Persimmon Homes Employee Reveals All In Secret Recording Of Meeting

Persimmon Contracts Manager’s site meeting rant.

Secret recordingA few weeks ago I was given part of a secretly recorded site meeting. In the recording, which I am of the opinion is genuine, a Persimmon contracts manager expresses his opinions.  The priorities of Persimmon Homes – would appear to be, build as many new homes, as quickly as possible. Or in his own words let’s make as much f***ing money as we can; let’s slash out as many f***ing units as we can because the market allows us.”  

This is part of a two-hour recording, made in November 2015 during a Persimmon Homes South Coast Region sub contractor’s site meeting. It was sent to me by one of the sub contractors, also told me:

“These are the most damning statements any contracts manager could possibly say about their company, seriously damning words about potential purchasers of their houses. Existing dwellings that have no building standard fire protections. Fact and it’s all RECORDED, all two hours 27 minutes of it! Buildings are sub-standard and some are dangerous. The NHBC are to blame as well as they passed 99.9% of work that inspectors shouldn’t have. 40 % of the plots have no secondary DPC tray system which in turn will mean the sole/base plates supporting the timber frame houses will ROT very quickly.” 

I don’t know what is more shocking, that any housebuilder would appoint this individual a contracts manager; or that having done so, anyone in that position would express such personal opinions in public meeting. This does indicate that if this is typical of the calibre of person Persimmon employs to oversee their site managers, then it is hardly surprising the company has never been rated a five star housebuilder by its customers!  Download to hear it for yourself  – but be aware there is a lot of foul language!

“Award-winning” ex-site manager from Barratt?

“I had 14 years at Barratts. I worked for BDW Southampton and I won, er Christ, seven Pride in the Job Awards…… site manager of the year for the division three times, regional three times, national runner-up twice.”

Comment from the room: “they have good agents at Barratts”

“They have their moments, they have their moments. They’re a lot better than they were. I had a conversation with a guy the other day that we were hoping would come and join us [Persimmon] and I’ve said to him, we are where Barratts were about ten years ago.”  

Persimmon homes flag“If your interested, the reason why it is like it is at the moment, when I first came onto Persimmons I came over to the top and at that time, they wanted to be a five star builder and it took us about 18 months and we got up to five star builder status and it was really, really good [note: Persimmon have never been a 5 star rated housebuilder] and we were doing 350 to 400 a year. “ 

“They then had a change of senior, senior management, Mike Farley was the chairman at that time [he means CEO!) and he wanted to be a five star builder. He then got to five star builder and he then retired, and Jeff Fairburn came in. The story’s common f***ing knowledge Jeff Fairburn, Nigel Greenway, and there’s one other, there’s four altogether, they’re on a one hundred million pound bonus on 2021, if by 2021, they can pay out £21 in share dividends in total by that time. [Persimmon director’s LTIP bonus is actually conditional on returning capital, 900p per share, to shareholders by 2021!] the emphasis has gone to let’s make as much f***ing money as we can; let’s slash out as many f***ing units as we can because the market allows us.”  

“They are ahead of schedule, the way they are going at the moment they will actually pay out in 2018. So in 2018, you know we’re all in here now, we’re all blokes, we’re no different to them, if someone came along and said you’d got thirty million, you’d got thirty million, you’d got twenty million, you’d got twenty million, are we gonna carry on working? No we’re not. So then they’re go, so then you’ll get new people coming in, who will then have a different agenda again.” 

“How sh*t Persimmons are..”

“Because obviously… what makes me laugh is we’ve been on the telly; how sh*t Persimmons are across the country. We’ve been on the telly; how sh*t Charles Church are. All over the f***ing place, Dispatches, BBC One, you name it they’ve been on it, over the last 8, 9, 10 months how crap they are. You go on the internet, and you’ve got all these f***ing websites: don’t buy a Persimmon home, don’t buy a Charles Church home they’re sh*t, blah blah blah blah blah right? Yet you will still get people paying two hundred, in excess of half a million pounds in some cases, for a house and they won’t even go and look at it, until the day they’re due to complete, until they’ve paid for the f***ing thing.” [Note: most housebuilders actually refuse access so buyers or their snagging inspectors cannot check the property!] 

