Homebuying reform could repeat HIPs failure, warns property lawyer

A well-known property lawyer has questioned whether the government’s proposed homebuying reforms will deliver the faster transactions and lower fall-through rates ministers are promising.

David Smith, partner at Bishop & Sewell, said the plans risk repeating mistakes made during the failed Home Information Pack (HIP) era and warned that compulsory sales packs may do little to speed up transactions unless they can be relied upon by buyers and their advisers.

The government has claimed the reforms could cut around four weeks from the average homebuying process. However, Smith argued that reducing a typical transaction from around 17 weeks to 13 weeks falls some way short of the transformation seen in countries often cited as examples of best practice.

He also raised concerns about the proposed introduction of mandatory sales packs, noting that ministers have yet to specify exactly what information they will contain. Smith said the government’s own consultation acknowledged similarities with Home Information Packs, which were introduced in the mid-2000s before being scrapped.

Smith commented: “The government is giving its changes the headline of slashing delays and stopping fall throughs. Slashing delays is a slightly optimistic turn of phrase given that the current average time to conveyance is 120 days which is just over 17 weeks and the government is proposing to remove four weeks from that, leaving 13 weeks. Norway is cited as an example of what the government is seeking to achieve but their the conveyancing process takes four weeks, the period the government is seeking to save. This seems like a generous use of the word ‘slash’.”

“The government plans to make ‘sales packs’ compulsory. They do not say what will be in these and the consultation admitted that they were dangerously similar to the failed policy of Home Information Packs which was introduced by the Housing Act 2004 before promptly being scrapped.”

According to Smith, one of the main challenges is that buyers often rely on their conveyancer to assess property information rather than reviewing detailed documentation themselves. As a result, he believes sales packs are unlikely to have a significant impact unless consumer behaviour changes or the legal framework surrounding transactions is altered. He also warned that compiling the packs could increase costs for estate agents and sellers.

While sceptical about sales packs, Smith said the proposal to encourage earlier binding agreements between buyers and sellers could prove more effective. He argued that such agreements can help reduce the number of transactions that collapse due to buyers overstretching themselves financially or seeking to renegotiate late in the process.

He explained: “Unless these packs are structured in such a way that they can actually be relied on (which was a major failing with HiPs) they will be of no significant effect at all. Most buyers simply do not look at the detail of a property they like and leave it to their conveyancer. It will take a major change in behaviour for sales packs to make much difference or a change in the law. This will also massively up estate agent costs (and fees) so if it is not of any use that would be a bit of a pointless exercise.”

“The more useful change is likely to be making the use of early binding agreements the norm. Some estate agents use these already [Smith has drafted some of them] and they substantially reduce the risk of prospective buyers being overly optimistic about their borrowing power and making offers they cannot ever actually afford, with either the intention of a last minute cut in their offer when it is too late for everyone to walk away or due to ignorance of their real financial position.”

Smith has welcomed plans for a new Code of Practice and mandatory training for estate agents, although he questioned whether either measure would have a meaningful impact on transaction times.

“Finally, there is, the almost obligatory mention [again] of compulsory training and a code of practice for estate agents. This is undoubtedly welcome but I cannot see it really altering the time it takes to buy a home!”

Smith’s comments add to a growing debate within the industry over whether the reforms will modernise the homebuying process or simply create additional costs and administration without addressing the root causes of delays.