searches were done post-offer then the purchaser’s solicitor would once again become the ‘unofficial quality control’ in the personal local authority search market that they were pre-HIP legislation. They would have the discretion to decide whether to use a personal search agent or to go directly to the council (as many solicitors and lenders prefer to do). In reality solicitors often have to re-order the searches anyway because they have gone over the 3 – 6 month period. These searches represent over two thirds of the cost to pack providers (around £134.00). The remaining two documents that have to be purchased (i.e. not free source information) cost around £58.00, EPC at around £50 and HM Land Registry ‘Register of Title’ and ‘Title Plan’ at £4 each. (All prices include VAT). (Add an additional £24 for a copy of the lease if applicable).

Make the Home Contents Form a required document. It’s free source information like the Property Information Questionnaire so why not use it? It is also one of the documents that everyone can understand. The cost of things like white goods, garden furniture, curtain poles, fixed mirrors etc can run into the thousands of pounds. Surely it makes sense to offer this information upfront before an offer is made?  The conveyancing process usually requires forms such as the TA6, the TA11 and the TA10 to be completed at some stage - the Property Information Questionnaire and the Home Contents Form would together satisfy most of the information on those forms. If these forms were adapted with the guidance, advice and authority of the Law Society then they would become a useful starting point for the purchaser’s solicitor to raise questions and address issues with the sale. By providing this pre-sales information upfront certain aspects of the purchasing process could begin earlier.  

Place restrictions on referral fees. The first question almost all estate agents ask me is - how cheap can you do the packs so we can maximise our profit? As the vast majority of consumers trust the opinion of their estate agent, their approach to HIPs has dominated the public’s perception. The only time you hear estate agents stick up for HIPs is when they are making a £100+ referral fee. If restrictions were placed on referral fees and the information was made cheaper and more accessible to the lay-men, then estate agents’ focus may shift. They may begin to see the information as a useful way of speeding up the process and reducing failed sales, instead of using them as a way to extract money from the unwitting consumer. At a minimum their fee should be in bold size 12 font on a document that needs signing by the client to confirm the order. Transparency will at least clean up the process. Most people would have no problem paying a £30 introduction fee to their estate agents but £300 is excessive to say the least.

Tidy up the deferred payment market. Many people have been mis-sold the deferred payment option as ‘free’ or ‘no sale, no fee’. In reality most of the time people are essentially buying very expensive credit that expires in 9 months. The worst example I have encountered was an estate agent charging £680 for the pack, deferring the payment for 9 months (at a further cost of £120) and in 9 months (when the sale had not gone through) the client had £800 removed from her account. Just to make matters worse when I asked her if she had seen her pack she said she had never seen it and had no idea what information was contained within it.

Legislate for the optional inclusion of ‘Home Service History’. Most of my packs carry guarantees, warranties, gas / electric safety certificates, council correspondence (including planning permission and building control certificates) and anything else that may be of interest to the buyers. You buy a car for £1,000 and you often get the full service history; you buy a house for £100,000+ and you get nothing. By including such documents there is a clear marketing benefit and also a benefit in terms of the speed at which the conveyance can be carried out. Furthermore, 9 times out of 10 if the householder has had extensions done with planning permission / building control approval they will have the certificates to hand. The provision of this (planning permission and building control) information discloses the key element of the most expensive document in the packs– the Local Authority Search. There are other questions in this search but by far the most contentious is planning permission and building control. The legal status of extensions and conversions has a large impact on the value and desirability of the property. If such documents were not included (and an extension had been carried out) then the purchaser’s solicitor would be able raise questions to the vendor’s solicitor sooner in the process.

Make it a duty for an estate agent to offer the information to the potential purchasers before an offer is made. The programme ‘Rip off Britain’ made some good points about packs but what I found really frustrating was the buyers complaining how they had never seen a pack and estate agents moaning that they had never been asked for a pack. Clearly, if no one asks and no one offers, no one is going to see the packs. That is not the fault of the packs or the information contained within them. It is true that by and large estate agents think packs are irrelevant but this does not mean that the buyer’s solicitor also thinks so. We regularly get requests from buyers’ solicitors to see packs and ultimately it is they who interpret the information and recommend purchase or not.