“Mugs” only buy Persimmon “because we are cheap”

“So who is the f***ing mug?  Because if I was parting with half a million quid, I’d like to go and see it before I parted with it. But you still get people today and you look and them and think, you’ve seen how shit we are on the telly, you’ve seen how shit we are on the internet, people saying don’t buy from us and you still do! And the reason why they do is because we are cheap. We are, not Waitrose, we are not even Tescos, we are the Lidls and Aldis of the construction industry. As we all know the Lidls and Aldis of the f***ing supermarket world are getting bigger and bigger and bigger. That’s what the public want. Now unfortunately, the knock-on side from our point of view is we get shit, f***ing surveys in the office and get moaned about a hell of a f***ing lot.” 

Comment from the room: “So what star builder are we at the moment?”

“We’re just about scratching on a one. This year were doing 350, this year we’re doing 800- right, in two years right. Next year…..”

Whilst it is clear he doesn’t really know much of what he is talking about it is nevertheless quite revealing. I hope to be able to provide the full length of this secret recording in due course, once I have transcribed the main highlights. Watch this space!

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A million new homes by 2020?

Who is the government  kidding?

On 21 September 2015, the then housing minister Brandon Lewis, stated on behalf of the government on BBC that it intends to build “a million new homes by 2020”. ie by the end of this parliament. A million new homes in a shade less than 5 years, around 200,000 a year. Big statement, big promise. Everyone will remember George Osborne’s “we are the builders” being seen wherever he could, wearing a hard hat and a hi-vis jacket.  So how is this going?Building a million new homes by 2020Well, recently released figures from the Department of Local Government and Communities (DCLG) show that just 139,030 new homes were built in the year to 30 June 2016. Whilst up 6% on the previous 12 months (131,500) and 29% higher than the low recorded to March 2013 (107,820), this latest total is still 18% below the peak in the quarter to March 2007 (168,640).

Since the pledge to build one million new homes by 2020 was made, in the 9 months to 30 June 2016 just 104,140 new homes have been completed. So to be on course, another 95,860 new homes will need to be finished by the end of September 2016! Clearly it isn’t going to happen.

Million new homes by 2020? More “needs to be done”

Even the DCLG Communities Secretary Sajid Javid admitted that more needs to be done:

“We’ve got the country building again with more new homes started and built than this time last year. This is real progress but there is much more to do. That’s why we are going further and increasing our investment in house building to ensure many more people can benefit.”

But homes being started isn’t the same as homes being completed. The “started” quarterly figures will always be higher as builders seek to protect planning permissions etc. as is demonstrated by the recently released figures from the DCLG which stated 144,280 new homes were ‘started’ in the year to 30 June 2016.DCLG Number of homes started and completedThe National Housing Federation said that between 2011 and 2014 only 457,490 new homes were built, but according to its own figures, Britain needed to build 515,510 more new homes during this four year period – a total of 974,000 or 243,500 new homes each year.

These latest figures only serve to demonstrate the industry’s continuing failure to deliver the homes that British people need. Current figures are way short of the  200,000 a year target and as long as housebuilders are allowed to hoard land in  landbanks and build at a rate that maximises profits, Britain’s housing crisis will continue. The plc housebuilders will never build enough new homes. Unless the government wakes up and begins a major council house building programme with new homes built by building contractors rather than relying on the plc housebuilders to build sufficient ‘un-affordable’ housing.

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The new NHBC ‘Register of Site Managers’.

The NHBC launched its Register of Site Managers earlier this year. Their press release on 9 March 2016 said:

“Recognising the key role that site managers play in delivering high quality new homes, NHBC has developed a dedicated online resource to support them and assist in their development. With over 1,200 users in the first weeks, NHBC OnSite is an online resource providing site managers with access to a host of technical resources and career support and in addition, allows them to build their personal profile.”

It should be noted that the early take up could have been due to the free prize draw (an iPad Air 2, 16GB) for site managers signing up to NHBC OnSite before 30 April 2015.

Creating a Profile:

In this section a site manager can choose to add quite a bit of personal information, there is even a 2000 word “About me” box! There is an option to hide anything, other than their name, crucially; all information entered will be viewable by NHBC. The information not hidden in the Profile will be visible on their public profile if shared via the “share profile” option.

Under the ‘Professional’ heading, site managers can add career information such as the number of years employed as a site manager, type of projects worked on, current and previous employers, Pride in the Job awards won, professional and academic qualifications and even their CSCS number!

There is even a Social Media heading where LinkedIn, Twitter, YouTube and Google+ URLs can be entered – but interestingly, not for Facebook. Quite why anyone would want their employer/future employer and the NHBC to have access to these is beyond me.

