More homes – Fewer complaints : APPG Inquiry Report

APPG Inquiry ReportMPs call for the DCLG to set up a New Homes Ombudsman in APPG Inquiry Report published on 13 July 2016.

At long last seven months after the last evidence session on 14 December 2015, the All Party Parliamentary Group for Excellence in the Built Environment (APPGEBE) has finally published the findings and recommendations in the report following its: “Inquiry Into the Quality of New Build Housing in England”

APPG Report Publication 13 July 2016

Lord Best, Helen Hayes MP (Lab), Maria Miller MP (Con), Chair Oliver Colvile MP (Con), Tony Burton, Nick Raynsford

The APPG Inquiry Report strangely titled: “More homes – fewer complaints” paints a damning picture of an industry that has and continues to, fail new homebuyers;  a broken industry in dire need of mandatory regulation. It  confirmed as was suspected at the outset, that “as the number of homes being built increased, the quality of new homes has declined.” A more suitable title would be “more quantity – less quality!” As housebuilders are only concerned about numbers, the poor quality of UK new homes is nothing new. As I have stated in previous articles, the housebuilding industry talks big, over-promising and repeatedly under-delivering all ends up. This extensive, in-depth APPG Inquiry and its findings leave this in no doubt whatsoever.

The Report states that: “the quality gap between customer expectations and industry actually delivers can only be closed by housebuilders making a concerted effort to create a more consumer-focused culture” saying that housebuilders house builders should be upping their game and putting consumers at the heart of the business model”

It is my view that this will not happen without mandatory regulatory intervention. The house building industry does not do anything that will inevitably eat into its bottom line unless it is forced to, often kicking and screaming, by legislation and government direction. This Report and its ten recommendations would go a long way to improve the quality of new homes and redress the imbalance currently in the housebuilder’s favour, giving consumers greater protection with better cheaper and easier forms remedy when disputes arise.

However, unfortunately, a House of Commons spokesperson has confirmed that APPG Inquiries are:

“not part of the House of Commons’ official business. APPGs are not required to submit their reports to government departments, and government departments and ministers are not required to consider any reports they receive from APPGs. APPGs are essentially run by and for MPs and Peers who share an interest in a particular subject. Such groups mainly provide a forum for debate, often involving non-parliamentarians with expertise in the subject, which helps inform parliamentarians.”

APPG EBE Chair Oliver Colville MP said:

Oliver Colvile MP“I am positively passionate about this issue. There have been too many reports of new homes that are quite simply uninhabitable. It is down to us as members of parliament, to put pressure on the government to make sure that they actually do take notice of all this [Report findings and recommendations] and that they are willing to listen. That’s the job that we have to do as members of parliament, to look after the interests of our constituents and the consumers that actually bought these properties”

I will be writing to all 650 Members of Parliament by e- mail to ask that they add their support and lobby the DCLG for the Report’s Number 1 and “key recommendation” that the DCLG initiate steps to set up a New Homes Ombudsman at the very earliest opportunity.

FREE  –  FAIR  –  FOR EVERYTHING

As the Report quotes from my oral presentation: “this would put pressure on housebuilders to up their game in the first place and spur them on to improve workmanship and increase levels of customer service”

Indeed, the Report contains a great deal of the evidence presented during the session I attended, resulting in 8 of the 10 Report recommendations.

The highlights of the Report findings:

  • “consumers want to see an improved quality of build, homes that are fit for purpose and an easy to understand warranty. When something is wrong, consumers want an affordable and accessible means of putting it right”
  • “A lack of competition and an imbalance between housebuilders’ and consumers’ bargaining power is short changing buyers with just 10 house builders accounting for half of all homes built in the UK.”
  • The decline in customer satisfaction levels in the HBF New Homes Customer Satisfaction Survey “unacceptable – falling from 90% to 86% in 2015 and equating to 15,500 unhappy new homebuyers.”
  • “The government must take a lead role to make sure house builders deliver a quality product and service and not just focus on numbers being built”
  • “As output has risen, so quality has fallen.”
  • “we need to see housebuilders putting consumers at the heart of what they do – making a concerted effort to create a more consumer focused culture”
  • “The evidence points to an industry…..which will at times ride rough-shod over dissatisfied buyers”
  • “for some, purchasing their dream home turns into a nightmare”
  • “Evidence suggested there is a continuing issue with poor standards of workmanship in new homes”
  • “At financial half-year and year-ends, the quality is reduced as they rush to meet targets.”
  • “Housebuilder’s own quality control systems are not fit for purpose”
  • An industry that is unique in “not relying on repeat business”
  • “onus on housebuilders to aspire to deliver zero-defect construction”
  • “There is no overall measure of Quality in housebuilding”
  • “We believe housebuilders should be upping their game and putting consumers at the heart of their business model”
  • “there needs to be an industry aspiration to achieve a zero-defects culture”
  • “good practice should be seen as building a new home that is defect-free”
  • “local Authorities to make sale of public land to housebuilders conditional on more skills training”

On inspections:

  • housebuilders should not rely on third party inspections to drive up quality”
  • Housebuilders should be: “increasing the number of trained people, and putting in place a culture and inspection mechanisms that aspire to reducing defects”
  • “responsibility for defect-free homes should rest with the housebuilder, not with regulatory inspectors”
  • “mandatory and warranty inspection reports to be made publicly available”
  • “Whatever solutions were proposed needed to be mandatory rather than voluntary codes”
  • “More on-site inspections by independent organisations.”
  • “the sign-off procedures in construction are flawed”  – Professor Chris Gorse
  • “we are getting reports that architects are not allowed to visit sites during the build process” –  Andrew Forth of the RIBA

Industry recognition that problems exist and change is required:

  • “I wholly support customers inspecting their property prior to completion”  – Peter Andrew Deputy Chairman HBF
  • “there are occasions when properties are not perfect at the time of handover to the owners” –  Peter Andrew HBF
  • “NHBC 9-month customer satisfaction survey scores generally 5-10% LOWER than the HBF 8-week survey”
  • “Neither warranties nor building control functions provides any sort of comfort that items like finishes and fittings will be defect-free when the house is handed over”
  • “In any other industry, it would be expected that the manufacturer or producer of a product should be held accountable for the quality of that product at the point of sale, rather than an independent inspection to verify whether the manufacturer or builder had done their job properly”
  • Council websites point out, that building control is not a 100% guarantee of compliance”
  • “consumers see both the building control process and warranties as a total hallmark of quality, rather than the limited service it actually is.”
  • “solutions proposed needed to be mandatory rather than voluntary codes”

NHBC said: “every single house it inspects is visited five times. The inspections are purely to prove to our underwriters that the property is a standard risk and the primary function on the warranty side is to manage risks – it is not about providing quality control.”

