Beset by delays since its unveiling in the Housing Act 2004, the age of the much vaunted, much derided, Home Information Pack (‘HIP’) has finally arrived. Sarah Richards and Hilary Harrison consider the roles of the home inspector and the domestic energy assessor, the new breeds of professional created under the HIP regime.
Back to the Beginning
From its inception, the purpose of the HIP has been ‘to improve the process of buying and selling a home’ (Department for Communities and Local Government "DCLG"). Anyone marketing a property is required to provide key information in the initial stages of selling that property. The information consists of that found within the usual searches obtained by the buyer (thereby transferring the costs burden to the seller) but also a new report on the physical condition of the property, a Home Condition Report (HCR).
Failure to Launch
The government had planned the launch for 1 June 2007, when it would be compulsory for all houses put up for sale in England and Wales to have a HIP. However, a shortage of home inspectors and an unprecedented move by the Royal Institution of Chartered Surveyors ('RICS') to commence Judicial Review proceedings against the DCLG for its failure to consult properly prior to implementing legislation to bring in HIPs, led to a revision of the proposals.
1 August 2007 saw phase one of the introduction of the HIP, as they became compulsory for every home marketed with four or more bedrooms. The second phase of the rolling-out process began on 10 September 2007, when the scheme was extended to homes marketed with three bedrooms. As of 14 December 2007, all one and two bedroom properties require a HIP.
What’s in a HIP?
In a change from the original proposals, the contents of a HIP is now divided into two categories:
- ‘required’ i.e. compulsory documents; and
- ‘authorised’ i.e. optional documents
The ‘required’ documents include an index, a sale statement, standard searches and evidence of title. An altogether new document falling into the ‘required’ category is the Energy Performance Certificate (‘EPC’). The EPC provides an energy rating for a home, ranking the energy efficiency of a property from A-G, band A being the most fuel efficient. EPCs can be prepared by either a home inspector or a domestic energy assessor.
All other documents fall into the ‘authorised category’. Another change to the original proposals is that the HCR is now only an optional part of the HIP.
The HCR is an objective report on the physical condition of the property, designed to operate in the gap between a full structural survey and a mortgage lender’s valuation inspection but without fulfilling the function of either. It can only be prepared by a certified home inspector but because of the nature of the HCR, such home inspectors will not be required to become Members of RICS.
Home Inspectors and Domestic Energy Assessors
Thus the introduction of the HIP has opened the door for two new professional roles, the domestic energy assessor and the home inspector, and with this the need for professional indemnity insurance for both.
Domestic Energy Assessors
The training programme for domestic energy assessors requires successful completion of the NVQ Level 3 Diploma in Domestic Energy Assessment. Once trained, domestic energy assessors must join an approved accreditation scheme in order to practise. Accreditation scheme operators have to demonstrate suitable arrangements for ensuring that members or their employers or the scheme itself have and maintain arrangements to protect customers. For schemes accrediting domestic energy assessors to produce EPCs, the scheme must set out its procedures to ensure a minimum indemnity cover of £50,000 for each claim in relation to any particular EPC in its application to the DCLG.
Home Inspectors
To qualify as a home inspector, applicants must pass the NVQ Level 4 Diploma in Home Inspection. It is anticipated most home inspectors will be qualified surveyors, but anyone can undertake the training; no surveying knowledge is required. For those with no experience, qualification is likely to take between 18 and 36 months, although some intensive courses last for as little as 12 months.
Once qualified, a home inspector must also become a member of a government-approved certification scheme. These schemes must comply with minimum operational standards, as prescribed by the DCLG, which require that they ensure, inter alia, that all HCRs are covered by valid professional indemnity insurance for at least 6 years after completion of the report. In addition, the operational standards provide that, at a minimum, any professional indemnity insurance policy must cover all potential civil liabilities assumed under the terms of an HCR and any award made by an independent third party properly appointed by the certification scheme to determine claims against home inspectors that could arise from the preparation and content of an HCR save for those liabilities which may be excluded (para1.5.1). The minimum limit of indemnity is £250,000 each and every claim or in the aggregate with unlimited reinstatement, or as an alternative £1 million in the aggregate with one reinstatement (para.1.5.3).
A Plethora of Claims?
Creating two new professions is bound to lead to claims, but who from and how many?
Domestic energy assessors and home inspectors have a statutory obligation to act with reasonable skill and care. Sellers, potential buyers, buyers and lenders are legally entitled to rely on an EPC and an HCR. This allows a direct right of action, regardless of any duty owed under the law of negligence. Furthermore, the contents of a HIP is valid while the home is continuously marketed for sale, so unlike mortgage valuation reports there is no expiry date on EPCs and HCRs.
A seller who is unable to sell his home and is looking for someone to blame might therefore allege the EPC was inaccurate or the HCR misleading. A seller who believes an HCR to be inaccurate and with whom the home inspector or company providing the HCR agrees, would be entitled to a new HCR and to have the inaccurate one removed from the register of HCRs. If the company or home inspector do not agree, the seller can then complain to a redress scheme to have the report removed from the register. A seller would likely be able to recover the costs of an inaccurate report but would it really be feasible to claim compensation for a loss of opportunity to sell? If such claims were allowed, would not home inspectors become the seller’s scapegoat for downturns in the property market?
It is envisaged the bulk of claims will come from buyers and lenders seeking compensation for a defect in the property which was not disclosed in the HCR. This could also cross-over with lender mortgage valuation claims, with surveyors who have trained as home inspectors facing claims relating to both the mortgage valuation report and the home condition report. However, the HCR is only optional and unless sellers come under pressure from buyers and their lenders, those faced with the cost of producing a HIP are unlikely to want to pay the extra cost of commissioning an HCR. And although the EPC is a compulsory document, it is a relatively new concept, therefore it remains to be seen how much reliance these parties place on it.
A potential cause for concern is the short period of training a person may undertake to qualify as a domestic energy assessor or home inspector. Although each must belong to an approved scheme before being allowed to practise, rigorous training is an important risk management factor when it comes to avoiding negligence claims. Such training becomes even more important when one considers the pressure home inspectors and domestic energy assessors could find themselves under. Many of us will have heard the recent outcries about the shortage of people qualified in these roles, and now that HIPs have become compulsory for all properties for sale with one bedroom or more, those who have qualified could find themselves seriously overburdened.
The Future
That said, a lot depends on how the housing market fairs over the next few years. If there is a downturn as predicted, a shortage of home inspectors and domestic energy assessors may not pose a problem, as fewer HIPs and HCRs will be commissioned.
Nevertheless, there is no escaping the fact we live in a litigious society and creating two new breeds of professional is bound to lead to allegations of negligence. How extensive these are depends on a number of factors: whether HCRs become compulsory; the extent of training and guidance given to the new professionals; and the buoyancy of the housing market to name a few.
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