Technical Assessment:

Site Managers who decide to register can choose to complete an online questionnaire for a technical assessment to “assess their own skills and knowledge”. This could help the NHBC determine how much of a claim risk individual site managers may pose. The NHBC also suggest ticking the box confirming acceptance of results being shared with your employer, to “help them understand which areas might benefit from additional focus/training.” NHBC Technical AssessmentBut as this is an “open book” assessment, meaning the NHBC actually recommend that a copy of the current NHBC Standards is available so correct answers can be looked up, the assessment results are meaningless. The technical assessment comprises of 30 questions to be answered within 45 minutes. Once completed, site managers can see their overall score and a breakdown against subject areas to “identify any particular strengths or areas for focus”. Those with a ‘pass’ mark of 80% or more, can download and print a certificate! The results will also be added to the site manager’s NHBC OnSite profile.

Easy access to Regulations and Standards

Registered site managers can view the Building Regulations and NHBC Standards Plus 2016. Including NHBC guidance notes, videos, 3D models and other supplementary material for each section. The NHBC have also developed two apps for tablets and mobiles, the NHBC 3D Viewer for Standards 2016 app and the NHBC Foundation Depth Calculator App.

NHBC at the APPG Inquiry

In their presentation to the APPG Inquiry Into the Quality of New Homes in England on 7th December 2015, the NHBC stated their intention to set up a ‘Register of Site Managers’ stating:

“Recognising the pivotal role that site managers play in delivering high quality new homes, and the fact that their development is a key factor in the on-going success of the industry, a new Register of Site Managers will be a confidential online register aimed at capturing key information that reflects site manager experience, qualifications and capability in relation to construction quality.

The registers key objectives include:

  • Incentivising and facilitating site manager development and consequential impact on construction quality
  • Creating a more effective communications channel
  • Providing site managers with access to a resource of useful information and initiatives
  • Providing site managers with an opportunity to differentiate themselves via key attributes
  • Providing a referral point as part of the recruitment process via a time limited unique identifier”
The website tells site managers:

“NHBC is here to support you. NHBC OnSite is your free, dedicated resource for technical and career support. Use it to access technical guidance on NHBC Standards and Building Control as well as our latest standards-raising training courses and seminars. You can also build your own profile, highlighting your key career achievements to date, which you’ll be able to share with others if you wish to demonstrate technical expertise.”

NHBC OnSite is free to access and contains:
  • help to interpret and implement NHBC Standards and Building Regulations through NHBC Standards Plus and NHBC Building Regulations Plus
  • access to technical support from our in-house experts
  • links to the latest and previous editions of Technical Extra
  • regular industry news and updates specifically relevant to site managers
  • details of our latest training events, including priority invitations to free training aimed at site managers.

The website states that: “Details of site managers benefiting from NHBC OnSite will not be published and will not be freely available.”

So I asked the NHBC to clarify the following:

Whilst the register is not going to be made “freely available” can you clarify what extent the site managers’ details will be available, other than if they choose to share their own profiles for a limited time?

Whether the NHBC site managers register will be made available (or is planned to be made available) to all (or any particular) NHBC registered housebuilders, either as part of their membership or for an additional fee.

The NHBC states: online register aimed at capturing key information that reflects site manager experience, qualifications and capability in relation to construction quality. Providing a referral point as part of the recruitment process via a time limited unique identifier”
What exactly does the NHBC plan to do with this information?

In reply, an NHBC spokesperson told me:

“The purpose of NHBC OnSite is to provide site managers with easily accessible, extensive technical resources in one place. Site managers signed up to the portal will be able to create their own individual profiles and will have the ability to share these with one another using a sharing link. Currently, NHBC is not planning to make the list of site managers registered to OnSite freely available.” 

NHBC OnSite DashboardSo it is only “currently not planning to make the register freely available” but that should be interpreted as “likely at a future date.” Clearly the NHBC are stockpiling an extensive database of detailed information about individual site managers and appear to be apparently free to choose how they decide to use it. I am concerned that such a register may be used as an unofficial industry blacklist or by omission, site managers may be blacklisted by employers for not being on the register. In my opinion, I believe this represents a potentially huge data protection and privacy issue for the NHBC with implications for those site managers who voluntarily choose to register for what appears to be very little benefit for them. Whether site managers who register could potentially increase their likelihood of winning an NHBC Pride in the Job Award remains to be seen.

Certainly, large plc housebuilders’ (the NHBC’s paymasters) could potentially use the register as part of their recruitment process (“only site managers on the NHBC Register will be considered”) or offers of employment will be conditional on the site manager registering on the NHBC ONSite. Perhaps registration will become “company policy” for the large plc housebuilders.