LABC’s Philip Hammond & Paul Everall said:

  • “67% of complaints were about non-warranty issues with 70% related to aesthetic finish or décor” “leaks and other common snagging issues are pretty endemic.”
  • “lower satisfaction compared with clients in other sectors [Construction], pointing to more evidence of a lack of quality control of those working in housebuilding.”
  • “it is the housebuilders responsibility to get it right first time, rather than have defects pointed out by an outside inspector” 

On the Consumer Code for Home Builders:

  • “the Code [Consumer Code for Home Builders] does not appear to give homebuyers the safeguards we think they should expect”
  • “it does not appear to us objectively to offer consumers a wholly satisfactory form of redress”
  • “The Consumer Code for Homebuilders is limited in its scope”

Clearly there is much room for improvement. This Report is a damning indictment on a largely unregulated broken industry. A morally vacuous profit driven cartel, indifferent to its customers and only kept alive on taxpayer-funded state life support.  I will examine and comment on the Inquiry Report recommendations in detail in my next article along with other measures that perhaps, have been overlooked that could and should have been included.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

House builders are cheating new home air leakage testing

Since 2006, Part L of the Building Regulations – The Conservation of Fuel and Power in England and Wales – has required mandatory air leakage testing of new buildings including homes. These regulations were further revised in 2010. But this does not mean every new home will be subject to an air leakage test to comply even under the latest 2010 Part L.

What is air leakage testing?

Air Leakage TestingThis test basically checks that a new home is air tight and will not let in draughts or provide a route for heat to escape through gaps in the structure. After sealing up all required vents to windows and extractors, air is then drawn out of the home via a large fan in an external doorway, with the pressure monitored for a set period of time to produce a measurement of the amount of air that leaks back into the home being tested.

So you would think that since 2010, all new homes would be relatively air tight, free of draughts and cheap to heat as a result?

Well you would be wrong! A ‘whistle-blowing’ air testing compliance engineer who contacted me last week said that nearly every home he tested failed the initial test. He said: “I have been air testing for them for the last 12 months and I have to say, at least 90% of all air test ‘passes’ are through bodging” and that he wanted to “shake up the construction industry” believing “the most important part of the new home chain is the end user, not house builders’ shareholders and directors etc.”

Gap Under Skirting

Large gaps under skirting boards in a Taylor Wimpey new home

He said:

obviously any new home will eventually pass an air test due to the amount of mastic and expanding foam used everywhere to seal gaps. But what I see on a daily basis – and this is pretty much every house tested – is mastic being applied to the bottom of skirting boards and under kitchen units and baths with larger holes being filled with expanding foam. Then the air test is carried out and it passes. What follows is all the mastic is then cut out before the carpet fitters fit the carpets!

This is standard practice and I feel a total fraud by passing these buildings but it’s what I’m paid to do. I tested one house that failed due to air leakage from all the skirting boards around the house, the builder then applied mastic under all the skirtings, expecting me back first thing the next morning. I didn’t get there until the early afternoon, by which time the carpet fitters had cut it all out! I tested it and it failed due to leakage from the skirting! The builder then re masticed the skirtings whilst I waited, I retested it and it passed. While I was packing my testing equipment away the mastic was cut out again! This is not a one off but something that is going on all the time.”

The problem, as our whistleblower sees it, is that house builders currently perceive air tightness as sealing the plasterboard ‘box’ inside the house. However it should be the fabric of the building, the external envelope, rather than relying on drylining and jointing to seal the home. Even so, it is obvious even this is not being done and NHBC standards not adhered to.

Air Tightness Dot and Dab

Continuous ribbon of adhesive at room perimeter

NHBC Standard 8.2 S3 (f) States:

Gap sealing – A continuous ribbon of adhesive should be applied to the perimeter of external walls, openings and services in drylined walls to prevent air infiltration. In addition:

  • drylining should be completely taped and filled at board joints and at abutments to ceilings and internal walls
  • dry wall lining at door and window openings should be securely fixed and filled. This also applies at external and internal corners
  • gaps around service points, electric sockets, light switches, etc should be filled with jointing compound.

But as our whistleblower confirms “this is virtually never done and so pretty much every house that is currently being built is non-compliant to NHBC standards.”  This give rise to one of the biggest sources of heat loss in a new building, a chimney-effect caused by the void behind the dry lining not being properly sealed, allowing heat to flow freely via convection upwards and out into the ventilated roof void, effectively sucking the heat out of a building. In addition, not sealing the plasterboard to NHBC 8.2 S3 (f) is also a significant fire risk. I spoke to a fireman a few weeks ago who confirmed that the fire service have serious concerns over dry lining because if a fire can draw air through electrical sockets and gaps under skirtings etc, it will rapidly spread through a building behind the dry lining and into other parts of the building.

The whistleblower told me that:

“Most houses scrape through their air tests. If the target is 6.00 for example, then getting 5.95 or thereabouts would be quite normal. It is rare that you get a good test result from most buildings but all the house builders care about is getting the pass and as long as it’s below the target they are happy! I can honestly say that of the 2,000 or so houses and flats I have air tested, only a handful are actually air tight through being properly sealed behind the dry lining. The majority have passed through the ‘sticking plaster’ approach. They are not allowed to use tape to seal gaps (which used to be standard practice) so now use mastic as a ‘permanent’ (temporary) seal and the house building industry accepts it!”

Air Leakage Testing Thermal Image

The blue area is the thermal image of cold air leaking into the home around the door.

