Hidden estate agency fees upping the cost of HIPs

Tuesday, 19 May 2009 4:05 PM

Please note this is archive material. Home Information Packs - or HIPs - were suspended on 21 May, 2010.

Estate agents may be adding more than £100 to Home Information Pack (Hip) costs.

A warning from the Law Society has urged sellers to check the real cost of their Hip with their estate agent, to "avoid inflated costs".

A Channel 4 News investigation found evidence more than £100 could be added to the price of a pack because of secret payments to estate agents.

The Law Society has also voiced its concern over the inclusion of the Property Information Questionnaire (PIQ) brought in with the Hip changes last April 6th, which they say "could harm the relationship between buyer and seller" if not filled out correctly.

Today's concerns about the cost of the Hip surround the claim estate agents who use a Hip provider for sellers are adding an extra fee.

Law Society president Paul Marsh said: "The cost of the Hip charged to the home seller by the estate agent could be much higher than necessary and more than the agent actually pays the Hip provider. Because of these hidden referral fees the estate agent is overcharging the seller and making a secret profit.

"Sellers should ask for details of the exact costs to discover if the agent is charging them more than they should be, and more than the Hip actually costs the estate agent. They should also ask if the estate agent is receiving a hidden commission from the Hip provider, which would mean the estate agents are keeping part of the cost themselves."

Since the changes were brought in last month a Home Information Pack must be completed before a property is marketed for sale, a change the Law Society says "raises the risk of quickly arranged Hips that are inaccurate".

"If the agent is paying £300 to the Hip provider and then charging their client £400 the client is paying an extra £100 unnecessarily. With the other costs involved in selling, these added costs are unwanted extras," Mr Marsh added.

"If sellers do find their agent is charging extra for their Hip they should ask their solicitor if they provide a Hip instead, as solicitors are required to be fully open with their clients about fees. The added benefit of using a solicitor is that they are all strictly regulated and required to follow stringent rules, unlike estate agents."

The Royal Institution of Chartered Surveyors (Rics) said they were currently consulting on a "wide range of issues surrounding transparency in fees"; with the Hips issue being one of the areas they are looking at.

But the Association of Home Information Pack Providers (AHIPP) has defended the use of Hip charges by estate agents as the "nature of commerce" and said estate agents who follow their Hips code are not a worry to sellers.

Ashley King, chairman of AHIPP, said: "Hip providers often supply Hips to estate agents on a wholesale price basis.

"The estate agent charges a retail price to the vendor, which may or may not include a mark-up. Naturally, consumers are free to shop around for the overall service and Hip price that suits them best. The vendor may opt for an all inclusive deal where the cost of the Hip is included in the agent's fee for selling the property.

"Alternatively, they may be charged a lower fee for selling the property but a higher price for the Hip, which may include the estate agent's mark-up. There are numerous fee options in the market."

He added not allowing estate agents a mark-up on a Hip was "to misunderstand the nature of commerce".

"In collecting the agent's mark-up as part of the retail price of the Hip, the Hip provider is not in the same position as a solicitor who pays a referral fee in return for receiving work. The fundamental difference here is that the Hip provider acts as an agent for the estate agent in the preparation of the Hip. It is the estate agent who determines the retail price of the Hip, and the estate agent who is legally responsible for ensuring a Hip is in place before the property can be marketed."

The controversial introduction of Hips was further exacerbated by the April 6th changes. It now costs the average seller between £300 and £400 to compile a pack, which includes an Energy Performance Certificate (EPC), PIQ and searches.

The National Association of Estate Agents (NAEA) had called for a scrapping of Hips in Alistair Darling's Budget last month, but to no avail. They have responded to today's news by saying estate agents who take part in such practice are breaking the NAEA's rules.

Peter Bolton-King, chief executive of the NAEA, said: "The NAEA has longstanding reservations on the complexity of the Hips package. However, given that it is now a requirement, the NAEA fully condemns the practice of receiving secret commissions from a Hip without the seller being informed. Any estate agent that receives such a commission without informing a client selling their home is breaking the NAEA's Rules of Conduct.

"If a NAEA member is found to be taking undisclosed commissions then they will be put in front of a disciplinary panel. If they're found guilty we will fine them up to £1,000 per breach. If it's very serious we will expel them with immediate effect."

Sarah Garrod

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• uk property news