It is possible to register using a false name with a Gmail e mail address and I would suggest that those site managers wishing to access the dashboard do so anonymously and untraceably.

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Defective Taylor Wimpey new home causes injury to 10-year-old girl

Enough is enough! What will it take before government finally acts, not only to end the misery faced by the majority of people that buy new homes, but also to drastically reduce the likelihood of another death caused by a defect in a new home? Last week a defect in a Taylor Wimpey new home injures a 10 year old girl.

Oliver Colvile MP

Time for action? APPG Chair Oliver Colvile MP

Since the APPG Inquiry published its Report  ‘Into the Quality of New Homes’  three weeks ago, there has been zero coverage of its recommendations in national media. On a personal level, I have written to every single one of the 650 MPs asking for their support and to lobby the DCLG for the introduction of a New Homes Ombudsman. Just one MP has replied so far. Is anyone prepared to do anything before someone else is killed in a defective new home?

On 15th October 2005, a four-year-old boy died from chest injuries after a 50kg (110lb) stone mantelpiece over a fireplace fell on top of him at his Persimmon-built family home in Coulthard Close, Towcester.

In February 2008, Elouise Littlewood was 26 when she died in the flat she owned with Notting Hill Housing Trust built by Barratt Homes at their Bedfont Lakes complex in Hounslow. A post-mortem carried out on the body found the concentration of carbon monoxide in her blood was 77 per cent. Her lodger, Simon Kilby, was left with permanent brain damage after he was discovered unconscious on the sofa.

Only this morning I learned that on 28 July 2016, a radiator had detached from a wall and had fallen on 10 year-old Gemma Fever in the kitchen of the family’s Taylor Wimpey new home at their Rackenford Meadows development in Tiverton, Devon.

Her mother Kate writes about the incident in her family blog

“We moved into our brand new Taylor Wimpey home on 18th December 2015. There were some pretty big issues after completion, resulting in 12-weeks worth of garden work, as well as all the downstairs flooring being having to be replaced, but over the last few weeks we really started to feel like we were settling in and that the house was just as we wanted it – clean, warm and safe.

Radiator falls off wall Then on 28th July 2016, after eating our evening meal, Gemma walked across the kitchen to put her plate in the dishwasher. As she did so, the huge, heavy double radiator on the kitchen wall fell onto her leg. The whole thing simply came straight off the wall, pulling all the fixings and brackets off with it. Unfortunately, my 10 year-old daughter’s ankle took the weight of it. Within seconds, blood was seeping through her socks, and on closer inspection, we discovered a large, deep cut which I knew would require some glue or sutures.

I rushed her straight off to the local emergency department, and we were seen very quickly. The wound was cleaned, glued and secured with steri strips and a bandage. It was obviously painful, and Gemma couldn’t hold back the tears. They suspected a ruptured Achilles tendon, and Gemma was taken to the plaster room to be put into a cast.Radiator falls on 10 year old girl 2The full extent of the injuries are not known yet – she may need an operation, she may need physio, and she is likely to need several weeks in a cast. The long term effects are yet to be seen. My poor girl has had her summer holidays ruined by something that should never, ever have happened.”

Raditor falls fixingThe on-call emergency plumber found that the large double radiator had been fixed to an exterior drylined wall with small, inadequate plasterboard fixings. Mrs Fever reported the incident to Taylor Wimpey, who sent a customer care manager to see them the following day. On arrival, they looked at the radiator and agreed to check all other radiators in the property at the family’s request.

Taylor Wimpey Support told Kate:

“We are very sorry that this has happened to your daughter and your family. The safety of our customers is of the highest importance to us and we want to reassure you we are treating this accident with the utmost seriousness. Pete and Nigel, our CEO and Divisional Chairman Central & South West, both replied to your email yesterday and Nigel called you on your mobile today and has left a voice message. Please do get back in touch asap with the best number for you so we can help.”

Later, a Taylor Wimpey spokesperson said:

“We would like to apologise to the Fever family for the distress caused by this incident and provide assurance that the health and safety of our customers and their families is our number one priority. Following a prompt and thorough investigation, the radiator has been repaired and all other radiators in the Fever family home have been checked. We are looking into the causes of this incident and any actions that can be taken to ensure it does not happen again.”