What should be remembered is that these are the new homes that the site management knows in advance that are going to be tested, yet still they fail. The remaining 50% are not tested at all, presumably built with even less care. The C4 Dispatches programme broadcast in November 2015, ‘Britain’s Nightmare New Homes’ showed a house with large unsealed gaps under the skirting boards (photo above) and, unsurprisingly, the buyers were complaining about draughts and feeling cold. Add into the fact that some of the homes had missing insulation as well, it is ludicrous to suggest, as the industry repeatedly does, that new homes are being built with care to a high quality standard and are energy efficient. If the mandatory tests are being fiddled on site, what is the actual reality?

Air Leakage Testing Thermal Image Corner of room

Cold air leaking in behind dry lining.

Under the 2010 revisions to Part L, with a Target Emission Rate (TER) improvement of 16% to 40% under the 2010 revisions, it is increasingly unlikely that new homes will be able to achieve the overall targets for energy improvement without significantly improving air tightness. Although the Approved Document L refers to tested buildings achieving 10m³/(h.m²) at a pressure difference of 50Pa as a ‘reasonable level’ of air permeability, in the real world, the actual requirement will be significantly lower to achieve the overall TER. With typical air testing targets improving from 6 to 10 down to 3 to 6.

Since the 2010 revisions to Part L, house builders were faced with a choice of either improving air tightness, or making potentially more expensive improvements to other design and specification factors that influence the SAP calculations such as renewable energy sources etc.

So what are the requirements for air tightness testing of new homes?

On new home developments a sample of each home type is tested. Under the 2010 revision, three tests or 50% of each home type must be tested for air tightness. The definition of types has been expanded to include variations in position (terrace/end terrace house or top/ground floor flat), construction details, size, defined as 10% difference in envelope area and other type defining variables due to design such as, storey heights, the number of doors, windows, flues, soil vent pipes and proximity to unheated spaces (garages, stairwells). In addition, half of the scheduled plots tested must be in the first 25% of completed types. Since 2010, these factors should have significantly increased the number of new homes on each development that need to be air tested. It is thought this could be up from 10 to 25% of homes to 40 to70%.

Air Leakage Testing Thermal Image Socket

Cold air leaking in around electrical socket

Given that not every new home is required to be air tested, results that are ‘re-used’ in SAP calculations for untested plots of the same dwelling type must have a ‘confidence’ factor applied. This means that the test results must be 2m³/(h.m²) at 50Pa better than the design air permeability allowed in the SAP calculation. In other words, if the target air permeability for the dwelling type in SAP is 8, the tested plot would need to achieve 6, for the result to be re-used for untested plots. The only alternative is to test every home on the site and no house builder or site manager would want to do that!

The NHBC also advises house builders that if there are early test failures, they may be required to test further examples of that dwelling type to restore confidence and show that any and all remedial actions have been carried forward into the remainder of the development.

Gap over window

Gap over window in a Persimmon new home

I believe it should be a mandatory requirement that every new home is subject to an air tightness test. The house builders cannot be trusted. The ‘confidence factor’ is non-existent. Air testing of buildings has been a requirement of the Building Regulations for ten years and yet still, homes are built and handed over to buyers with large gaps around doors, windows and under skirting boards, which clearly would not pass an air tightness test and therefore comply with the Building Regulations.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Builders shares crash as Britain votes to leave the EU

It would appear that the house builders’ share price rise since the financial crash of 2008, has been built on the same dodgy foundations as some of their houses are. A business model built on selling sub-standard houses to sub-prime borrowers.

This was illustrated during the first two days of trading following the UK’s historic vote leave the EU. Worst hit in the initial market panic were Banks and shares in the listed house builders. Despite this, some ever-greedy directors used the Friday crash to buy more shares on the cheap, known as “catching a falling knife” and promptly lost another 15%! Taylor Wimpey Non-Exec director Dame Kate Barker, 59, who produced the Barker Review on housing supply in 2004 – which resulted in the industry setting up the HBF Customer Satisfaction Survey two years later, but has failed to have any impact on improving either supply or quality – bought 20,000 Taylor Wimpey shares for £26,953 but the shares closed down 15% leaving her with a paper loss of £3,800.

Taylor Wimpey Brexit Share price crashWhilst most sectors have recovered to normality, the same cannot be said for shares in the major house builders. Since Brexit, Crest have fallen a massive 41%, Taylor Wimpey 40% with Barratt, Persimmon, Bovis, Bellway also down 37%-39%. So the pre Brexit share price of the major house builders was not real. It was based on market sentiment based purely on future prospects, rather than a realistic value of the plc house builders. Analysts remain “bullish on the longer term fundamentals” with some expecting fresh support for the housing market following the Brexit decision. Anthony Codling told Money Mail that: “increasing home ownership would be a useful tool for any post-Brexit government to support the argument that the UK is better off out than in the EU. It is our assessment that government support for new-build housing will remain firm.”

So why did house builders tank after the EU Referendum results?

The rationalisation was that Brexit will mean an economic slowdown and a reduction in bank lending, which in turn would hit demand for new homes. The reality is the people have got to live somewhere. Following the result many believe that clarity and confidence in the sector has been reversed, wiping around £8bn from the value of the four biggest house builders: Barratt, Persimmon, Taylor Wimpey and Berkeley.

This calls into question the multi-million  Long Term Incentive Plans (LTIP) for many of the industry’s senior directors. The recent share price collapse demonstrating that their contribution to the huge rise in share prices is negligible at best, being built on and nearly entirely driven by, an inflated housing market bubble, created by low-cost borrowing and a government hell-bent on increasing home ownership at any price for purely political reasons.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Persimmon CEO Jeff Fairburn £93m bonus windfall

“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those that have too little.” …Franklin D Roosevelt

I was disgusted when I first reported on Persimmon Long Term Incentive Plan (LTIP) in April 2013  – I still am.

This week, Persimmon’s LTIP bonuses have come into further criticism and were the subject of universal widespread condemnation. Apart from their PR company spokesperson, no one can possibly agree that bonuses on this scale can be justified, even if there has been exceptional performance. Investment giant, Royal London Asset Management said Persimmon was being insensitive when many were suffering from their failure of house builders to construct enough homes, Mike Fox went further saying the payments were “too high in all circumstances”.   The LTIP payments have been critically publicised this week in The Guardian, Daily Mail, Telegraph, Independent and on the BBC website.

