The production of a Home Condition Report
(HCR), which will form part of a more general Home Information
Pack (HIP), is one of several requirements that make up
the Housing Bill. The bill was announced in the Queen’s
speech of November 2003 and introduced to Parliament on
8 December.
The Housing Bill introduces several new
requirements such as mandatory licensing of Houses in Multiple
Occupancy (HMOs) and replacing the existing housing fitness
standard with the evidence-based Housing Health and Safety
Rating System (HHSRS). One of these requirements is that
it will become compulsory for anyone planning to sell a
home in England or Wales to assemble a HIP, so that the
information needed by buyers and sellers is available when
the property is first advertised or otherwise marketed for
sale.
The need for a HIP was highlighted by
Government research, which showed that “problems revealed
by either a lender’s valuation inspection or an independent
survey accounted for over 40% of transaction failures occurring
after an offer had been made and accepted1.” At present,
most buyers buying with a mortgage rely on a valuation assessment
carried out on behalf of the mortgage lender. However, these
assessments are not condition surveys but are designed to
see whether the property provides adequate security on the
mortgage being sought. Consequently the main objective of
the HIP is to make the home buying process more transparent
and to make failure less common.
The HIP, formerly known as a ‘sellers’
pack’, is itself made up of several sections.
These include, among others, copies of
any planning, listed building and building regulations consents
and approvals, the terms of sale, evidence of title and
a HCR. This document summary focuses on the HCR.
A HCR is simply an objective report on
the condition - not the value - of a property. “The
aim of the HCR is to provide home sellers, buyers and lenders
with an objective report on the condition and energy efficiency
of the home that they can rely on2.” Because the HCR
will be mandatory it was felt that an appropriate balance
should be struck between comprehensiveness and cost and
therefore that it should not be as detailed as a Building
Survey but should be significantly more extensive than a
mortgage lender’s assessment.
All properties requiring a HIP will have
a HCR conducted as part of this process. Those
properties that are currently unlikely to require a HIP
include:
- Non-residential property, including
where non-residential property has planning
permission for conversion to residential
- Residential property that is being sold
for redevelopment, not occupation
- Mixed commercial (or industrial) and
residential property
- Properties sold with sitting tenants
and therefore unavailable for owner occupation
- First sales of new homes covered by
an approved housing warranty scheme
- Homes with a low market value or those
in low demand areas. The choice of area as opposed to
value has not been made as yet, nor has a value threshold
been set,
although the Housing, Planning, Local Government and Regions
Committee
recommended a limit of £30,000.
Sales under the “right to
buy” scheme, although the Government will be consulting
with local authorities and other social landlords on the
possibility of extending the HIP
to these types of sale; and
Portfolios of properties.
The HCR will give a full overview of the
condition of a property and will cover the following:
- Exterior condition, including structural
stability, waterproofing and decorative
condition
- Internal condition
- Services (water, gas, electricity,
heating and drainage)
- Grounds, boundary walls, outbuildings
and common facilities
- An energy report; and
- Other matters such as health and safety
risks associated with the property.
The energy report will take the form of
an energy label based on the Government’s Standard
Assessment Procedure (SAP). It will show the percentage
of homes falling within each range of SAP figures and will
place them into a band, from A to G. The exact SAP rating
of the home in question will be displayed for easy comparison
with other properties. In addition, the report will list
the current energy efficiency measures in place and will
suggest improvements that could be made. The improvements
will come with figures showing a range of typical costs,
a range of typical savings over a 10 year period, the SAP
rating improvement and the percentage reduction in carbon
emissions due to heating and hot water (as opposed to the
use of appliances). Finally, the report will recommend no-cost
and low-cost energy efficiency measures that could also
be adopted, such as fitting low energy lights, and will
signpost the householder to the Energy Saving Trust’s
network of Energy Efficiency Advice Centres (EEACs) for
more information.
It is intended that the energy report
will fulfil the requirement of the EU Directive on the
Energy Performance of Buildings to introduce energy performance
certificates for buildings and to ensure that these are
made available to prospective owners when properties are
sold. More information on this directive, which must come
into force by January 2006, is available in the Practical
help document summary of the Directive.
A HCR, as part of a HIP, will be paid
for by the seller, either up front or when the property
is actually sold. The person marketing the property will
be responsible for ensuring that the HIP is available and
a certified Home Inspector will carry out the survey of
the property.
The job of home inspector will not be
limited to certain professions but will be open to anyone
who can demonstrate their competence in the field. Some
questions have been raised over whether there will be enough
qualified home inspectors, however the Government has said
that the whole HIP scheme will not come into force until
enough inspectors are available to do the required work.
In order to ensure consumer confidence
in the HCR, all home inspectors will have to produce their
report in accordance with the requirements of an approved
certification scheme. HCRs will be electronic documents,
which should aid the speed and transparency of the process.
At present there will be no requirement for sellers to renew
their HCR, rather, as the ODPM states, “decisions
on whether the HCR needs to be updated are best left for
buyers and sellers and their professional advisers to take
depending on the circumstances of each case.”