Kate Says:

 “Your home is your secure place, somewhere you can relax and enjoy as a family, knowing your children are safe. Right? But that wasn’t the experience we got when we bought a Taylor Wimpey home.”

“Taylor Wimpey have admitted the fault “in fact”. They have already tried to blame the contractor, saying he no longer works for them. But, I have contacted a solicitor today he has confirmed Taylor Wimpey are legally responsible.”

Taylor Wimpey is responsible. Their contractors are deemed ‘competent’, on behalf of Taylor Wimpey to carry out the works contracted. Taylor Wimpey are therefore in law, ultimately legally responsible and it is for them to properly manage their contractors and carry out adequate supervision and inspection to ensure the standard of all contracted work by third parties follows their specifications, designs and instructions.

What is almost certain is that all of the 30 plus homes already built so far on this 255 house development will have been fitted in exactly the same way. Indeed Mrs Fever confirmed today, five days after the kitchen radiator fell on her daughter, that Taylor Wimpey’s plumber has found that all the radiators in her home except two, had been fitted using the same inadequate fixings! The plumbers also confirmed they have been told [by Taylor Wimpey] they may need to check radiators fitted in other homes.  Only “may need to check them”?

Pete Redfern

Passing the buck? CEO Pete Redfern

Kate Fever sent an e mail to Taylor Wimpey CEO Peter Redfern providing a link to her blog article about this incident and her daughter’s injuries. It has been referred ‘down the line’ to Nigel Holland, Divisional Chairman for Central and South West. So it would appear CEO Peter Redfern, doesn’t think he should get personally involved when a potentially lethal defect in one of his company’s new homes injures a child? Shame on you!

Radiator fell off at Taylor Wimpey brochure at Tiverton

But keep away from the radiators!

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APPG Inquiry – ten recommendations to improve the quality of new homes

The All Party Parliamentary Group Inquiry Into the Quality of New Homes In England has made ten recommendations and says house builders should be “upping their game and putting consumers at the heart of the business model. Alongside this, Government should use its influence to promote quality at every opportunity.” The cross party committee of MPs and construction experts called on the Government [DCLG] to set up a New Homes Ombudsman to mediate in disputes between homebuyers and housebuilders. This is the number one “key recommendation” of 10 recommendations setting out measures to improve the quality of workmanship in new homes and provide consumers with easier and cheaper forms of redress, to get defects and problems fixed. 

APPG Inquiry Report Recommendations:

Recommendation 1: DCLG should initiate steps to set up a New Homes Ombudsman.

APPG Inquiry Report Recommendations“The role would include mediating disputes between consumers and their builders or warranty providers to offer a quick resolution procedure paid for by a housebuilders’ levy. We see this is as the key recommendation to provide more effective consumer redress, if things go wrong, and a good way of applying pressure on housebuilders and warranty providers to deliver a better quality service. Our view is that the new service should be funded by a levy on the sector, but it would need to be completely independent and replace the dispute resolution service offered as part of the Consumer Code for Home Builders. Our recommendation picks up on one made by the Office of Fair Trading, in its 2008 market study into the house building industry, which suggested that, if the industry failed to make satisfactory progress, it would recommend further intervention in the form of a statutory redress mechanism for new homebuyers funded by a levy on the industry.  

Although funded by the construction industry [housebuilders] it should be a public body not under the industry’s control. It should provide a cheap, quick and effective system of redress and have power to enforce standards and award compensation. 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 service.” 

This echoes the findings of the 2008 OFT Market Study into Homebuilding stated (page 165):

“7.12 there is no scheme which directly and comprehensively covers failings by the homebuilder – in the event that the industry fails in its efforts to bring about change, we recommend the introduction of such a scheme.  

7.13 If we reach the point where it is necessary to recommend that a statutory redress scheme is introduced this will, unfortunately, mean that the industry scheme has been unsuccessful. If this were to happen, we would recommend a single statutory scheme to which all homebuilders are obliged to belong, set up independently of the industry, and funded by a levy on the industry. 

7.14 The central objective of the recommendation is that the introduction of a mechanism, via which homebuyers have a means of redress directly against the homebuilder, should be a force for change in the industry. This means that the scheme should have real weight and the ability to award redress and compensation for any failings in the sales process, shortcomings in contracts, delays or faults.”  