Beleaguered Persimmon buyers across the country must have recoiled in disgust when they learned of the scale of the projected payments that 150 Persimmon executives will trouser over the next five years if, as seems likely, the twice extended, Help to Buy gravy train keeps on running all the way to house builders’ bank accounts until 2021.

Vince Wareham Persimmon Render Photo

Legal action: Unhappy Persimmon buyer Vince Wareham is going to court.

“Optimising shareholder returns and maximising profit”

Persimmon is a company that places profit and value for shareholders above everything else. A quick glance at any of the last five annual reports leaves this is no doubt. At Persimmon, it would appear that greed isn’t just good, it’s compulsory! In their 2014 Annual Report Persimmon stated: “We remain focused on optimising shareholder returns in line with our long term strategic plan. The Group strives to maximise the value of each and every new home sold whilst controlling development costs to deliver the best gross margin from each site”

How must the much put upon site staff feel when they learn 150 of their directors are in line for life-changing bonus payments of up to £93million over the next five years, as in the case of CEO Jeff Fairburn. Most of them get by on industry-level salaries and in most cases, annual bonuses limited to four figures if they keep their noses clean! It would take it would take one of their site managers around 380 years to earn just one of Fairburn’s annual £19m bonus payments.

What has Fairburn achieved?

Jeff Fairburn 2sBut who is Fairburn; surely he must be some sort of house building guru or new homes genius to justify such a windfall? Sadly no. This is a man who has presided in a decline in the number of NHBC awards for quality that have been won by his 380 site managers, from 21 in 2012 to just six, (yes SIX!) in 2015 and only seven this year. A man that managed to oversee a fall in his company’s customer satisfaction levels and Star Rating in his first year in charge, maintaining it at the low 3 star level the following year. Amongst all the major house builders, only Bovis fares worse.

Top job! Socket in architrave 1Persimmon featured on BBC Watchdog not once but twice in 2015. The second programme as a result of hundreds of disgruntled Persimmon buyers, from as many as 60 developments across the country, contacting the Watchdog office with their experiences of unfinished homes, defects and poor customer service. On a personal level, hardly a day passes when I am not contacted by a Persimmon buyer at the end of their tether, seeking advice on how to get this company to honour its warranty obligations, to finally and properly fix defects  in their homes.  Unlike most of his peers, Fairburn does not make his e mail address publically available.

PrintIt would appear that one of Fairburn’s first tasks was distance himself from his customers by taking his e mail address down. Anyone wishing to contact him must do so through via his second PA in less than three years, jacqueline.fennon@persimmon.com acting as a barrier from the many unhappy buyers complaining about their shoddy homes. Persimmon also uses an external PR company to deal with any press enquiries and issue the usual banal statements whenever there is any adverse publicity

Fairburn – “in the right place at the right time”

But these LTIP bonuses were never about adding value to the company or any perceived ability of those running it. They were never an incentive to work hard; this is a bonus for having the good fortune to be in the right place at the right time, riding a recovery boosted by ultra-low interest rate policies and unrivalled government support for the industry. A time when “£18bn worth of taxpayer-funded subsidies are holding up the business” as Ann Pettifor of the Policy Research in Macroeconomics put it on BBC Radio 2 Jeremy Vine last Monday. It could also be argued over the last three years, even a monkey sitting on his hands, could have done ‘as well’ as Fairburn.

Persimmon maintain that since the incentive scheme was put in place in 2012, allegedly backed by a majority of shareholders, the company has increased the number of new homes built by half. The LTIP will ultimately result in a total of 30million shares – a tenth of the company – being awarded to the company’s 150 top managers by the end of 2021. It said: “The analysis simply assumes that the share price in 2021 will be the same as it is today and ignores the challenge of returning £1.9billion to shareholders, while simultaneously growing the business to deliver an increase in the ex-dividend share price performance period of almost ten years……..This is a long term plan which is designed to drive outperformance through the housing cycle and there remains a very long way to go”

In 2013, 22% of Persimmon’s shareholders voted against the remuneration report after the UK shareholders’ Association came out against a £20million “golden goodbye” for the outgoing CEO Mike Farley and the long-term incentive plan (LTIP) under which, most of the grants had already been made. The UK shareholders’ Association says the arrangement is a “case study in regulatory failure….a huge transfer of value from a scheme that was never justified in the first place and has since been inflated by the effect of Help to Buy”.

At the £19.41 closing price of the shares on Friday, the deal is hypothetically worth £582.49m and would be one of the largest share bonus schemes ever awarded by a UK FTSE 100 company outside banking.  But the LTIP was set up from an historic low base. Pre Help to Buy, Persimmon shares traded at 620p. In 2012, Persimmon built just 9,903 new homes after sacking 2,000 of its 50,000 employees following the global financial crisis. Since then, the number of new homes built by the company has increased, up 43% on 2012 levels by the end of 2015. By way of comparison, Redrow have increased new home completions by 63% since 2012.

The original LTIP was £400m. It is now reported to be £600m;  40% for the LTIP scheme vests in December 2015 and is paid out in January 2018. The remainder paid between 2017 and 2021 or when the Capital Return is completed. To qualify for the full payout the company must return £1.9bn to shareholders (equivalent to £6.20 a share) by 2021.

Charles Church Porch fell off before anyone moved in! St Johns Wood North Baddesley Hants

Falling to bits before anyone moves in!

The LTIP made no mention to targets for improving the quality of the homes Persimmon build. There were no targets to increase the number of NHBC Quality Awards won by their site managers each year. No incentives of for attaining a 5 star Customer Satisfaction HBF survey rating (for the first time) and certainly, not related to any reduction in the number of complaints the company receives from its unfortunate customers.

Around a third of the scheme, worth around £206m based on Friday’s closing share price, is set to be shared among just five senior bosses, including chief executive Jeff Fairburn, who stands to receive a maximum of 4.8m shares worth almost £93.2m.

There is so much money flooding into the company through ever increasing profits – up a staggering 287% on 2012 levels, that the Capital Return Plan has also been increased 45% to £2.76bn or £9.00 per share. Indeed the Capital Return Plan has been a significant contributory factor in the 232% rise in share price since 2012.

