Joined by the HIP

How does a law firm that is well established in providing legal services move into a venture that not only is new to them, but one which is new to the market. This is a story of how one such law firm set up their own HIP company, and along the way learned how a new company could teach them the value of customer service.

McMillan Williams (MW) is a South London Law firm formed over 25 years as a typical high street practice operating a wide range of legal services. MW has taken a progressive attitude to growing in a market which has become ever increasingly difficult for small to medium-sized practices to survive in and remain competitive.

After the last property decline in the 1990s, MW also made a conscious decision to adapt its structure and diversify in other areas of law such as clinical negligence and family law, whose lawyers are now recognised independently as being experts in their fields. As well as diversifying its legal practice MW has embarked on an ambitious organic growth plan of expansion which has seen number of offices and fee earners double.

In addition to this growth MW also took the bold step of setting up a Home Information Pack (HIP) company. This decision was taken at a time when there was still a lot of uncertainty as to whether HIPs would even be introduced. This was initially a commercial decision taken to preserve the referral work it received from the estate agents it worked with. The referral work from estate agents has been under threat for a time in a market that has become dominated by referral agencies seeking ever increasing commission fees.

MW set up two companies, HIPS Systems Limited (HSL) and HIPS Energy Limited (HEL). HSL prepared the HIP and acted as the contact between HSL & MW, and HEL employed the Domestic Energy Assessors (DEAs) that would go out and prepare the Energy Performance Certificates (EPC).

MW business model for HSL was based on the simple premise that if HSL could prepare the HIP, MW could manage the opportunity to obtain the conveyancing work and the work would flow back to MW. With this business model in mind the early sales message was of a local firm of solicitors providing a local HIP solution to local agents. HSL's target agents were independents who would welcome to the local solution.

Although the history of HIPs has been dogged by scepticism, uncertainty and a general census from the legal profession that the good intension of speeding up the house buyer/selling process as unlikely to be achieved, MW took a different view.

Originally the HIP was going to be required from 1 June 2007. However, just ten days before that date, Communities Secretary Ruth Kelly announced that they would be phased in from August 2007, and initially only for larger properties. Between 1 August and 10 September only homes marketed with four or more bedrooms were legally required to have a HIP. This was extended to cover homes with three or more bedrooms from 10 September.

On 22 November, Housing Minister Yvette Cooper announced that HIPs would be rolled out to include one and two bedroom properties as of 14 December, completing the government's phased introduction of HIPs to residential homes marketed for sale within England and Wales.

The change in start dates and the phasing of property sizes for the implementation of HIPs had a huge impact on all HIP providers. The reason cited by the government for the delay was a shortage of DEAs. The timing of the rollout of HIP had a significant impact on HSL as it had taken the unusual step of employing all their DEAs whereas most other companies were going to use freelance DEAs.

The logic behind using HSL's own DEAs at the time was that by employing its DEAs HSL would be able to provide an excellent branded customer experience, and ensure a high level of professionalism could be maintained. HEL recruited its DEAs, and funded their training to ensure that a consistent level of service would be provided.

By the time HIPs was launched MW had invested in providing a fully integrated online solution that would be managed by its internal IT department. It had been instrumental in the software development and the IT solution provided was a bespoke program that would subsequently be rolled out by the software provider to other HIP companies.

The business model was set out to ensure that HSL retained control over the whole process from preparing the EPC to compiling the search documents, managing the IT and dealing directly with the estate agents. The majority of HIP providers had set up a structure which meant that all aspects of the business were outsourced. By retaining control over all functions it allowed HSL to maintain a high level of customer focus and satisfaction. All the agents HSL worked with were able to get the direct contact with not only the staff of HSL but the management structure within HSL and MW. This was truly a unique experience and one which large national HIP providers were unable to achieve.

Increase the agent base

As a consequence of the delayed start for HIPs, HSL was given an opportunity to review its marketing objective. The infrastructure MW has set up for HSL was large and detailed enough to be used beyond the existing estate agents base. It had the capacity to work with a far larger base. It became apparent that the existing agents were not going to provide a large enough volume of work and an active marketing campaign was launched to significantly increase its base of agents from around 20 agents to over 80. It moved from a single room to a purpose built site in less than six months of HIPs being launched.

As HSL had regular contact with the agents it was able to adapt very quickly to what the customer required. Although HSL was providing HIPs to the general public its real customer were the agents who acted as the gated keepers for the HIPs business. The price of the HIP was not too important for them, as by the time HIPs launched the price had levelled off with most HIP providers.

HSL had originally set up a system with a very detailed online mechanism allowing the agent not only to order the HIP on line, but also track the HIPs progress.

However the agent's main concern was more to do with simplicity rather than the complexity or sophistication of the HIP solution. The agent's requirement was to ensure that they could establish compliance with the first day marketing rules set out in the regulations. Once they got the green light to market the property then the rest of the HIP was incidental to them. HSL was able to simplify its processes so that it did away with the agent doing most of the management of the HIP as HSL took responsibility. HSL's motto became 'we will take the pain away', and it was nt long before HSL was able to get agents to transfer their business from national HIP providers to HSL.

The agent simply had to call HSL with the client's details and HSL would take over from there. There was still an option to make the HIP as detailed as the agent wanted, and to allow them to retain the level of control they were comfortable with.

There were a number of challenges faced when setting up the business. The preparation of HIPs was a new product that had not been exposed to the market. There were no rules on what model would work out to be the most profitable and the most cost effective. Having no reference points to work from meant that HSL had the freedom to develop a business tailored to its customers' requirements.

Period of uncertainty

As the housing market moves to a period of uncertainty, the service level HIP providers must offer is even more imperative. HSL has responded to the new changes by providing a potential revenue stream for the agents, as well as retaining a competitive price.

The next phase of HSL's development is to continue with expanding the base of agents and work with partners to provide value added services such as floor plans or internal photography. It has invested in a completely new in-house developed software program that will make its online solution simple and easy to use. It will also manage the information that will help HSL and MW in their future marketing activities.

The level of customer service HSL has provided is one of the main reasons why HSL has survived in an extremely competitive market dominated by national HIP providers. This is the lesson that MW has learned from setting up HSL. The concept of who is the client is taught to all lawyers, but in this context, who is the client and what level of service do we need to provide to them is even more important. The client for MW is not only the client that has signed our retainer, but the estate agent with which HSL has an association.

MW has learned from HSL that in an environment where your client can transfer their business overnight means that the common complaints from estate agents such as 'the solicitor doesn't return my call', or 'the sale fell through because of the solicitor's delays', just could not happen. If MW did not value HSL's clients, not only would MW lose the conveyancing opportunity, they would lose that agent together with all the HIPs they would have referred.

HSL provides the conveyancing leads which mean that the whole house selling transition is managed seamlessly from inception of the HIP to completion. MW has to be a partner in this process, and work towards a high level of customer satisfaction. Unfortunately there is very little margin for error and MW is learning from HSL.

HIPs are now required for all properties, and the next big event on the horizon is the introduction of EPCs for rental properties. This may be the only lifeline that most HIP companies are looking for but going by the current history of the rocky ride HIPs have already endured we will have to hope someone in government makes a pragmatic decision. HSL has already embarked on its programme for ensuring that it is in a strong position to take advantage of the rental market EPCs - and whatever next opportunity HIPs presents.