I have been campaigning for a New Homes Ombudsman for over two years. Anyone reading the APPG Report can be left in no doubt whatsoever that, 8 years on from the OFT Market Study Report, the industry has indeed failed in every respect and it is time to set up a wholly independent, government-appointed New Homes Ombudsman, funded by a housebuilding levy to replace the industry’s inadequate, wholly unsatisfactory and failing Consumer Code for Home Builders Dispute Resolution Scheme which adjudicated just 170 cases between April 2010 and 1 July 2016, 80 of which being made in the last 18 months. The maximum claim is £15,000 and compensation for “inconvenience” is limited to just £250. There have been no CCHB Annual Reports since April 2014 which is suspicious. A month ago, a spokesperson for the Code said: Our most recent Annual report is currently in production and will cover the two years 2014-15 and 2015-16, enabling the major consultation and review of the Code that took place during this period, to be incorporated in the report. Once completed, the report will be available for download from our website.”

A New Homes Ombudsman must be set up now:


Recommendation 2: Housebuilding sales contracts should be standardised.

“This would remove much of the uncertainty that presently arises from the bespoke nature of each builder’s sales contract, which can deter so many from pursuing claims. The Law Society’s Standard Conditions of Sale work well for normal conveyancing transactions and there is no reason why a similar approach should not work for new homes. We would expect the contract to set out how defects are handled, including provision for dealing with disputes before referral to an ombudsman.”

Housebuilders have their own form of sale contracts, often with specific terms that are invariably designed to suit the best interests of the housebuilder. It is often difficult, if not impossible for new homebuyers, even with legal representation, to change or renegotiate most of the terms. Standardised contracts, with specific reference the procedure for dealing with defects and disputes would make to process clearer and fairer for consumers.

Recommendation 3: Buyers should have the right to inspect properties before completion

“There should be a mandatory right (which could be introduced by the inclusion of suitable provisions in the standard form contract) for buyers to inspect and, should they wish carry, out a full survey of their property prior to financial completion. We suggest that they be given 10 days’ notice by the builder of when their property can be inspected. If after the inspection the buyer/ surveyor deemed that the property is not capable of occupation, the final financial completion can be delayed. Such a provision would also discourage builders from serving notices to complete prematurely, or concealing major defects until after they have received the full purchase price, and would also encourage better quality control and site management pre-completion. In our view, the above suggestion would be relatively easy to implement, and would encourage improvements to construction quality without deterring capital investment or adversely affecting land values for developments already in the pipeline.” 

Indeed this could be easily implemented by the industry. It was even supported by Peter Andrew, Deputy Chairman of the industry’s own body, the Home Builders Federation (HBF) during the session he attended:I wholly support customers inspecting their property prior to completion – there are occasions when properties are not perfect at the time of handover to the owners”

APPG New Homes Expert 3

“New Home Expert” standing up for new homebuyers at the APPG Inquiry meeting on 23 November 2015

So why do most of the large plc housebuilders routinely, often quoting “company policy” refuse access to both the new homebuyers themselves and their snagging inspectors until after legal completion? The only reason, as the HBF acknowledges, is because new homes are “not perfect at the time of handover” but they could and should be. Indeed, I would go further and say it is because the homes are not even 100% finished. I said in my submission, that buyers should have a mandatory right to inspect the new home they are buying before they legally complete. I would like this to go further, with a legal requirement for qualified inspectors (Professional Snagging Inspectors), chosen by the buyer and paid for by the housebuilder, to independently snag and inspect every new home before financial legal completion. New homebuyers are not best qualified or placed to thoroughly and fully inspect their homes.

Recommendation 4: Builders should be required to provide buyers with a comprehensive information pack.

“The purpose would be to improve transparency of the design, building and inspection process. We would like to see housebuilders be required to provide prescribed and comprehensive written information to buyers during the conveyancing process as part of a standard contract (and in an electronic format) to make it easier for buyers to take issue if what they get is materially different to what they contracted for. The pack should contain:

  • Designs and plans, specifications etc.
  • Details about both warranty and building control inspections, when carried out and by whom.
  • What the warranty covers in plain English
  • Which version of the Building Regulations the house was built to and complies with
  • How to contact the builder to rectify defects.” 

For too long, housebuilders and their site-based sales staff have misled new homebuyers, often deliberately, even though it is against the law and the industry’s own Consumer Code to make misleading statements or withhold relevant information that would enable a buyer to make an fully-informed decision. This has resulted in many of the claims made using the Code Adjudication Scheme. Many others were dismissed due to lack of evidential proof from the buyer. A comprehensive information pack would provide indisputable evidence of the design, specifications, plans and standards the new home should be built to. As it would provide clarity for both parties, I cannot understand why this is not already voluntary standard practice across the industry. Housebuilders should also be required to give buyers written confirmation of all verbal representations.