Despite pressure and encouragement from the government, Persimmon has only marginally increased output. The total number of active sites has remained static at around 380 over the last three years. The number of new homes built by Persimmon in 2015 was 14,572 – up just 42% on 2012 levels. Indeed the annual rise in completions only started after the introduction of the Help to Buy scheme in April 2013.

House builders benefitted from Help to Buy

Since the start of Help to Buy, as at 31 December 2015, 15,708 buyers had taken advantage of the taxpayer-funded Help to Buy scheme to buy a Persimmon new home. Indeed since 2012, the company has built a total of 9,900 additional homes. Originally running until 2016, the government’s Help to Buy scheme was first extended to 2020 and again by one year, last autumn to 2021 – strangely coinciding with the last year of Persimmon’s senior management LTIP! It should not be overlooked that the reason that Help to Buy was introduced being due to the lack of affordable mortgage finance without a substantial 25% deposit following the financial crisis. This is no longer the case as lenders are falling over themselves to offer 95% loans at historically low interest rates for those that can meet the affordability test criteria.

Fairburn’s bonus – “completely obscene”

Commenting on Fairburns’s bonus and Persimmon LTIP, Mark Garnier Conservative MP and Member of the Treasury Select Committee told the Daily Mail: “This is completely obscene. Absolutely nobody is worth £100million. This is obviously a company that has losing its way and is not getting the balance right between rewarding its staff and serving shareholders and society as a whole”

Well Mr Garnier, you are in the right place to insist George Osborne imposes a large windfall tax levy on the excessive profits being made year on year, created on the back of the taxpayer-funded Help to Buy, a scheme that is now no longer necessary. It can also be argued that Help to Buy should at least be withdrawn from house builders such as Persimmon that fail to improve quality and service as I suggested at the APPG Inquiry into the Quality of New Homes in England. Mr Garnier part of this APPG Inquiry Committee!

Rather than paying £600million in bonuses to the already wealthy unproductive few, surely the £200million earmarked to be shared by just five senior bosses by 2021 would be better deployed improving all aspects of the quality of the homes Persimmon build. Providing additional resources to improve the failing customer care and plummeting levels of customer satisfaction. Better quality new homes would improve this company’s dire reputation and reduce the cost of post-occupation remedial works. Surely a CEO worth a £2million salary and a £20million a year bonus would know this! Sadly his legacy as a CEO at the company will be purely short term financial gain, rather than for building good quality homes and satisfied customers.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

BBC Radio 4 ‘You and Yours’ – What needs to be done to protect consumers in the housing industry?

BBC Radio 4Earlier today, BBC Radio 4 You and Yours interviewed Oliver Colvile MP, chairman of the All Party Parliamentary Group Inquiry into the Quality of New Build Housing in England, looking into measures that would improve the quality of new-builds and how to give greater protection to new homebuyers.

Oliver Colvile MP told the programme:

Oliver Colvile MP“I am afraid I’ve had an awful lot of constituents who have come to see me and talk to me about how they don’t feel they have got the product which they thought they had actually bought.”

“The consumer wants to see, they want to actually see something that is going to deliver a quick and easy resolution as far as their contractual decisions have been made. After all, when we go and buy a new home it normally is the most expensive thing biggest investment which we make in the whole of our lives, for them [HBF] to be complacent I have to say, to say its 85% [satisfied with their homes] well what about the 15% then who have actually had a fairly a bad deal out of it. The other thing as well is that I don’t think the house builders generally understand that they’re dealings with the person who is buying it [the new home] isn’t necessarily always particularly brilliant. The consumer feels that actually somewhat concerned that they are actually banging their head against a brick wall, by trying to get the builders to take some notice of all of this.”

“I think the first thing we need to make sure is going to happen is that we should initiate steps to set up a New Homes Ombudsman. That is someone who is independent, of both the developer and consumer, to look at the issues surrounding these new-build houses and to make sure there is a judgement made on that as to whether or not the developer has actually done the job properly.”

“I also want to make sure that you know the Government looks at consumer rights and why is it that housing and development is not covered necessarily in that consumer rights when people are purchasing their new home; so after all when you go an buy a new toaster and it goes wrong, you can go back and you can make sure that the shop who sell it to you either replace it or give you back your money, especially after a certain amount of time. Why is it the case that it is so difficult if there is a problem with something which is really an expensive commodity if you end up by then going back you then have real difficulty in actually getting any kind of recompense on this.”

“She would then be able to go to one individual person to actually get them to give some ruling about how it is the developer has operated and that doesn’t happen at the moment. I think also the other thing as well which she could do is she should have the opportunity to have an inspection done on the property before she actually buys it.”

But will the recommendations happen? Will they [the industry] accept an Ombudsman?  In response Oliver Colvile MP said:

“Well I think that is down to us as members of parliament to put pressure on the government to make sure that they actually do take notice of all this and that they are willing to listen. That’s the job that we have to do as members of parliament, to look after the interests of our constituents and the consumers that actually bought these properties.”

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

New Homes Ombudsman should be set up – An APPG Inquiry Recommendation

In his speech at the JCT Parliamentary Reception on 17 May 2016, APPG EBE chair Oliver Colvile MP highlighted the main findings of the Inquiry and some of the main recommendations, in particular that a New Homes Ombudsman “should be set up.” stating “this would mediate disputes between consumers and their builders or warranty providers to offer a quick resolution.”

It is to be hoped that this and all the recommendations in the Inquiry Report, due for publication at the beginning of June 2016, will be taken forward and fully implemented by Government at the earliest possible opportunity.

Official Ombudsman

Houses of ParliamentAn Ombudsman is usually appointed by the government or by parliament, but with a significant degree of independence. They are charged with representing the interests of the public investigating and addressing complaints against public bodies, private companies, organisations and sometimes entire industries. An ombudsman should be a totally independent body capable of investigating complaints of malpractice, maladministration or a violation of rights, both fairly and impartially.

Now that the need of a New Homes Ombudsman has been clearly identified by a government all party inquiry, one must be appointed by the Government or parliament. The house building industry cannot be afforded any opportunity to dilute the powers, effectiveness or independence of the New Homes Ombudsman. I believe the New Homes Ombudsman should be set up, funded and operated in a similar way to the Financial Ombudsman Service, giving new home buyers access to impartial dispute resolution.