According to the ODPM: “The cost
of the HCR will not be fixed by any central body. It will
be determined by market forces - the price charged will
reflect a number of factors, including the time the inspector
needs to undertake the task (which in turn will depend on
the size and complexity of the December 2003 3 property),
and on local market conditions. By way of illustration,
the cost of preparing a HCR for a typical 1930s three-bedroomed
semi-detached house located in a provincial town could be
£250-300. This is offset by potential savings on abortive
costs, unexpected repair bills and fewer mortgage valuation
surveys.”
The EU Directive on the Energy Performance
of Buildings requires the HCR system to be in place by January
2006, although some estate agents and conveyancers are already
offering them on a voluntary basis. The precise contents
of the HCR are still under discussion, with some consumer
testing still ongoing. Although there may be some minor
changes before the full introduction of the HCR, the ODPM
considers that there will be no major changes to the current
consultation model.
Likely effects of the introduction of
a HCR on local authorities and housing
associations This section deals only with the likely effects
of the introduction of the HCR, as opposed to the HIP or
the Housing Bill as a whole. There are 3 possible areas
of local authority (LA) and housing association (HA) activity
that could be affected by the introduction of the HCR.
The exclusion of properties sold with
sitting tenants and those sold under the “right to
buy” scheme, means that the vast majority of LA and
HA owned properties will not be affected by the introduction
of the HCR. The Government is, however, currently negotiating
with the Housing Corporation and LA representatives to introduce
an analogous scheme. These negotiations are separate to
the Housing Bill and it is not known when or if these types
of properties will be required to have a HCR or similar
report carried out on them.
The cost of a HCR is borne by the house
seller and therefore, unless an LA or HA owns a property
that is not excluded from the requirement to have a HCR
conducted, they will not incur any costs. As far as monitoring
of the HCR scheme is concerned, it is envisaged that a body
or bodies will come forward and meet the criteria to run
an approved certification scheme. LAs and HAs are unlikely
to incur any costs or extra responsibilities as a result
of the certification and monitoring programme.
Because most HA properties will be exempt
from the requirement to have a HCR conducted, the introduction
of the scheme is unlikely to affect HAs’ current duties
and targets. However the voluntary use of HCRs could well
prove beneficial for the following reasons:
- Government is currently consulting
on the introduction of a HCR for HAs - as note above -
and therefore preparation for this event could yield benefits
- The results of a HCR could highlight
areas in which substantial energy savings and
improvements to tenant comfort could be made
- A HCR could be used to generate information
useful in meeting the Decent Homes
Standard in England, for example the requirement that
dwellings have both effective
insulation and efficient heating. In Wales the same can
be said for the Welsh
Housing Quality Standard’s requirement on the cost-effective
upgrading of dwellings' thermal and ventilation performance
- In England sustainable energy is a
clear objective of the Housing Corporation’s
Regulatory Code, including the General Needs Performance
Indicators for 2003,
which specify measurement of the average SAP rating of
dwellings; and
- Also in England, voluntary use of the
HCR could help with progress towards
implementing the Housing Corporation’s Sustainable
Development Strategy and
Action Plan, published in June 2003.
From an LA perspective the most important
effect of the introduction of the HCR is likely to be an
increased profile for energy efficiency and, all things
being equal, an increase in the takeup of energy efficiency
measures by owner occupiers and private landlords. Given
that these are traditionally difficult sectors in which
to ‘sell’ energy efficiency, the HCR must be
seen as a useful tool for increasing domestic energy efficiency
and contributing towards HECA targets.
Exactly how this effect might be measured
is open to question however, as there will be strict limits
on who can access the electronic database of HCRs. According
to the ODPM, access issues for this information are still
being discussed, but no automatic right of access for LAs
is envisaged. Given that the average property in England
changes hands roughly every 7 years the HCR database represents
an invaluable source of information on domestic house conditions
and progress towards HECA targets.
Finally, the use of HCRs means that a new generation of
energy efficiency schemes could be put in place to ‘piggy
back’ the report. For example, local authorities may
be able to:
- Work with estate agents, possibly in
conjunction with their local EEAC, to ensure
energy efficiency reports in the HCR are taken seriously
- Promote energy efficiency grant schemes
to estate agents
- Promote high-efficiency housing to
householders, developers and others; and
- Promote high-efficiency housing to
their planning departments and through their Local Development
Plans.
Given that one of the main functions of
the energy survey in the HCR is to draw attention to the
energy efficiency measures that could be installed to raise
the energy rating of the
building, the opportunity to promote such measures should
not be missed.
More information on any of the reports
and guidance mentioned in this document summary can be obtained
by contacting Practical help.
Practical help also offers a free enquiries
service – the team will undertake to answer
any query regarding sustainable energy or sustainable road
transport within a
maximum of 3 working days.
EEAC Energy Efficiency Advice Centre
HA Housing Association
HCR Home Condition Report
HHSRS Housing Health and Safety Rating System
HIP Home Information Pack
HMO House in Multiple Occupation
LA Local Authority
QCA Qualifications and Curriculum Authority
SAP Standard Assessment Procedure