Recommendation 5: There should be a review of laws governing consumer rights when purchasing new homes.

“There is a strongly held view that in disputes, the balance has been tipped too far in favour of housebuilders. This includes the Ruxley v Forsyth case, which set precedent whereby housebuilders do not have to pay the costs for putting wrong work right if the costs are disproportionate to the impact of getting it wrong.” 

The often used saying is that consumers have more rights when buying a kettle or a toaster or even a Mars bar than they do when buying a new home is a fact. You cannot get a full refund if your new home fails to meet your expectations and is defective. As it currently stands, you may not even be allowed to see it before you own it. It is to be hoped this and other recommendations bring about a much needed change.

Recommendation 6: DCLG should commission a thorough review of warranties.

“At present, warranty providers offer varying levels of cover and consumer protection. Our evidence suggested that warranties on new homes did not match the expectations of the consumer and our suggestion is that they need to be reviewed. In the context of buying a new home, consumers may well be prepared to pay more if it meant getting a better degree of service and would pay for additional cover on what they already get as part of the warranty. We would expect the review to:

  • Establish whether the warranties currently provided are adequate; what the minimum requirements should be, how they would need to change to achieve the needed level of cover and what the cost implications might be.
  • Establish easier form of redress with warranty providers as part of a New Homes Ombudsman role. At the moment, as financial bodies, warranty providers are covered by the Financial Services Ombudsman, which we were told was not always effective in dealing with the types of disputes we are looking at.
  • Look into ways that warranty providers and housebuilders can set out more clearly at the time of conveyancing what the warranty actually covers.” 

Any review should including extending the housebuilders’ responsibility and liability for defects occurring for the first five years after completion, not two as at present, further encouraging housebuilders to be more focused on quality. 

Recommendation 7: Housebuilders should instigate a new quality culture by adopting quality systems to ISO standards.

“If defects are to be reduced and satisfaction levels improved, there needs to be an industry aspiration to achieve a zero-defects culture, with greater emphasis on quality assurance and compliance measures adopted as standard by housebuilders. We would like to see the Home Builders Federation taking a more active part in driving this.” 

Whilst an admirable recommendation, in reality this is never going to happen. Defects in new homes are widely regarded as the norm, standard and inevitable. Buyers are even told to expect to have problems! It would take a complete mind-shift at every level within the industry for quality assurance and compliance measures to be adopted as standard and apart from PR statements and spin, I cannot see the HBF doing anything to drive this.

I suggested to the APPG Inquiry that new definitive quality and workmanship standards should be incorporated in both the building regulations and NHBC’s warranty Standards with “should be” guidance, replaced with “must be” requirements. 

Recommendation 8: The industry should significantly increase skills training programmes.

“We would like to see greater emphasis on training and investment for both new and existing workers to embed a quality culture, whilst also bringing new people into the sector. We believe local authorities and Government should leverage more training by making it a condition on sale of their land.” 

The Construction Industry Training Board (CITB) was set up as long ago as 21 July 1964 to work with employers to encourage training, which helps to build a safe, professional and fully qualified workforce.” In every housing boom since, more skilled people have been required and at the start of every slump, so called skilled trades people lost their jobs. Any new training initiatives devised by the industry itself, will be doomed to fail as they have repeatedly during the previous 52 years. Currently there are three times as many people are leaving (60,000 a year) the building industry as are joining (15,000-20,000). As the CIOB estimate that the cost of an average apprenticeship works out at around £24,000, so does it make economic sense for the industry to invest in training? Of course not that is why there has been a ‘skills shortage’ for over 50 years. To improve quality of new homes there needs to be a change of attitude across the industry at all levels. It is not a skill, but a desire to care, take pride and have a moral conscience. 

Recommendation 9: A minimum standard should be set for compliance inspections.

“The responsibility for construction of defect free homes should rest with the housebuilder who should not rely on third party inspections to drive up quality. But we recognise that inspections from third parties do have a vital role to play and we need to ensure that the corners are not cut. We are concerned that competition in building control might be fuelling a race to the bottom and we are therefore recommending there should be a defined minimum number of inspections that local authority building control and approved inspectors in the private sector and warranty providers should not fall below. We suggest that the minimum level should be considered by DCLG in consultation with the industry. We are also recommending inspection reports are made available to the public and form part of the information pack provided to purchasers when they buy a new home. (See Recommendation 4)” 

There are currently eight stage inspections (six are mandatory) required for Building Control. The NHBC told the Inquiry that every home it inspects [for its warranty presumably] is visited five times; “purely to prove to our underwriters that the property is standard risk”. I suggested there should be more inspections and that every home must be inspected at each stage not just those on sites risk assessed at for likely or possible non-compliance.

Recommendation 10: Housebuilders should make the annual customer satisfaction survey more independent to boost customer confidence.

“We believe it would boost consumer confidence if the Customer Satisfaction Survey is seen to be more independent of the NHBC and the HBF – bringing in a high profile third party to conduct and take ownership of the research in their name. Furthermore we would like to see more in depth research on consumer trends based on the follow up survey carried out by the NHBC in their nine-month survey. We feel this could provide a real insight into how builders are tackling initial defects and complaints.” 

During my presentation I called for a fully independent new home customer satisfaction survey, with all results for each housebuilder made public along with the NHBC 9-month survey results. The NHBC, warranty provider for 80% of all new homes built each year, acknowledges that more could be done to improve both quality and satisfaction. It said that: 0.7% of warranty holders each year have problems stemming from latent defects which constitute a valid claim.” However, this does not reflect defects in homes not judged by the NHBC to be “valid claims” which account for around 9,000 homes each year. The NHBC confirmed that “satisfaction levels from their 9-month survey are generally 5% to 10% lower than those measured at eight weeks.” This would put most builders firmly into 3 star rating territory, demonstrating a fall in satisfaction levels once their customers realise just how bad their new homes are and the indifference of their builder’s to fixing problems. The housebuilders can (and do) freely and easily manipulate their customer’s satisfaction survey responses and have even encouraged their buyers through threat or favour to give positive responses than they might otherwise have done.

However, whilst a great step forward towards better quality new homes and increased consumer rights for new homebuyers, this APPG Inquiry and Report despite ten excellent recommendations, failed to make the most of the opportunity and to recognise the need for additional initiatives by also recommending and including the following suggestions made in oral and written presentations:

  • Fully independent gas and electrical installation safety inspections. There should be an end to the current box-ticking, self-certification by those installing.
  • Building larger and healthier homes. Revision to the building regulations to include the new space standards and a minimum natural light lux levels for each room.
  • Introduction of new minimum standards for customer service.
  • Change the housebuilder’s bonus culture away from production, making quality, customer satisfaction and after sales service a large part of the KPI bonus calculation
  • End state funding and government help such as Help to Buy for housebuilders that fail, rated three stars or less and fail to win sufficient NHBC Quality Awards.
  • No housebuilder should be allowed to encourage their buyer to use any particular firm of solicitors or mortgage broker.
  • Minimum build durations in Building Regulations and Warranty Standards as more time to build will result in better built, higher quality new homes. No new home should be constructed in a time-scale of less than 12 weeks.
  • A new rule that only homes independently inspected four weeks prior to a housebuilders’ year-end would be allowed to legally complete before the financial year-end to prevent homes being rushed.
  • A legal requirement for building projects over a certain value/size to have an independent, qualified inspector on site full-time, every day for the duration of the building works.
  • A photographic record of construction and during every mandatory stage inspection should be taken for future investigation of issues
  • An end to “gagging clauses” aka confidentiality clauses used by both housebuilders and warranty providers such as the NHBC. Consumers have a right to know what settlement was reached. Openness and transparency can only improve quality, service and trust in the long term.
  • Limit the practice of landbanking by large plc housebuilders to encourage more competition.
  • All warranty providers should be regulated and independently audited.
APPG Report Publication 13 July 2016

Just how “passionate” are these MPs about seeing their recommendations implemented?

It remains to be seen whether all or any of the recommendations made in this Inquiry Report are implemented by the government. APPG Chair Oliver Colvile has previously stated that he is “positively passionate about this issue.” At the time the Report was published Maria Miller MP, Vice-chair of the group said: “The APPG has taken a hard look at the need to raise the quality of new build housing. The role of the building control inspector is a key part of the process, and the report tackles this head on, both by recommending a minimum level of compliance inspections, and by giving new home buyers information about the building inspections carried out. Making the building inspector’s reports available to people who are buying a new home is an important way to improve transparency, and I welcome the fact that in response to my call for change, the Minister has already indicated that he will act.”

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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.


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 Inquiry 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 Inquiry 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.

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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 TestingAir leakage testing 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 leakage 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 leakage 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 leakage 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.

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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.

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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, 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.

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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.”

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