Fair – Free – For Everything

Government appointed Ombudsman services include:

Financial Ombudsman Judicial Appointments and Conduct Ombudsman
Pensions Ombudsman Prisons and Probation Ombudsman
Legal Ombudsman Local Government Ombudsman
European Ombudsman Parliamentary and Health Service Ombudsman
Property Ombudsman Telecommunications Ombudsman
Housing Ombudsman New Homes Ombudsman TBA?

However, official government-appointed Ombudsman should not (but could) be confused with organisations offering “independent ombudsman services” that various companies and trade bodies prefer to use. Most describe themselves as: “Approved by the government under the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015. We are an independent not-for-profit organisation which specialises in providing Alternative Dispute Resolution services for consumers and businesses in the (area or trading) sector(s).

In reality they are little more than an outsourced dispute resolution service, paid for by an industry, masquerading as an independent ombudsman. The Ombudsman Service Ltd (Ombudsman-services.org) is a company limited by guarantee; a not-for-profit organisation that operates alternative dispute resolution schemes across a range of sectors dealing with complaints regarding: Aviation * ABFA * Communications * Consumer Goods or services * Copyright * Energy * Glazing * Green Deal * Home Improvement. Ombudsman * Parking * Property.

Are these Ombudsmen truly independent and government appointed?

The Ombudsman Service Ltd states: “we are good for consumers and good for business”. Ombudsman Services was founded in 2002 to provide independent dispute resolution. We provide an independent, impartial and cost effective means of resolving disputes outside the courts. We are experts in dispute resolution; here to sort out complaints about the companies which have joined us. We are funded by those whose complaints we handle through a combination of subscription and case fees.”

Whilst better than nothing, as is the case with the currently unaccredited Consumer Code for Home Builders Adjudication Scheme, these “Ombudsmen” are not always promoted by the companies or organisations that join. It is also open to question whether any ombudsman service, voluntarily funded by the member companies and/or their trade organisations, specifically to operate a dispute resolution service, can ever be fully impartial.

As the Consumer Code for Home Builders state in their FAQ: “Home Builders benefit from having self regulation rather than Government imposed regulation and a levy to pay for it. There will be a speedy, low-cost resolution of disputes which might otherwise result in expensive litigation.”

Well self-regulation hasn’t and isn’t working. But for the New Homes Ombudsman to be effective, it must be fully independent and government appointed, not a sub-contracted dispute resolution service company either set up or chosen by house builders, to protect their own interests.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Preliminary announcement of findings and recommendations of the APPG Inquiry into the Quality of New Build Housing in England

The waiting is nearly over.   Its official!  The New Home Ombudsman is coming! A culmination of two years’ campaigning and ten years dedicated work highlighting the plight of UK new homebuyers.

I spoke. They listened!

The APPG Inquiry report is being finalised and is due for publication in “at the beginning of June 2016.”

APPG Announcment 1On Tuesday 17 May 2016, chair Oliver Colvile MP made a speech at the JCT Parliamentary Reception highlighting the findings and the main recommendations.

He said that he, and “many of his Parliamentary colleagues across the country have had new homebuyers coming to their MP’s surgeries to complain about the way their new home was built.”

Although the report hasn’t been finalised, I can confirm that the Inquiry Committee has agreed on a number of recommendations and I would like to share a few of those with you”

  1. A New Homes Ombudsman should be set up. This would mediate disputes between consumers and their builders or warranty providers to offer a quick resolution procedure.
  2. Standardised house building sales contracts should be enforced, meaning uncertainty surrounding bespoke builders’ contracts would be removed.
  3. There should be a mandatory right for buyers to inspect and, should they wish, carry out a full survey prior to financial completion. More details of this particular point will be announced in the final report.
  4. To improve transparency, builders should be required to provide homebuyers with a comprehensive information pack. This would include plain English explanations so that homebuyers can understand exactly what they are buying.”

Mr Colvile said that he “believes at the very least, these four recommendations will go a long way to creating better homes for buyers, improving trust in the house-buying system and driving up standards across the sector.”

I whole heartedly agree! I am personally delighted, having made a presentation at one of this APPG Inquiry sessions, that all four of these specific recommendations come as a direct result of the presentations made during the second session I attended. Indeed, I have personally and unstintingly campaigned for nearly two years  for the introduction of a New Homes Ombudsman and I also proposed to the committee that buyers should have a mandatory right to either inspect their home, or have a professional snagging inspector do so, before they legally complete.

 

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Reasons why new homebuyers should never use the house builder’s choice of solicitor

It can be tempting to use the solicitor that the house builder’s helpful, friendly sales advisor suggests. Buyers could be moving to a new area or they may never have needed a solicitor before. Whilst it is not generally a good idea to choose a conveyancing solicitor on the basis of cost, it is essential that all new homebuyers choose solicitors that are completely independent of the house builder, one that will act solely in the buyer’s best interests.

It is a good idea for new homebuyers to ask for the house builders’ list of “preferred” solicitors. They can then be certain not to choose one of those firms and know that the solicitor they do use definitely does not have any conflict of interests. I frequently come across new homebuyers who have problems that occur or are made worse, not least because they have been coerced or financially incentivised into using the house builder’s choice, suggested, preferred or “nominated” solicitor.

House builders cannot force a new homebuyer to use a particular solicitor. Doing so is against the law and the Consumer Code requirement. 2.5.

But that doesn’t stop builder’s pushing their own solicitors. It is often suggested to buyers that “it makes things easier and quicker” or that a particular firm has already carried out searches for the plots on the development, making delays less likely when trying to meet a house builder’s 28-day ‘exchange of contracts’ deadline. It is even common practice for house builders offer free extras and cash-back incentives. Recently an Avant buyer told me he was offered £1,500 on condition he used Avant’s choice of solicitor. Some builders have been known to withdraw a part-exchange deal if their pet solicitor is not used.

So why do house builders do this? What do they gain?

More importantly why specifically, this is bad from the buyer’s perspective, apart that is from the obvious conflict of interest – something that the law society should be clamping down on!

Property ownership and boundary disputes

title planIt is not uncommon for house builders to make a mistake during land registration. This often results in a dispute with a homebuyer about a boundary position, rights of way, rights of access, land ownership or parking spaces. If the buyer has appointed the builder’s preferred solicitor, it will not be possible for him to act for the buyer in any dispute as it is likely he will have made a mistake with either the land registration, ignored a builder’s error, or perhaps failed to see it at all.