If these proposals were taken on board you would find that HIPs (or there rebranded equivalent) could be produced for under £100. They would include the Energy Performance Certificate (which is required by EU law), HMLR Title information, the Lease (if applicable), the TA6 / TA11 (versions of the PIQ) and the home contents form (a version of the TA10) as well as anything else of interest to buyers. (Please note additional forms are required for Leasehold and Commonhold properties). Most importantly, none of the information would go out of date. If you could adapt the free source information forms (Property Information Questionnaire and the Home Contents Form) with additional guidance, gave re-assurance (via the Law Society) about the use of that information and accepted the fact that solicitors are best placed to decide what searches to purchase and when, then everyone should see the information as a way of speeding up the process and reducing the stress between offer and completion.

In reality there will always be a small delay between offer and completion as valuations and structural surveys need to be carried out by the purchaser’s agents. This could be done at the same time as the council and water searches are being prepared. In total these additional documents should take around two weeks to be completed and if the pre-sales information was in place then the two week timeframe could begin the day an offer was made - saving everyone time.

I understand that the Conservative party are considering making the Energy Performance Certificates an order-only (complete within 28 days) requirement before marketing can begin. I would strongly recommend against doing this as you would find that disreputable companies would start sending out ‘confirmation of order’ letters with no intention of actually doing the EPC. They would undercut reputable firms like mine and after 6 months the company would fold, thereby making a large profit for the director, leaving the vendor back at square one and bringing the whole EPC industry into disrepute. The EPC industry is already riddled with issues which I would gladly discuss in more detail at a future date, but very briefly the worst problems are:

a) A massive over supply of Domestic Energy Assessors (DEA’s) - over 4 times more accredited than required and even more if you consider those who have already dropped out. Similar figures also exist in the Commercial Energy Assessor market.

b) The training providers are still taking thousands of pounds from the most vulnerable (and largely unemployed people) claiming that becoming an Energy Assessors is a ‘brilliant new career opportunity’ when in reality the work just is not there. Last year I was getting 1 or 2 calls every week from recently trained energy assessors in my area looking for work, (recently this has slowed to around 1 or 2 a month). I feel extremely sorry for all of them who have been conned into spending a fortune on training, equipment and marketing, - not to mention the time it takes to complete the qualification itself.

c) The quality of the information is being compromised by ruthless price competition and poor enforcement in the domestic, commercial, local authority and new-build markets. All EPCs make allowances for default values to be used in case when information cannot be reasonable attained. The unfortunate reality is that default values are being used far too often, thereby often generating irrelevant ratings and recommendations. If there is no enforcement on the quality of information then most businesses will cut every corner to save time and maximise profit. Inevitably, all companies will have to adopt such practices because they will not be able to compete on price with companies who can complete a certificate in half the time with lower paid and less experienced staff.

d) The lack of an independent government advice phone line that can instantly help both industry professionals and consumers establish what type of EPC is appropriate. The Energy Performance of Buildings Directive (EPBD) had a fantastic DCLG funded helpline that could do just that. This was replaced with a email only advise team that is now run by Landmark and although they promise to respond within 15 days, practically this is not sufficient when you have clients relying on your reports to be completed yesterday. The existence of this ‘email only’ help line is little publicised within the energy assessment industry so how other professionals (estate agents, letting agents, solicitors, ect) let alone the general members of the public are supposed to access this advise is beyond me. Furthermore they have no power to enforce the legislation they advise on. As the legislation is so complex trading standards have little chance of enforcing it, it seems obvious to me that the an independent body should both advise, enforce and publicise their services. Without such a service Energy Assessors are deciding which types of EPC are appropriate, often making incorrect assumptions that financially suit them best. Currently, the best (and most common) way for energy assessors to get legal interpretation of the legislation is to go to their accreditation schemes. After discussions with my accreditation scheme they have told me that a large proportion of their members never call at all, which makes me wonder how other energy assessors are interpreting the legislation? Furthermore there is a clear conflict of interest here as if the accreditation scheme does a full and comprehensive review of all individual assessors that may drive up standards but it is likely to cost the scheme money and drive energy assessors (who want an easy life) away. A lose / lose position for the accreditation schemes.

The EPBD is a very complicated piece of legislation that has many ‘grey areas’. Buildings come in a multitude of different forms and uses and it is often very difficult to establish the form of assessment that is required and the recommendations that are appropriate. Without a definitive voice to guide and enforce the industry the quality of the information provided will remain poor.

I hope that you have found this information useful and I would really appreciate your opinions, including what plans and ideas you have for the future. I have not got a problem with fair competition, in fact I welcome it. The purpose of this letter is not to say how hard done by I feel, rather to establish the viability of my business. HIPs and EPCs are in need of radical revision and my belief in the original idea is faltering under extreme industry pressure to cut corners. I hope that you will take my assessment into account when deciding the best way to improve the process of buying a home.