Agents get HIPs 'hidden' payments
Updated on 18 May 2009
Channel 4 News has seen evidence that up to £100 could be being added to the price of a Home Information Pack because of secret payments to estate agents. Bridgid Nzekwu reports.
The Law society says these undisclosed commissions are 'quite wrong' and the Royal Institute of Chartered Surveyors is now investigating the practice. Critics say the HIP industry isn't properly regulated and there are calls for the government to step in and clamp down on the practice.
HIPs were introduced in England and Wales in 2007 and since April this year it has been illegal in England and Wales to put a house on the market without having a HIP in place first.
The average pack costs £300 to £400 and includes various documents, including a description of the property, an energy performance certificate, searches and a property information questionnaire completed by the seller.
The government has always insisted that HIPs improve the home buying and selling process, yet they have been consistently criticised as a waste of time by estate agents, surveyors and solicitors.
Channel 4 News has obtained documents which show an agreement between a HIP company and an estate agent to add an undisclosed commission to HIPs.
In one, the HIP provider suggests a deal in which the company will supply HIPs at a cost of £220 + VAT "on the basis of being your sole HIP supplier" and suggests that the agent can add any margin onto the pack "which is totally hidden from the vendor". The HIP company states that this undisclosed fee "will be paid to the estate agent on the last working day of the following month from order".
A second document, a leaflet given to the seller by the same estate agent, recommends the same HIP provider and states that the price of the pack will be £350 + VAT. So the price paid by the seller is almost £150 more than the price originally stated by the HIP provider.
Peter Ambrose of The Partnership says he is approached regularly by estate agents requesting secret payments in exchange for recommending his company to sellers.
He told Channel 4 News: "We think the idea that someone is paying an estate agent without telling the consumer is almost tantamount to bribery in some ways, in that saying to the agent use us and we'll pay you for doing this and they're paying them anything in the region from 50 to 150, 200 pounds. We've even had situations where people are paying £50 of M&S vouchers... it may not be illegal what people are doing, but it's definitely unethical."
Approximately 80 per cent of HIP companies belong to the voluntary trade association AHIPP. The body accepts that undisclosed commissions are commonplace and has told Channel 4 News it sees nothing wrong with the practice which it believes to be "the nature of commerce".
In a statement AHIPP said: "In collecting the agent's mark-up as part of the retail price of the HIP, the HIP providers 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."
However the President of the Law Society in England and Wales, Paul Marsh, insists that secret commissions are "quite wrong" and that solicitors around the country are complaining to the Law Society about it.
He is urging the Government to take urgent action: "We always made it very clear when we were speaking to Yvette Cooper [former Housing Minister] and the ministers at the time when HIPs were introduced that they were introducing a business which was going to be worth half a billion pounds a year and that business needed to be properly regulated.
"We believe the Government should put in place effective regulation to make sure there is transparency throughout the system so the public know what they're paying for, who's getting what and that they are getting value for money."
The Chief Executive of the National Association of Estate Agents, Peter Bolton-King, has condemned practice of adding commissions to HIPs without the seller being informed. Any estate agent that receives such a commission without informing a client selling their home is breaking the Association's Rules of Conduct.
Mr Bolton-King warned that the NAEA would fine or expel any member found taking undisclosed commissions. He told Channel 4 News: "We can take somebody in front of a disciplinary panel. If they're found guilty then we fine them up to £1,000 per breach. If it's very serious we chuck them out."
Such is the concern at the widespread anecdotal evidence about secret commissions between HIP companies and estate agents that the Royal Institution of Chartered Surveyors is now investigating the issue as part of a wider review of commissions across the entire property industry. It is inviting anyone with evidence to come forward by July. A report and possible recommendations will follow later this year.