House builders’ covenants

imagesCAWUV27M Most house builders add restrictive covenants in the Title Deeds of the homes they sell. These usually only last for a Restriction Period of say four or five years from the start of the development. Examples include restrictions on parking of commercial vehicles, caravans and boats, repainting front doors a different colour and a requirement for new homeowners to obtain the house builder’s consent for any alteration or extension such as a conservatory. This is quite reasonable as an early buyer could build an extension which detracts from the development and could potentially, put off prospective buyers of the remaining homes. Most builders stipulate an administration charge for their approval!

Any solicitor on the house builder’s preferred list will be less inclined to challenge any of the more unusual or unfair covenants whereas an non-conflicted solicitor selected by homebuyer, will go through every clause in the contract and will be happy to answer any question his client asks and will protect his client’s interests, discussing implications with buyers of specific covenants in title deeds such as charges for private roads, street lighting and details and implications of easements for servicers and electricity sub stations etc

Conflicts of interest

It is inconceivable that any builder-promoted firm of solicitors would not have a conflict of interests. A spokesman for the Law Society told me:

“We believe that it is right that consumers should be free to choose their own solicitors in all transactions and that there are dangers of a conflict of interest where the same solicitor is acting for both sides in a transaction…..There are rules relating to conflict of interest are contained in the Solicitors Regulation Authority (SRA) Handbook”

Contractual inaccuracies, errors and misinformation

scales-of-justicesIf complaints made to the Consumer Code for Home Builders Adjudication Scheme are anything to go by, house builders’ sales staff often mislead and misinform new homebuyers. Changes to the length of leases, discrepancies and omissions with management changes, ownership or adoption of estate roads and public open spaces and their maintenance; alterations to agreed specifications; landscaping and charges for optional extras all have the potential for a legal dispute. Often these are clarified at exchange of contracts but the information is not then passed on to buyers by a builder suggested solicitor.

Inability to change the house builder’s Standard Terms of Contract

House builders like buyers to use their own choice of solicitor as they can be fairly certain that those solicitors will not try to renegotiate or change the standard terms in their contracts, which are inherently imbalanced in favour of the house builder. These would and should ordinarily be renegotiated by a fully-independent buyer’s solicitor to include:- access to the property before legal completion for buyer’s (or their agent’s) inspection; clause stipulating postponement should the property be incomplete or snags not rectified on handover day; a negotiated retention to protect the homebuyer and incentivise early rectification of any snagging and defects that occur.

Forced Legal Completion on unfinished new home

With house builders keen to include as many legal completions for their financial year-end, buyers can be incorrectly advised, forced or even pressured by builder suggested solicitors, into legally completing on a new home that is not 100% fully finished. It has been known that buyers are told the completion certificate and warranty documents have been received by their (“builder-preferred”) solicitors when they may have not even been issued, often due to unresolved compliance and warranty problems with the home. In some cases buyers have even moved into their new homes without mains water or electricity.

Post-completion legal action

If it becomes necessary, in the absence of any government appointed Ombudsman, that new home buyers can go to, new homebuyers may need to start legal proceedings against their house builder, either to recover the cost of remedial works to their home or claim justifiable compensation for loss of earnings, distress and inconvenience. Those who used the house builders suggested solicitor may soon discover that they are unable or unwilling to take legal action against the house builder often (then) citing the conflict of interest.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Persimmon counter claim against their buyer for £8,000 for the cost of repairing his house!

Persimmon issue counter claim to recover cost of repairing new house in Sunderland.

Persimmon Homes, rated just three stars by their own customers in the industry’s  “satisfaction survey,” appear go out of their way to be confrontational and intransigent to any customers who take issue with the builder. The phrase “the Customer is always right” isnt even on their radar if this story from the North East Evening Chronicle is anything to go by.

Vince Wareham Persimmon Render Photo

An unhappy Vince Wareham outside his Persimmon new home at Alexander Park in Sunderland.

New homebuyer Vince Wareham told the Chronicle about his shock when he learned Persimmon were taking legal action against him in an £8,000 counter claim, after he decided to take the house builder to court, claiming £2,950 in compensation for remedial works carried out on his new home.

This is apparently a culmination of a long running dispute regarding poor quality render at the property in Alexander Park, Sunderland. The dispute centred on whether the render should (or could) be repaired (Persimmon’s view) or taken off and completely replaced as owner Mr Wareham insisted. Last year the Chronicle reported that Persimmon had “finally agreed to replace the render after Vince refused to back down”

This latest escalation, came after Mr Wareham issued County Court proceedings against Persimmon for inconvenience, distress and his out of pocket expenses dealing with the complaint.

In response, Persimmon are counter claiming £8,000, the difference in cost between simply repairing the render and the total replacement. As far as Vince is concerned, this part of the dispute had already been resolved. He told the paper: “I can’t believe they have brought up that issue when I thought it had been resolved last year.”

Last year Persimmon told the Chronicle:

“We reviewed the homeowner’s issue. Despite having been advised by the original contractor that the render could be repaired, we decided to undergo a full re-render of the property. We also decided to use an independent contractor to undertake the works and have since placed the order with them.

The decision was taken without further complaint having been received by Mr Wareham as we thought there could be no ambiguity regarding the quality of finish and application of the render by taking this action.

Mr Wareham was advised by our Contracts Manager and our intent and was happy for us to proceed. We anticipate the works to be completed in the next few weeks.”

Mr Wareham was happy with the decision and, as promised, the rendering was replaced in full.

In court documents Persimmon legal representatives stated:

“The defendant [Persimmon] has gone above and beyond what was reasonably or legally required of it as a gesture of goodwill and to prevent any disputes.

The cost of the render repairs which were necessary would have been in the region of £2,000. The entire re-render cost the defendant approximately £10,000.

The defendant is entitled to, and does, set off the sum of fully re-rendering the property against the claimant’s claim.”

Vince, however, is furious that an aspect of the case he thought had been settled has been brought back into play.

