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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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 ( 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.

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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.


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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.

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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


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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

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No Regulator or Ombudsman for complaints about house builders

It is not just house building that has dissatisfied customers. However,  most other industries have an Ombudsman and official Regulator.

If you bought a new home in the last ten years, the following statements will have a familiar ring to them. After all, the house building industry has a dreadful reputation for both quality and customer service, yet makes every effort to smokescreen and spin the opposite.

  • “Stop solving problems…just make the customer happy”
  • “staff are under pressure to bat away complaints and instead focus on appeasing callers to boost satisfaction ratings”
  • “persuading customers to believe all is fine is more important than getting to the bottom of their problems”
  • “All [the company] care about right now is the net promoter score. Staff are rated on this survey it sends out after a call or web chat. Well actually, on the first question only, “How would you rate [the company] to a friend?”
  • “one of the advisors I spoke to made promises they didn’t deliver. I wonder if this is the way they are trained – to reassure the customer but actually not to do anything.”
  • “other support departments are unhelpful and more interested in their own KPI, pretending they care about customers, but the reality is they are treating them appallingly”

The above comments could be from any new homebuyer or a whistleblower from most major house builders. The fact is, these statements were made about a large UK mobile phone provider in yesterday’s Mail on Sunday, yet the similarities with the house building industry are staggering, right down to the Customer Satisfaction Survey and key question!

Scales of justiceThe only difference being that the consumer has a Communications Ombudsman to take their complaints to. In addition there is also a communications regulator (Ofcom) which has the power to issue fines and demand a company improve. Until the UK house building industry is brought to heel, customers will continue to be badly treated and have their complaints dismissed out of hand or ignored. A New Homes Ombudsman is essential. An official regulator for the new home industry is desirable.

If you have problems with a new home or house builder:
  1. Be sure to document all the problems with dates. You will need evidence so be sure to put everything in writing.
  2. Keep a record of everything. Letters, e mails, telephone conversations what was said by who with time and dates.
  3. Send letter by recorded delivery. It gives you proof it was received and shows the house builder you mean business and are serious.
  4. Send copies of your letters to the warranty provider, normally the NHBC. They can and will step in if the house builder continues to refuse to honour their obligations under the warranty.
  5. Demand a deadlock letter. You will need this if you want to go to arbitration with either the NHBC or the Consumer Code for Home Builders Adjudication Scheme. It will be useful if you choose to take the builder to court and fight for compensation as it demonstrates you have taken every reasonable step to seek resolution and have no other option.
  6. Write to your MP. Do not underestimate the power of an MP’s letter. Most MPs won’t bother to intervene, but unless MPs continually get letters from their constituents about their defect-ridden new homes and indifferent customer service from the house builders, nothing will be done to force the industry to improve. Don’t leave it to someone else! If your MP is unsympathetic or unwilling to do anything, don’t vote for them again!
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Have Persimmon Tried To Buy A Better HBF Star Rating?

Can buyers trust HBF  builder Star Ratings?

The HBF National new home customer satisfaction survey is now in its eleventh year. The house builder star ratings (awarded by the HBF) “are allocated according to the proportion responding Yes..” to Question 1 of the survey: “Would you recommend your builder to a friend?…. Yes or No”    The more that respond “Yes”, the better the builder’s star rating.

During research for a previous article concerning claims made by the HBF in the 2016 survey results, I considered the possibility that builders’ sales and site management may be influencing their buyers to respond more favourably in the NHBC 8-week survey. After enquiring on social media, buyers from Britain’s two largest house builders, Persimmon and Barratt, who together built over 31,000 new homes last year, publicly expressed their opinions and claims:

Persimmon HBF SurveyJP (16 October 2015) said: “I’ve bought a recent new build from Persimmon and o boy what a joke their after sales are. I would like to point out I love my flat it’s them that annoy me. We have all been bullied and harassed to tick the first box on the NHBC survey that we would recommend a friend. Obviously didn’t tick it and because I naively ticked share my opinions Persimmon are now treating me like dirt……They were ringing us Saturday and Sunday and I quote “If I do you a favour now, you can do me a favour and tick the first box” They didn’t give a **** about our problems just whether we had said yes or no.”

DI (7 Dec 2015) said: “ We bought with Persimmon. We wanted our downstairs toilet to be taken out. They offered to do it for free if we gave good feedback in the survey. I’m glad to say we ignored this and just filled it out honestly.”

Persimmon £250 John Lewis Bribe (2) No nameGL (28 March 2016) said: “We were given a £250 John Lewis voucher for completely [sic] this survey and answering yes to the question “would you recommend persimmon to a friend”. We weren’t happy to answer that question positively which the sales team knew at the time so bribed us with that voucher”

I think this was by far, the most shocking response I received. I even queried the amount of the voucher! After further discussions with this Persimmon buyer, it was confirmed that the voucher was indeed for £250 and not £25.

GL confirmed: “Yes definitely £250 it was shocking to us too. The sales team had a list of people they knew wouldn’t say yes to ‘recommending a friend’ and so knocked on the doors of those people’s houses to incentivise them.”

A series of e mails I have seen, between GL and Persimmon Customer Services, would appear to confirm that vouchers were given and indicate this buyer needed to chase Persimmon for his £250 John Lewis Vouchers – two months after completing the survey last September! Apparently the vouchers were ordered by Persimmon’s sales department and were then being passed to the site sales offices.

So why would Persimmon do this?

Last year Persimmon were rated 3 stars by their customers. In the latest results, they are again rated just 3 stars. Hardly something to advertise considering Bovis are the only other large house builder to match their low 3 star rating! But might it have been worse?

For example, out of a total 6,034 survey responses, it would only need as few as 240 buyers who intended to respond “No” to be persuaded to respond “Yes” to provide a 4% swing. This might be sufficient to change a builder’s star rating from a possible 2 star (less than 69.9% “Yes”) to 3 star (above 70% “Yes”).

In addition, as the “Industry Results are weighted”, this could also have a marked effect on the industry’s overall “satisfaction – recommend a friend” score percentage, as the six largest house builders accounted for over 53% of the total surveys returned in the 2016 results.

It is unfortunate but fairly common, for house builders to offer cash incentives to encourage their homebuyers to use the builder’s favoured firm of Solicitors, more often than not to the buyer’s detriment. But cash, in the form of store vouchers, in return for positive customer survey responses is, in my opinion, a new low even for this industry.

Persimmon released their 2015 Annual report on 22 February 2016. In it CEO Jeff Fairburn, who is due to receive 934,992 share options worth £19.8million in December next year, stated:

“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….Our sales teams across the business are trained to provide excellent levels of service to our customers.”

“During 2015 we invested substantial resources in new customer focused initiatives to improve our customers’ buying experience and our NHBC/HBF 3 star rating. We have introduced dedicated customer liaison managers on our larger sites, improved communication processes with our customers, introduced new processes to strengthen our build programmes and provided additional resources in our customer care teams. These initiatives are showing some early signs of improvement in our customer satisfaction ratings and we will continue to pursue this agenda to secure further progress this year.”

It is not known if the “substantial resources” referred to includes incentives given to buyers in the form of £250 John Lewis vouchers. I think it is ironic that Persimmon would choose to give John Lewis vouchers (a company with unquestionably the best customer service reputation in Britain) in an attempt to improve their own customer satisfaction rating. All house builders would do well to replicate John Lewis’ customer service policy and ethos!

I contacted Persimmon to provide an opportunity for comment to either confirm or deny whether any Persimmon Group employees have ever offered any incentive to their customers, such as store vouchers or free extra works, in return for a positive response from the buyer completing the 8-week HBF Customer Satisfaction Survey; in particular a “Yes” to Question 1 – the star rating question?. I also asked if Persimmon kept a list of buyers on developments, those most likely to give unfavourable responses in the HBF 8-week survey.

In response their PR Company said: “I can confirm that Persimmon won’t be commenting within your article. If you have any future press enquiries, we have a group email –” Regarding the £250 vouchers I specifically asked the PA to Jeff Fairburn if any of the main board directors were aware of the vouchers and if not, what it the Company’s official response or comment? The reply I received stated: “I would refer to your previous e mails and would confirm Persimmon will not be commenting.”

I asked the HBF if they or the NHBC have any way of validating or verifying to rule out “incentivising,” especially as blatant as this? I also asked whether they are aware that some builders incentivise their customers to complete the survey with more favourable responses than they might otherwise have done and what action would be taken against any builder found to be breaking star rating/survey rules? In reply Steve Turner at the HBF told me: “clearly builders can offer incentives as part of their marketing, but it is against the rules to offer incentives that relate to the survey. If you send us details we will of course follow up.”   Well the HBF have the  details now!

The Star Rating results (until 2011) stated: “The star ratings are based on sample estimates, and are therefore subject to sampling error. For each estimate, there is a 95% chance the true figure lies within an error range either side of the sample estimate. An ‘α’ indicates that, taking account of the error margin, the true figure could lie within a lower star band.”

In 2007, Persimmon were rated 3 star but the results indicated an ‘α’, meaning after taking into account the error margin, the true figure could lie within the lower 2 star band. In 2008, Persimmon were rated 2 stars. In 2009, Persimmon were again rated 3 star with the ‘α’ indication that the true figure could lie in the lower 2 star band. No error identifiers have been given since the 2010 results. I asked the HBF if Persimmon could have had the ‘α’ in the 2016 results, indicating a possible 2 star rating?

How do house builders know when they need to “act” to get a higher Star Rating?

For NHBC registered builders (completing more than 300 units a year for private sale) the NHBC automatically operate a standard customer satisfaction survey service and provide a licence for house builders to view the results online. The results are updated with new responses everyday enabling house builders to track “how satisfied their customers are.”

In particular “the radar chart shows year-to-date scores for each question in the survey and compares with a benchmark group”. Clicking on the chart shows “all the results to all survey questions broken down by month for the current survey year.” The star rating indicator (shown above) summarises the year-to-date responses to the question “would you recommend your builder to a friend.” House builders can also click on the dial to display a league table showing their rank “against anonymised peers over the last 12 months on a question by question basis.”

The NHBC say that house builders can: “Compare divisions within your organisation. Compare sites within a division. View individual homeowners responses.”  “Identify problems fast We will send you email alerts if any poor performance scores are received so you can take immediate action. With Direct customer feedbackYou can see attributed customer comments in your reports if customers opt to let you see their verbatim responses.”  (see NHBC 2 minute video above)

An NHBC spokesperson told me Sharing homeowners’ feedback with housebuilders can assist them in understanding where improvements may/could be made. It is a positive outcome if a housebuilder chooses to make changes as a result of reviewing homeowner feedback.”

Rule 2 of the HBF star rating scheme states: “HBF will inform Members in writing of their HBF Star Rating only when all Star Ratings to be awarded in the year in question have been decided by HBF.”  Decided by the HBF? All house builders building 300 or more new homes already know, as shown above!

Rule 11 states: “Members may not use or refer to the statistical data underlying their Star Rating in the public domain.” Why? What could this reveal? How closely some house builders might scrape into the next star rating? Note: a Q1 70% score for Yes is 3 star but 69.9% is 2 star. A close call!

“Written in the stars” – Is this how Barratt get their five star rating?

Do Barratt site employees offer their buyers inducements (free extras and alterations etc) in return for good marks in the HBF 8-week survey? In 2013, a Barratt contracts manager told me that a proportion of their site manager’s £10,000 maximum annual (“best in the business”)  bonus (unusually, paid in monthly instalments) is dependent on his buyers returning an average five-star (92% or more) survey satisfaction score each month. (Other bonus criteria included: customer care, NHBC inspections and Health & Safety.) He said most of his region’s site managers received “at least 70%” (around £583) of the maximum bonus available each month. Could this bonus be the incentive or is giving buyers free extras in return for good scores,  simply a means to a desirable end?

In any customer survey, financial incentives offered to staff based on survey results will always have the potential to corrupt the results, no matter how strong the corporate culture is. It is more important to gather authentic feedback about customer satisfaction from the survey. Incentives poison the well. Survey results shouldn’t be used to measure employee performance. It will be more effective to share relevant, genuine, honest feedback with employees so that they in turn can serve customers better in the future.

Barratt state on their website that they are now: “recognised as the highest quality national housebuilder” “We are industry-leading in terms of our quality…” A fact that could perhaps be justifiable on the basis of their site managers winning more NHBC Quality Awards than any other house builder. It could also be because they are the only house builder to have been rated ‘five stars’ in the last seven surveys.

Barratt homeowners have given their opinions in posts on social media, which a reasonable person might take to indicate that they were offered incentives in return for giving “good marks” in the HBF survey. Here are some examples:

Barratt HBF Survey 2 No nameLS (19 March 2016) said: “Our site manager wanted to be present whilst I filled in the survey. He wanted me to call him in the minute it arrived. (Obviously didn’t) They couldn’t do enough for us pre survey. I waited some time to complete it, which I was chased on a regular basis. After a damming result it all turned very sour, 2 years of fighting and various NHBC claims. We’re still waiting for our final one to be resolved. …………………………… Our neighbours were told they’d provide them some more paving slabs on the basis that provide Barratt with a good survey. ………………. Glad it’s over, our house/garden is (nearly) finished. I’ve had to be the hardest person I can be throughout the process, it’s paid off.”

JG (19 March 2016) said: “Never offered anything, but did get a knock on the door with a request to give a 5 star review.

Buyers on one particular Barratt development at Clovenfords near Galashiels in Scotland claim that:

Barratt HBF Survey 4 KS (all 19 March 2016) said: “Another person on the same site, this person moved in before LW, notice she informed the regional office of this incidence but senior staff choose to ignore. The agent in these two cases is the fourth on this site, my dealings were with the first agent. Now IF it is not company policy it certainly seems to be the policy of the East of Scotland regional office.”

Barratt Survey 18 of us No NameKS said: “Barratts are ……………………..which is the only reason there 5 star. Just out of interest was everyone promised the earth when they first moved in if they gave a really good marks on the HBF survey”

LW said: “Hahahahaha K!!!!! I wasn’t allowed my steps at the front down to my garage/driveway until I had given at least 9/10 on the survey!!”

KS asked LW “do you mind if i share this.”

LW replied: “Don’t mind K. I’m pretty sure S was promised stuff too….. we definitely weren’t the only ones…”  “out of 74 homes on the development i know this has happened to at least 18 of us. Will hopefully find others in due course”

SS said: “KS, I was asked to give 9 out of 10! Then was told one day if I didn’t do the survey I would have to live with my kitchen like that! I phoned barrett and told them this! Guess what tho they de care! I got told I would get a door into my garage at one point! No put in but they would give me one! …………………………………………………..!” [SIC]

Barratt NHBF Star ratingWhen I first contacted Barratt about their buyers’ comments, a Barratt Developments spokesperson said:

“We have very high standards regarding the accuracy of our NHBC customer surveys. We are currently reviewing the issues raised on the Facebook group in question.” Adding, “I just wanted to assure you we are actively looking into this issue and will definitely come back to you with a more detailed statement on it.”

The recent detailed statement from a Barratt Developments spokesperson said:

“Your article contains a number of significant inaccuracies in respect of which we reserve our position. We take any allegations of wrongdoing by any of our employees extremely seriously and have systems in place which allow our customers to report such matters in a number of ways. We also have policies and training regimes in place which meet best practice. We take a huge amount of pride in our approach to customer care and will address any issues raised with us by our customers.”

In an effort to be as fair and accurate as possible, I have asked Barratt to clarify which of the statements in this article (specific to Barratt) that they consider to be “significant inaccuracies” offering another opportunity to correct or clarify. (If there are any “inaccuracies” I am happy to re edit.)

The HBF have strict clear rules regarding their survey and especially the HBF Star Rating Scheme. It is clear that these rules are not being adhered to:
Barratt 5 star rating flag 2016

Breaking HBF rules: No year and wrong colours

“Rule 7. Members may only use the Star Rating Logo and their Star Rating in a manner whereby the number of stars actually awarded and the year in which they were awarded is clearly stated. Members must ensure that it is very clear in any use of the Star Rating what their current rating is. Members can not refer to in any way a dated Star Rating awarded in previous years.”

Rule 8. Members may not make any alteration (as to size, shape, colour and any other characteristics) to the Star Rating Logo nor at any time use any other logo or device which is similar to or may be confused with the Star Rating Logo. The design guidelines for use of the Star Rating logo are defined in Section 3.

Rule 21. Members may encourage homeowners to respond to the Survey by informing them of its existence prior to the commencement of the invitation process which begins exactly 8 weeks after legal completion. However, once the invitation process has started Members should not discuss the survey with the respondent or pressurise them to complete it.

Rule 22. Members may not offer respondents any direct financial or other benefit or incentive that is any way linked to completing the Survey or answering any of the questions in the Survey in a particular way. Members may advise respondents that they will make a charitable donation for each returned Survey.

Rule 23. Members must not under any circumstances seek to intercept the survey whilst en-route to or from the respondent and NHBC.

Rule 24. In line with the Bribery Act 2010 Members must not incentivise or pressurise respondents into completing the Survey with dishonest responses, this applies to all questions in the Survey including the respondent’s right to keep their responses anonymous.

Rule 25. To avoid the perception and/or possibility of influence, Members must not be present when the respondent completes the Survey,

Rule 27. Once response are received they cannot be amended or retracted due to the potential for the respondent to have been incentivised or otherwise influenced to dishonestly amend or retract their response.”

It would appear that the HBF rules are being broken and knowingly! 

What could the NHBC/HBF do to stop house builders corrupting buyers’ survey responses:
  • Send the first 8-week survey randomly, at any time in the first 8-16 weeks. This will mean house builders won’t know when buyers receive it, making coercion more difficult.
  • Make all survey responses 100% anonymous, rather than leave buyers to tick a box. This would ensure house builders are less likely to offer “incentives” as they would have to implicitly trust buyers to give positive responses. This would also make it less likely that house builders would victimise buyers for submitting unfavourable survey responses.
  • Prevent house builders from seeing their scores until the survey is published. Having the ability to see their current star rating (and other scores) in real time, means builders are more likely to break the rules in attempts to achieve a higher rating.
  • Only allow builder’s a star rating if the number of surveys returned equate to at least 50% of the private homes they build in the survey year.
  • Properly enforce the star rating scheme rules, with sanctions for house builders found to be breaking them.

Normally, the purpose of a consumer survey is to enable customers to give an honest response regarding the product or service. It should highlight the best, praising those doing excellent work and highlighting those areas of a business in need of improvement. A customer-satisfaction survey that dissatisfies customers and produces false information is an embarrassment to the industry and those conducting it.

It is essential to have reliable, honest and true measures of customer satisfaction for new-build homes. The new home customer satisfaction survey must be made 100% independent of the house building industry and audited.

At the APPG Inquiry, I called for a fully-independent “New Home Customer Satisfaction Survey” for EVERY new home built, conducted by a totally independent and autonomous government-appointed body such as the Trading Standards Institute, with all results and a house builder league table being made public by the Office of National Statistics. The APPG Inquiry report is due out mid-May!

It is my opinion that the buyers’ quotations in this article, reproduced entirely as they were originally written on posts freely made publicly on Facebook, that would be considered by a reasonable person, to be true and the opinions or experiences of these private individuals. This article is my honest opinion of the buyers’ own claims that any reasonable person might also conclude. I believe this is a matter of public interest, as the house building industry so often refers to their 8-week survey results as confirmation and evidence of high levels of both customer satisfaction and quality. If HBF star rating rules have been broken, UK consumers can no longer rely on builders’ star rating as an accurate reflection of customer satisfaction for comparison purposes. I have contacted the house builders concerned and the HBF, on several occasions to obtain confirmation, denial, or any possible explanation, justification, or information and have included these response(s) such as they are.

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HBF Survey Shows New Home Satisfaction Levels Are Falling

HBF  Customer Satisfaction Survey Results 2016

The waiting is over. The results are in,  and the winner is……. well pretty much the whole house building industry if you believe the accompanying Home Builders Federation (HBF) editorial headlined “Homeowner satisfaction with new homes remains high.”

The HBF use the same phrases every year, irrespective of the survey results to market new homes. Why else would the HBF list on the front page their “key benefits of new homes” for the last four years, including the claim that “new homes are built to a higher standard than ever before and the customer satisfaction survey results reflect this” – well not over the last three years they don’t! Since 2013, the key satisfaction questions have provided results that show a marked decline from 91% in 2013 to 85% in 2016!HFB Survey Results

During the survey year to 30 September 2015, a total of 135,860 new homes were built, of which 104,670 were privately sold, these being potentially eligible to be part of the HBF customer satisfaction survey and only new homes with an NHBC warranty (around 80% of new homes) will almost definitely (96%) receive a survey, provided that these homes are not rented by buy-to-let private landlords. Out of an approximate potential 83,736 privately sold new homes (104,670 x 80%), the NHBC sent out 80,582 surveys on behalf of the HBF and received 45,342, a response rate of 56%, exactly the same as the previous year.

HBF Surveys Sent-Homes Built

The HBF claims:

“Housebuilders are delivering extremely high levels of customer satisfaction.”

Some claim! Especially considering that the 2016 results again show 93% of new homebuyers reported problems to their builder in the first 8-15 weeks. Indeed, since the survey began in 2006, between 91% and 95% of homebuyers reported problems with this industry’s product! The number of buyers that reported more than 16 problems has been in the range 34% and 47% since 2013. In fact, I would suggest that a new category of more than 50 problems would probably yield a similar percentage!  A psychologist could also argue that a new homebuyer reporting 20 problems to their builder, all of which are then sorted out in an efficient and timely manner, is more likely to give a higher satisfaction response in the survey, than a new homebuyer who never reported a problem.

HBF 8-week survey p1HBF 8-week survey p2

“The results of the 11th survey demonstrate a customer satisfaction level that matches or exceeds those in almost any other industry or sector”

It could be that new homebuyers moving from cramped, rented accommodation in need of upgrading, to a brand new home are always going to be inclined to be at least fairly satisfied. The same could be said of someone buying a new Ford Focus after driving around in a rusty 1990s Ford Escort. The only difference being that 93% of Ford Focus buyers do not have to take their new car back to the dealership to get defects repaired within the first 8 weeks. Furthermore, the car is delivered on the date promised without mechanics rushing to fit wheels and finishing it off when they get the keys! Even the most recent National Rail Passenger Survey showed that overall, 83% of passengers were satisfied with their journey and overall satisfaction of train operating companies was between 73% and 97%! (August 2015)

“86% of respondents were satisfied with the overall quality of their new home”

Not quite! 39% were only “fairly satisfied” Given that the industry promotes an expectation of failure, delivering a defective and  imperfect product; respondents are probably ‘fairly satisfied’ that their new homes are not worse than they expected, with 43% confirming the number of problems they encountered was in line with their expectations.

“levels of customer satisfaction are one of the many reasons why more and more people are buying new”

It could be more realistically argued that the taxpayer-subsidised Help to Buy Scheme, accounting for around 37% of Taylor Wimpey sales and 42% of Persimmon sales in 2015 is the main reason for increased demand for new homes.

“New homes are built to a higher standard than ever before. And the customer satisfaction survey results reflect this”

Just not true! Looking at the survey results over recent years. The highest ever “satisfaction” was in 2011/12 (91%). Since then there has been a steady decline to the present 85% level. In fact customer satisfaction level is lower than it was in 2008/09 when more new homes were being built than last year! As for higher standards,  62% of respondents confirmed they reported more than 11 problems with their new home (27% in 2012).

“Since the survey was first introduced 12 years ago, the industry has consistently demonstrated a commitment to customer service……….There is of course always room for improvement. As we look to maintain the increases in output we have seen, we must all remained totally focussed on ensuring customer service improves still further.”

Sadly, such demonstration of “commitment to customer service” has been sadly lacking over many years as the recent three-year decline in satisfaction levels from the survey indicate. As the Bovis e-mail (below), featured in the C4 Dispatches programme last November demonstrates, this is the industry’s real attitude towards “customer service.”Bovis Doctor report e mail Dispatches

With the exception of Barratt, all of the major house builders have a lower star rating losing one or more stars, or remained at the current industry low rating of around 85%. This has nothing to do with increased production or any perceived skills shortage. The only significant increase in the number of new homes built since 2011 was in the last survey year (2014/15 up 17%) and the CITB has been collecting a levy from construction employers and using this to “support training and skills in construction” since July 1964. 

How do we know the builder Star Rating is an accurate reflection homebuyers’ responses?

Rule 11 of the HBF star rating scheme states: “Members may not use or refer to the statistical data underlying their Star Rating in the public domain.”   So why the need for secrecy?

Not every returned survey is used for Star Rating. This year 11,499 (25.3%) of surveys were not used. (Last year the figure was 8.974 -23.5%). The HBF told me that the total 45,342 survey responses included those who bought homes from non-HBF members. As the Star Rating is just for HBF members, the surveys from buyers of non-HBF member homes are not included in the star rating, explaining the lower reduced sample. The HBF said: “every single valid Barratt response (7,594) counts towards Barratt’s rating; every single valid Bovis response counts towards their score and statistically, based on 1200 of their customer’s responses, they are a 3 star builder. Not one valid response is ‘not used’ for any company.” (A ‘valid response’ is one which is returned by the homeowner within the 20-weeks of moving in.) Of the 33,843 surveys ‘sampled’ for the 2016 star rating, 33% of the sample were five star ratings, 41% four star, 21.5% three star and 1.3% two star.

However, looking at the 2012 survey results, (the last year that the sample sizes were stated for all questions and before the use of pie-chart graphics), it can be seen that the sample for the ‘Industry Results’ (which includes responses of buyers from non-HBF member builders), the sample size is the same as the total sample for the Star Ratings – 20,129.

In the Star Rating results until 2011, an error identifier was used to indicate that the true figure could lie in a higher or lower star band. It stated:

“The star ratings are based on sample estimates, and are therefore subject to sampling error. For each estimate, there is a 95% chance the true figure lies within an error range either side of the sample estimate. For example, a company may have 72% responding Yes to Q8, with an error range of +/-3%. The result would be shown as three stars. However there is a 95% chance the true figure lies within the range 69% to 75%. An ‘α’ indicates that, taking account of the error margin, the true figure could lie within a lower star band. Alternatively, ‘β ’ indicates the true figure could lie within a higher star band.”

Quite why, in this age of computers, any sampling is required I don’t know, especially as it would appear to create an unnecessary and fully-preventable error in something the industry relies on year after year to paint a rosy picture, giving the illusion of new homebuyer satisfaction. The HBF spokesman told me “there’s nothing to hide here – we just simplified the document as it was very long and repetitive. The full details are all on the web site.”   Surely adding the “Key benefits of new homes” and marketing quotations from 5-star rated house builders and a few carefully selected new homebuyers made it even longer! In addition,  at the time of writing I have not been able to find the “full details” of the error identifiers (for any survey since 2010) on the HBF website either!

Despite being the second question for at least the last two surveys, this was the first year the survey results included responses to the question “On a scale of 0-10, how likely would you be to recommend your builder to a friend?” The results show that just 47% would be “likely,” 30% “neutral” and 23% “not likely”. It can be argued that this is a far more accurate reflection than the Yes/No version of the same question. In fact if you deduct the neutral 30% from the overall 85% “Yes” score, it would imply the real figure is around 55% – giving the industry an overall satisfaction rating of 1 star!

The proportion of homebuyers completing the survey has remained suspiciously consistent at around 56% over last 6 years. Some housebuilders appear more successful than others, with 46% of Barratt homebuyers returning the survey compared to just 37% of Taylor Wimpey buyers and 30% of Bovis buyers.

The way the HBF presents the results has changed. Since 2013 a colour graphic has been used with almost indistinguishable colours for both “very” and “fairly satisfied” which can only be to give a misleading perception of higher overall levels of satisfaction. In 2014, the words “Taking everything into account…..” were added before questions 3 to 14. This term would lend itself to a more positive response than a straight “How satisfied….” question.

The survey is out of date by the time the results are published.

The survey year ends on 30 September but the actual results are not published by the HBF until “mid-March.” This means that a house builder displaying a ‘5 star 2015’ flag in 2016 could be rated 4-star for 2015, as the results are not known until March 2016. For all responses, the survey results are nearly six months old by the time they are published.

The HBF said that “Homeowners are first invited to complete the survey 8 weeks after their legal completion date; they then have a further 12 weeks to respond. So homeowners who legally completed on 30th September (last day of the survey year) are invited during November and have a further 12 weeks to respond to the survey which brings us to mid-February. So in effect the ‘survey year’ is up to 20 weeks behind the ‘reservation year’ being measured. We then have to get the results validated by Reading University and then sort out the document that we publish – which takes us to mid-March.”

In the letter sent by the NHBC with the survey, it asks buyers to complete and return it to them within 7 weeks of the date on their letter. When I contacted the  Statistical Services Centre at Reading University to ask how “validation” is carried and what is involved they said; “I can confirm that the Statistical Services Centre validates the results published by the NHBC from the said survey, using a methodology set out by the NHBC themselves. We have never advised on which question to ask or how questions are presented. All further queries should be directed to the NHBC”  As all  completed surveys are returned to the NHBC, presumably Reading University  only “validate” the survey responses they are given by the  NHBC.

It should also be noted that the NHBC provide a service for house builders so they can view their daily updated results in real time online – enabling house builders to track “how satisfied their customer are.” – or not as the case might be!  But UK new homebuyers have to wait for out-of-date information to be published!

I am currently researching and writing an article which shows just what some of the large house builders will do in their attempts to  improve their Star Rating and survey scores. Watch this space!

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