A spokesman for Persimmon told the Chronicle:

“We are somewhat surprised that Mr Wareham has decided to take this course of action given our resolution of his issues. We have attended his primary complaint with a full re–render application to the property.

We undertook these full and extensive works despite independent survey advice to the contrary whereby a ‘patch’ only application was recommended.

Therefore we are extremely disappointed to learn that despite going way beyond our contractual obligations between Mr Wareham and ourselves and despite initial feedback that he was happy with the final outcome he has chosen to take the matter in this direction.”

Reading what Mr Wareham said in comment to the story online (below) it would appear that Persimmon are more concerned about cost than customer satisfaction. It should also be noted that the “extensive works” referred to would not have been necessary had Persimmon originally done a better job of the render. Persimmon CEO Jeff Fairburn, stated in the firm’s 2015 Annual Report: “The Group’s priority is to serve our customers well by providing good quality new homes and great service. All of our team are responsible for delivering high levels of customer satisfaction….”

Clearly his message is not getting through to his employees! Remedial work is not a goodwill gesture. Neither is carrying out a full rectification “to prevent any disputes,” rather than Persimmon’s preferred and proposed patch-up job. In my opinion, it is also questionable how re rendering the top half of a modest family home could cost as much as £10,000.

Vince Wareham Persimmon Render Comments

 

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Why are private roads so common on new housing developments?

“The council do not adopt new housing estates anymore”

Private roads (as defined by Sections 203 to 237 (Part XI) of the Highways Act 1980) are a highway not maintainable at public expense. The local highway authority is therefore under no obligation to pay for its maintenance. Responsibility for the cost of maintaining a private road rests with the frontages – the owners of properties with frontages on such roads.

Flooded road at Bovis

Bovis development – Homes finished but not the road!

It is now becoming increasingly common on new housing developments that roads and other public areas are not being taken over and adopted by Local Authorities. With the roads and landscaping areas remaining private ownership, all new-build homebuyers on these developments are legally responsible for their maintenance, repair and insurance, paid for via years of ongoing, potentially ever increasing, annual management charges.

Plot layout cut

Be sure the roads are being adopted by the Local Authority.

Apart from the obvious and unavoidable extra cost to those buying on these developments, there are many other disadvantages for new homebuyers on developments where roads and public open spaces are not being adopted by the Local Authority.

Disadvantages include:
  • Cost. New developments have an ongoing management charge that covers communal areas on a the development which include unadopted roads, street lighting, signage, third party insurance, children’s play areas and landscaping. The ongoing annual charges will mean lower selling prices and will probably put off many buyers when it is time to sell.
  • Maintenance costs for shared driveways may not be included in the overall management charges.
  • The duty to maintain un-adopted estate roads and any sewer drainage under them, falls to all the owners of property on the development or depending on how and when it was set up, those fronting that part of the road. This can cause problems when residents of a private street disagree on the cost, timing and expense of maintenance.
  • Homeowners could get stung for the costs of clearing up contaminated land if the home was built on a brownfield site and potentially, getting rid of Japanese Knotweed on communal areas.
  • If repairs are not made, private roads can fall into serious disrepair, causing other problems such as flooding.
  • Owners of properties on non adopted estates will still be required to pay full council tax.
  • Local authorities have discretionary powers to improve the standard of any privately-owned street at any time and to contribute to the cost, but most would choose not to exercise these powers.
  • The Local Authority will probably not: grit the roads in icy conditions or clear heavy snowfall; carry out road sweeping or drain gully clearance.
  • Refuse collections may not even enter the private road. The road may be too narrow for the refuse wagon. Residents would then be required to wheel their bins to the nearest adopted main road.

Any advantages would depend on the area and the particular development. It might be argued, that there may be less traffic, better security and greater control over the surroundings and better community spirit.

So why have the house builders started doing this?

I asked both Barratt and Persimmon why they are increasingly using the private management option in apparent preference to local Authority adoption under a Section 38 Agreement for estate roads on their developments? Neither has replied and no replies are anticipated!

So what could be the reason for roads not being adopted?

I considered whether Local Authorities had chosen to refuse at the planning stage, to adopt estate roads under a section 38 agreement, presumably to avoid future maintenance costs to the council taxpayer. But it would appear that some developments, even with the same builder, have Section 38 Agreements in place on one site and another two miles away is to have privately-owned estate roads. So the decision is being made solely by the house builders. I don’t believe, as some new homebuyers do, it is another ruse to fleece even more money from buyers. The sums involved, typically £200 to £300 a year per home, are relatively trivial compared to house builders’ main business operations.

Their decision could be one of expediency. It can take time before work can start on site, to get all the legalities of the Section 38 Agreement signed-off and fees paid. Without this, work to construct adoptable site roads cannot be commenced, delaying virtually all other the work on site.

Road not finished after two and a half years (Persimmon)

Persimmon development road and footpath not surfaced after 30 months.

Every Section 38 Agreement also requires the house builder to provide a Bond. This is a sum of money, held in the form of a Bond, often provided by the NHBC, to pay for any works required should the builder fail in his obligations to build the roads to the Local Authority specifications and standards. House builders are often slow to complete the adoptable areas, arrange inspections and complete remedial works. This results in bonds being held for longer. When builders reach their bond limit, no new bonds are available and the only option is privately roads.

The use of non-adopted roads often results in narrower roads, narrower pavements, smaller parking spaces and reduced, low specification street lighting, making it possible to cram in even more new homes. Private roads can also be constructed to a lower specification which could substantially reduce construction costs. It will matter nothing if the road collapses after a few years as buyers will be paying for the repairs!

One of the most important questions to ask the sales advisor at the outset is whether the roads will be adopted by the local authority under a Section 38 Agreement on completion of the development. If the answer is no, then buyers should walk away. Private roads and ongoing management charges are something that new homebuyers can well do without and avoid can altogether.

Management fee breakdown on new estate.Private roads and landscaping charges are a common complaint I see. Many buyers tell me that they were never informed that the development roads were not going to be adopted by the Local Authority. Some buyers are never shown the management costs at the time of reservation by sales or later by their solicitor, especially when buyers have been persuaded or incentivised to use the house builder’s suggested choice of solicitor.

Some residents are so fed up with management charges for private roads they have no control over,  have set up an action group Homeowners Rights Network

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter