Carbon Monoxide Poisoning Risk In New Homes

Is your new home killing you?

Killer new homes - carbon monoxide poisoningThe shocking truth is, any new home built since 2000 that has a gas central heating boiler could be lethal. There is now widespread recognition that systems with concealed twin extended boiler flues, pose a significant risk of carbon monoxide poisoning. I am calling for a mandatory requirement that all new homes must be fitted with carbon monoxide alarms.  In addition, every new home must be independently inspected, not merely ‘signed off’ and certificated  by the installer.

Carbon monoxide poisoning kills

14 November 2007
Maria Ighodalo (28) dies from carbon monoxide poisoning
London and Quadrant housing association tenant, Maria Ighodalo, died in a block of flats, known as ‘Beulah Hill’, in Upper Norwood from carbon monoxide poisoning. The flat had a gas safety certificate and a concealed flue heating system.

27 February 2008
Elouise Littlewood (26) dies from carbon monoxide poisoning
You would think that following the tragic death of 26 year-old dance teacher Elouise Littlewood on 27 February 2008, who died from carbon monoxide poisoning from a faulty boiler installation in her flat on the Barratt development at ‘Bedfont Lakes’ in Notting Hill West London, that all house builders would be double checking every boiler in every new home they build, to ensure they are 100% safe and installed to manufacturer’s and GasSafe instructions.  Elouise bought the two-bedroom property through a shared ownership scheme with Notting Hill Housing confirming: “Barratt had installed the gas system and produced a gas safety certificate with a one-year guarantee.”

Prosecutions over inadequately installed concealed boiler flues
After separate investigations by the Met Police and the Health and Safety Executive, the gas fitter accused of her manslaughter, Paul Williamson (53) from Sutton, was cleared of manslaughter by gross negligence by an Old Bailey jury in June 2012. His employer, Malden Plumbing and Heating Limited, was also cleared of failing in its duty to protect non-employees from risk.carbon monoxide alarm Following the Bedfont Lakes tragedy, which also left Her lodger, Simon Kilby, with permanent brain damage, the Health and Safety Executive warned that 1,200 homes with concealed flue boiler systems could be ‘immediately dangerous’ with a further 4,800 a potentially ‘at risk’. The figures were based on exploratory work carried out by Barratt and other developers. Carbon Monoxide [CO] is a colourless, odourless, tasteless, poisonous gas produced by incomplete combustion of carbon-based fuels. It stops the blood from bringing oxygen to cells, tissues, and organs and can kill quickly, without warning.

28 May 2008
No Commissioning certificate for boiler in Persimmon new home
A few days after Lisa Peplow and her family moved into their brand new home she discovered the boiler installed by Persimmon Homes, could have leaked potentially fatal carbon monoxide fumes after calling an emergency plumber when the boiler stopped working and produced a “funny smell.”

The plumber told her that the boiler at her house in Shackleton Close, Bowerhill, near Melksham, did not even have a commissioning certificate – a legal requirement. She told This is Wiltshire:
“He came out, disconnected it and condemned the installation saying it was illegal. I had three things wrong with the boiler last year and he said if I hadn’t had them repaired there would have been a carbon monoxide leak. I was horrified; I was really shaken because I’ve got two girls here. Especially by the fact that carbon monoxide could have leaked out because of the installation.”

The plumber found part of her boiler had melted, giving rise to the strange smell.

25 September 2008
Gas safety checks at 319 new Barratt homes
The gas central heating systems in 269 homes in Colchester built by Barratt Developments underwent safety checks after concern was raised about the standard of their installation, with condensation stains spotted on a ceiling indicating evidence that a twin-pipe flue was leaking. The UK’s largest housebuilder said occupants could be at risk of carbon monoxide poisoning because of problems with flue installations. Another 50 apartments on a Barratt development in Leeds were notified of similar problems. Residents were told to contact British Gas to safety-check their systems; with others having the gas supply to their homes switched off to ensure their safety. The Barratt spokesman saying at the time:
“After detailed discussions with the Health and Safety Executive, as a precautionary measure we have engaged British Gas to conduct quality assurance checks at a limited number of housing developments where a central heating system may have been installed.

31 January 2009
Gas supplies turned off in 340 Taylor Wimpey new homes
A Taylor Wimpey development of 340 homes at ‘Harbour Reach’ in Poole had their gas supplies turned off after a leak of a potentially fatal carbon monoxide was discovered, detected by a carbon monoxide detector, fitted in all homes owned by Raglan and Swaythling Housing Associations. One resident Chris Walsh, who had moved in over a year earlier, said at the time:
“We’ve been told there are serious problems with the boiler flues and levels of carbon monoxide, it’s a silent killer. When you buy a new property you get a [gas] certificate that the property has been tested and complies. How can that be allowed to have happened?”  

2 December 2010
HSE issued a safety bulletin which was updated on 20 May 2013
It is a requirement under The Gas Safety (Installation and Use) Regulations 1998 for a service engineer working on a boiler, to check the flue for correct operation. This cannot be done where the flue has been installed within the fabric of the building with no access. The most commonly installed boilers that could have been fitted with extended concealed flues are: Range Powermax, Potterton Powermax, Gledhill Gulfstream, Ideal iStor.

Even if there has not been a carbon monoxide leak in a home, engineers might discover that the flue pipes were not connected as securely as they should have been presenting an ongoing risk to the occupants if left unresolved. All homeowners especially those that have bought a new home are advised to fit a carbon monoxide detector. These can be bought for as little as £7 to £25 and could save you and your children’s lives!

9 July 2012
Couple poisoned by carbon monoxide for five years in Taylor Wimpey home
Doreen and Gerald Lee were exposed to carbon monoxide for five years because of a faulty boiler flue. They claimed housebuilder Taylor Wimpey had put their lives at risk after discovering that levels of deadly carbon monoxide in their ‘Winthorpe Gardens’ home in Borehamwood were “through the roof.” Their home had been built by Taylor Wimpey five years earlier, but a “wrongly installed” boiler flue only came to light when the property was checked five years later. Flats in another Taylor Wimpey development, ‘Keble Court’, next to Winthorpe Gardens, were evacuated on 14 July 2012 after more concerns about carbon monoxide leaks.

Six months earlier, Taylor Wimpey were forced to take action on another of their developments, the 791 home Grand Union Village, in Ealing and Hillingdon after elevated levels of carbon monoxide were discovered at an apartment in December 2011.

Taylor Wimpey inspect 9,000 homes in 4 years
Taylor WimpeyIn total, Taylor Wimpey had conducted inspections on more than 9,000 of its new homes in the four years to October 2012. It has even inspected homes that did not have extended concealed flues. Taylor Wimpey told Inside Housing:
“We have also identified that only a very small proportion of homeowners are having their gas boilers inspected and serviced regularly. In light of the concern that many customers are not having gas appliances inspected or serviced regularly, we have now amended our standard specification to include the installation of an audible carbon monoxide alarm in any room which contains a gas appliance.”

Taylor Wimpey wrote to all of its customers who bought homes completed from 2000 – when concealed extended flues were commonly used, highlighting the risks of carbon monoxide poisoning, emphasizing the importance of regular boiler servicing and offered to supply free carbon monoxide alarms. As of October 2012, Taylor Wimpey had written to a staggering 150,000 customers about the issue and says it has installed or supplied more than 30,000 audible carbon monoxide alarms since 2009 following the HSE safety bulletin in December 2010.

Persimmon, Britain’s second largest housebuilder by volume, whilst refusing to comment on whether it had found problems in any of its homes and whether it had taken steps to protect residents in homes with concealed flues, it did tell Inside Housing in October 2009 that it had found 384 properties that “did not have access panels in accordance with the safety requirements”. It had undertaken to complete work on these by December 2009.

March 2014
At risk notice on Barratt boiler after Ideal sent engineer to fix it
As John Gosling writes in his excellent blog ‘A Barratt Home From Hell’ that the Ideal engineer pointed to the air inlet on the outside wall explaining that because of the way it had been fitted, the boiler was receiving insufficient air and would not be running efficiently. After John called the HSE Barratt quickly fixed the problem.

23 November 2015
Home built in 2006 had unsealed flue
An inspector found a fault with the boiler of a home built by Roland Bardsley Homes in 2006. The company being acquired by David Wilson Homes in 2006. Louise Dunn, from Shaw near Oldham, suffered symptoms of carbon monoxide poisoning in November 2015.  It was discovered that the flue, designed to take carbon monoxide away from the home, was left unsealed, meaning the toxic gas could leak back into the house.

December 2016
Taylor Wimpey still apparently have issues on their developments around the UK with boilers.

A Taylor Wimpey homebuyer recently posted on the forum :

“We have an ongoing issue with Taylor Wimpey. An insurance-appointed engineer shit down out boiler because it was “dangerously unsafe” He found that the flue to our boiler was incorrectly fitted at installation because flue lengths were cut too short, damaged elbow and missing seals. A second engineer second engineer of my choice, attended [on 11 January 2016] and pretty much reached the same conclusions Taylor Wimpey have sent their own independent engineer but they are refusing to share their findings (which I’m not surprised at). Carbon monoxide has been leaking into our home, which explains why I get headaches and nauseous when working at home. Fortunately, we have a three-storey townhouse and neither of us spend that much time on the top floor. We’ve been without running hot water and heating since 30th December 2016 because the engineer shut down our boiler on the grounds that it was dangerously unsafe.

 “I’ve since learned that Taylor Wimpey have had issues on other developments around the UK with boilers and subsequent carbon monoxide emissions. Indeed, on our development a string of boiler failures prompted Taylor Wimpey to install carbon monoxide alarm monitors on every home on site (almost 300). About four years ago, a row of houses on our development had some pretty serious boiler issues. After the remedial works were completed, Taylor Wimpey then sent ‘engineers’ to every home and installed CO [Carbon Monoxide] monitors outside every boiler cupboard and allegedly checked every flue. They fitted three brackets to ours, one in the boiler cupboard and two on the main body of the flue in the loft.”

I can’t begin to list the number of issues other new homebuyers have told me about. Most concern boilers found to be “wired incorrectly” after the first annual service was carried out. This forum post concerning Charles Church homes  being typical.

Independent inspections of Gas and Electrical installations

At the APPG Inquiry Into the Quality of New Homes in November 2015 I made a submission/presentation and said that there should be:
“Independent Electrical and Gas installation inspections. Electrical and gas safety inspections must be carried out by an outside inspector rather than the current self-certification by the individual or installing contractor.”

I have asked government for this measure to be considered for inclusion in the Housing White Paper (along with the New Homes Ombudsman) as people’s lives are being put at risk and certain house builders retrospectively fitting carbon monoxide alarms is not a solution to the leaking, potentially lethal, boiler flues and incorrectly installed gas boilers.

As a minimum, it is essential to make fitting carbon monoxide detectors in all new homes a mandatory Building Regulations requirement and NHBC warranty standard. As it stands, there is no legal requirement for builder, landlords or gas companies in England and Wales to install alarms where there are only gas appliances. There is a duty under the Building Regulations Part J from 1 October 2010, when a solid fuel or bio fuel heating system is installed, such as a wood burning stove.

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Housebuilders’ Recommend A Friend Schemes

We all know about the oft-quoted HBF survey question: “Would you recommend your builder to a friend?” In the 2016 survey results an somewhat unbelievable 85% said they would, but did they? Most of the large house builders have recommend a friend schemes also known as “send a friend.” Normally a leaflet outlining the scheme is dropped in the Welcome Pack buyers are given when they move in to their new home. They offer a cash payment to buyers who recommend a friend or someone who goes on to buy a home from the house builder. These payments vary considerably from a paltry £300 (Keepmoat) up to £4,000, although it appears £500 is the most common.

For most, the extra money will come in handy at a time of need, especially with all the costs associated with moving home. But beware there is a procedure and significant hoops to jump through before you can get your referral cash,  even then it can take several weeks. The referral payment is only made following the friend’s legal completion.

Firstly, you should also consider whether your house builder is worthy of recommendation. Would your friend thank you if their new home turned out to be an unmitigated disaster from hell as they often do?

Check recommend a friend expiry dates or time limits

A Ben Bailey (part of Avant group) new homebuyer told me that:
“despite having proof of her recommendation under the recommend a friend scheme and their friends also having made it clear from the outset that they had been recommended on their first visit when they reserved their property and on subsequent visits to pick flooring, tiles etc. – the sales advisor kept saying she would look into it but just before completion told them they don’t qualify for the referral fee without any explanation why!”
It transpired that the reservation was made three days beyond the expiry date of the recommend a friend offer.
 Another buyer says:
“Having done this, we tried but failed to jump through all the hoops. Amongst other things, we were told we submitted the form too late. Notwithstanding we had never been given one. My impression of the scheme is that it appears to be a con. When I questioned the issues I was almost made out to be lying about the facts and this from a company who pride themselves upon customer care.”

Buyers have to chase their house builder for their referral payments
“We received the cash (well, cheque) but did have to chase for it. Numerous phone calls to the head office over the course of 5 or 6 weeks for each promotion claim.” 

Most house builders stipulate the form has to be submitted on the first visit to the sales office at the time the friend buys the property.

Be especially wary of schemes that say “up to £2,000” for example.
Bovis Recommend a FriendAll house builder’s sales advisors are given what are known as negotiables. They are an amount of discount they can offer, which can be a reduction in price, and/or “free” optional extras such as turf rear gardens and carpets for example, without having to ask their manager. So when a buyer negotiates a £5,000 discount they won’t get the “free” turf or carpets that their neighbour got for “free” included in the full price they paid. It would be foolish to believe that the recommend a friend referral payment isn’t coming out of their negotiables budget and so the recommended friend will be actually paying the buyer’s referring them!

Read the small print!
Persimmon Homes Recommend a FriendWatch out for time restrictions and requirements such as presenting the recommend a friend voucher before any price negotiations take place.

Persimmons voucher states that: “For a limited period only”- “This voucher is to be given to the Sales Advisor before any purchase negotiations have begun.” Now you know why!

Redrow states the voucher: “must be completed and handed to the sales advisor at the time of reservation.”

A Bovis buyer posted online:
“My friend got £500 for recommending Bovis to us. The Sales team weren’t happy that we didn’t mention it straight away as they said that would have affected the deal that they were able to give us. It definitely goes against the buyer to say you were recommended by someone”

Bovis Homes optimistically included four recommend a friend referral postcards in their Welcome Packs, working out at four recommendations of £500 for each one.

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Bovis give buyers £3,000 cash incentives to move into unfinished new homes.

Bovis Homes

Just when I think there isn’t anything else this industry can shock me with – coverage in the national press has revealed that Bovis Homes offered “bribes” of up to £3,000 to their buyers if they legally completed or moved into unfinished new homes on or before 23rd December 2016. This was done in a vain attempt to meet the City forecasted target of 4,170 completions for their financial year-end.

The “incentives” were offered to buyers just days before Bovis issued a profit warning, stating that 180 homes were “being deferred into early 2017” resulting in profits lower than previously expected. Equity analyst Anthony Codling at investment bank Jefferies, told The Times: “This will be where they are trying to make their targets. They would have been trying their hardest to complete those homes to get people moved in before Christmas. There is pressure from an investor perspective to meet the volume target and they will do what they can to meet those targets.”

Other analysts said that the cash incentives from Bovis were part of a failed attempt by the FTSE 250 company to meet City targets saying Bovis’ share price had “substantially underperformed the sector over the last seven years.”

Have Bovis Group attempted to deceive investors and the City as to the true year-end results of the Company, by pushing through legal completions (sales) on new homes that were not 100% finished at year-end? I am no expert on financial reporting regulations but more is here.  Perhaps this is something that the Financial Conduct Authority [FCA] should be investigating.

Outraged buyers have taken to social media complaining about Bovis asking them to legally complete on unfinished homes with no driveways, windows, paths, gardens, unpainted walls and even the wrong kitchen units being installed. The Facebook Group “Bovis Homes Victims” now has over 1,000 members, as media reporters and others join to find out what buyers are saying about the company on the Closed group.

Rob Elmes, 32, told The Times he refused to accept an initial offer of £2,000 to complete on a three-bedroom £320,000 home in Worcestershire and was offered £3,000 four days later to legally complete on 23rd December. Mr Elmes refused, saying that his home was not yet finished with workmen still in the house and his drive unfinished. To compound matters, Bovis have even managed to fit the wrong kitchen!

Bovis have admitted that customers had been offered an incentive to complete before the year’s end, but claimed that no one was forced to move in before Christmas.

A spokesman from Bovis said: “Customers were clearly free to decide their preferred course of action. The Group often offers a range of incentives at sale and completion in line with industry practice.”

The firm said that all homes “were habitable”, with the required industry certification as per the Council of Mortgage Lenders’ Handbook Rules. A Bovis spokesman said: “A limited number of customers were offered an incentive to complete before the year end and all homes were habitable with the requisite CML industry certification, with a timetable for outstanding finishing works to be carried out in the New Year”

However the reality would appear to be different and members of the Bovis Victims Facebook Group were quick to add their experiences. One member who has asked not to be named, said she was initially told she was due to move to her new Bovis home in October.” She posted: “We were offered £2,000 by Bovis to complete early on 23 December and told we’d be able to move in to our home over a month later on January 27th. We decided not to take the offer due to the shaky legality and were assured this wouldn’t affect the build. We’ve just been informed our anticipated completion has now moved to 31 March”

How could these homes be regarded as “habitable”? It can hardly be substantially complete if it will take up to three further months to complete the “outstanding finishing works.”

On 23rd December, posts on the group included: “Bovis want us to complete today and move in and [sic] the end of January.” Another Bovis buyer claimed that even if they had accepted Bovis’ cash offer they were unable to legally complete because Bovis had “not completed the correct Help to Buy document.” In addition, forcing or coercing buyers to legally complete on unfinished houses is not new. One posted that they were put in a hotel for 10 days as Bovis would not wait till after Christmas back in 2013. They wanted to complete asap. Been a fight ever since”

Bovis told The Guardian: “We recognise that our customer service has to improve and the leadership of the organisation is absolutely committed to getting this right.” This came just two days after Bovis CEO David Ritchie “resigned” who admitted a “limited number” of customers were offered an incentive to complete before the end of the year, but no one was forced to move in.

Bovis Apologises

On another Bovis development, the company has finally bowed to pressure and has apologised to buyers for problems at two sites in Norfolk. A Bovis’ spokesman said:

“We are working with our customers at Costessey and Cringleford to resolve their issues and we take their complaints very seriously. We recognise that in some cases at these locations we have not provided the standard of home that we pride ourselves on, for which we apologise. We also recognise that our customer service has to improve and we are absolutely committed to getting this right and are taking actions to put in place robust procedures and practices to rectify issues such as these and prevent them from occurring again.”

My award for ‘best headline’ currently goes to The Sun with “Bovis and Butthead”

Council of Mortgage Lenders (CML) Rules

The CML website states:
“Under rules introduced in April 2003, to help eliminate the practice of builders allowing occupation before the home is completely finished, the Council for Mortgage Lenders’ (CML) initiative requires builders to obtain a completion certificate. This is issued by an independent Building Inspector, normally the NHBC, following a satisfactory final inspection of the property. The lender requires this completion certificate, along with confirmation that the new home warranty is in place, before they release the mortgage funds.  

It is common for the Final Inspection to be made 14 days before the completion date. This will give the solicitors and mortgage provider time to arrange for the funds and provide you with an opportunity to inspect your finished home.”

Could those Bovis buyers, in accepting the “incentive” payments and legally completing on an unfinished and uninhabitable new home, be innocently complicit with Bovis Homes, the solicitors and the warranty inspector in potential mortgage fraud? The homes would not have been in the condition on completion and therefore the full value, that the lenders believed. Even more, those bought using Help To Buy may have, proportionally, also defrauded the taxpayer!

The Council of Mortgage Lenders told me:
“We can’t comment specifically on these cases in relation to mortgage fraud, as I am sure you’ll understand. I think our members will be concerned about the emergence of this practice, [payments to buyers to legally complete on unfinished new homes] however – as you rightly point out, this practice shouldn’t be able to happen as the properties must be inspected and signed off as complete for habitation; the use of a cash incentive will also potentially distort the true value of the property if the valuer is unaware of it.

For clarity, the CML does not have its own ‘certification’ process in relation to new homes completion. We think this reference is probably to the CML Lenders’ Handbook, which is a set of instructions to conveyancers. In that, it stipulates that lenders require a form of new home warranty (such as an NHBC warranty) to be in place prior to completion, which the conveyancer checks as part of the conveyancing process. This requirement was introduced some years ago to prevent this very issue. It may be useful to contact warranty providers, to establish how they think this might be happening.”

Indeed it might; so I did. I asked the NHBC how it was possible for a CML final inspection certificate to be ‘signed off’ by the NHBC inspector? Especially when some of these houses were clearly far from finished requiring in one case, three months work! Another had not been decorated.

The NHBC said:
“All homes registered with NHBC are inspected at key stages of construction. This includes a pre-handover inspection, which is designed to ensure that the property is fit for occupation and that our 10-year warranty cover can be provided. Where people do experience issues with their new homes we offer protection under our warranty for 10 years, including a free Resolution service in the first two years. We would encourage homeowner (or constituents) with concerns about their new home to get in touch with us so that we can offer them our help.” 

Not exactly enlightening is it? Again, how is it that any of these homes are judged finished and “fit for occupation”? On 6th January, NHBC Chief Executive Mike Quinton quit after four years – three days ahead of David Ritchie’s “resignation” as Bovis’ CEO.

NHBC Guide to CML InitiativeUnder the CML rules introduced in April 2003, a lender will not release the mortgage funds for a new property until the buyer’s conveyancer has received confirmation, in the form of a cover note, that the property has received a satisfactory final inspection and that a full new home warranty will be in place on or before legal completion. In an excellent article (March 2010) Building.co.uk highlighted that the “A Guide to the CML Certificate” ended with a warning stating that: “If [the consultant] signs the certificate and defects are subsequently found to affect the property, it is highly likely that they will face a claim on their professional indemnity insurance some way down the line.”

You also have to question quite what, (if anything) the buyer’s solicitor entered into the CML “Disclosure of Incentives form” (Section 10) for those that chose to take the Bovis’ incentive!

HBF Buyers’ customer survey ratings

This letter breaches HBF rules 23,24 & 25.It would appear that Bovis are also manipulating the HBF Customer Satisfaction Survey. Bovis Homes, rated just three stars by its customers for the last two years, has allegedly offered John Lewis vouchers to buyers in return “for giving good feedback on the NHBC survey” Whilst not uncommon within the industry, this is clearly against the HBF Star Rating rules 21,22,24 and 25.

Barratt, Persimmon and Taylor Wimpey distance themselves from this latest scandal

Last Thursday Tom Knowles reported in The Times that the country’s biggest housebuilders were distancing themselves from the scandal, in particular Bovis’ claims that cash payments to buyers to legally complete on unfinished homes was “in line with industry practice.

The scandal has led to Oliver Colvile MP, chairman of the All Party Parliamentary Group For Excellence in the Built Environment, to call for a debate into the standard of new homes, he said: “We will try to have a debate in the House of Commons about the quality of new-build housing. We need to press the government to do more.” In July last year, Mr Colvile and a group of MPs published their Inquiry Report detailing ten recommendations, which included my suggestion that buyers or their surveyors, have a mandatory right to inspect their properties before they complete their purchase. Many Bovis new home buyers have complained they were not allowed to enter their homes until the day of completion and on doing so, discovered workmen attempting to complete the works in time.

In a statement Bovis suggested offering cash to customers to complete by a certain date was “in line with industry practice”, but the three biggest housebuilders, Barratt, Persimmon and Taylor Wimpey, said that they never make this offer. Ryan Mangold, chief financial officer of Taylor Wimpey, said: “We have never given cash incentives to get buyers to move in by a certain date.” Peter Truscott, chief executive of Galliford Try, said that while developers occasionally offered investors buying several homes, cash incentives to complete by a set date, this was not the case for individual customers. The Home Builders Federation said: “It is not common industry practice to offer cash to new home buyers to complete early.”

However, a Persimmon homebuyer posted on ‘Unhappy New Home Buyers’ Facebook Group:
I read that about this morning in The Mail. Persimmon tried this on lots of our purchasers including us in 2010, but for some reason we had put our money in a 6 month Bond and told them where to go…..needless to say we won….but our neighbours moved in with Windows missing!, Trouble is it did not do us any good because we had so many problems, and still have some, we pay out for some things ourselves, but some [sic] we live with!”

A spokesman for Bovis told The Times:
Each individual customer was approached on a case-by-case basis and, where appropriate, they were offered the opportunity to move into their homes in time for Christmas with an agreed timetable for outstanding finishing works to be carried out in the New Year. Customers were offered help in the form of payments for a range of reasons in light of the extra costs they would incur by doing so . . . Similarly, some customers were offered compensation payments as a gesture of goodwill in light of the added disruption over the festive period.”

The scandal is so serious that several MPs have said they could raise the issue in Parliament. Among them are Labour MP Melanie Onn, former Tory housing minister Mark Prisk and as mentioned earlier, APPG EBE Chairman Oliver Colville MP. However the fact of the matter is that issues such as these are not new. The APPG EBE ‘Inquiry Into the Quality of New Homes In England’ found that “as the number of homes being built increased, the quality of new homes has declined.” The Inquiry Report painted a damning picture of a broken industry, bereft of any moral compass. It said:

“The evidence points to an industry…which will at times ride rough-shod over dissatisfied buyers… House builders should be upping their game and putting consumers at the heart of the business model…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…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.”

Debate or no debate, it is to be hoped that the forthcoming Housing White Paper due later this month, does indeed take note of the ten recommendations of the APPG Inquiry Report and includes measures to address the ongoing quality and service shortfalls of the major housebuilders, especially by undertaking to set up an independent New Homes Ombudsman before the end of this year.

It is my opinion that the buyers’ quotations in this article, reproduced entirely as they were originally written on posts freely available on Facebook,  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 and statements that any reasonable person might also conclude. I believe this is a matter of public interest.

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Bovis Homes CEO David Ritchie “Resigns”

Bovis CEO David Ritchie Officially at least, David Ritchie, CEO of Bovis Group, Britain’s 6th largest house builder by volume ‘stepped-down’ yesterday with immediate effect after eight years in charge. It took Bovis less than a day to remove Ritchie’s profile from its corporate website. The Evening Standard reported that “doubts over Ritchie’s position are understood to have come to a head in recent days culminating in a board meeting at which he offered his resignation to chairman Ian Tyler, who accepted.”

The announcement coming just three days after the resignation of NHBC chief executive Mike Quinton and 13 days after Bovis issued a profit warning  (on 28 December 2016) saying that pre tax profits would be lower than predicted:

“we have experienced slower-than-expected build production across the group’s sites during December, resulting in approximately 180 largely built and sold private homes that were expected to complete in 2016 being deferred into early 2017”

The company issued a similar profit warning in November 2015, at the time blaming planning delays and rising costs caused by labour shortages.

Following this, in February 2016 Bovis’ announced that poor productivity and poor quality of work was forcing it to review and replace a substantial number of sub contractors across its sites.

But are housebuilders are placing too much importance on their year-end figures and rushing completions?  Bovis Homes have regularly over-stated and under-achieved their beleaguered buyers. Now it would appear they have been doing this to investors.

Bovis homebuyers are not ignorant of the issues regarding the rush for year-end completions with one tweeting:  “sales equals targets equals bonuses! Buyers are conned into moving into incomplete homes #yearend”

Tweeting about the Bovis year-end legal completions on one development: “completions on 23 December 2016 were especially bad. Owners residing in homes with no driveways, windows, gardens. Yet it’s happening! Cash incentives for buyers to complete is common practice!”

Bovis buyer's warning!But just how unfinished were the homes that were put back to “early 2017”? It is also questionable why the warranty inspector ‘signed-off’ the CML final inspection certificate if these homes were so unfinished that buyers were allegedly “bribed” to legally complete regardless. This should not have been possible without a final inspection and a signed-off CML completion certificate. KentOnline said: “it has emerged many families due to move into its Orchard Fields development in Maidstone were told their properties were not ready – some with less than 24 hours notice.”

Ritchie, who was paid £1.54 million in 2015 including his £550,000 salary, is understood to have received a payoff, reportedly a year’s salary (to be announced in April) and has no other job to go to. Ritchie remains as non-executive director of Irn Bru soft drink maker AG Barr, following his appointment in April 2015.

Ritchie a chartered accountant joined Bovis in June 2002 as Group Financial Director and became Group Managing Director in January 2007. He took the helm as CEO in July 2008.

Bovis statement on Monday said:

“The Board of Bovis Homes Group PLC announces today that David Ritchie, Chief Executive, has notified the Group of his intention to leave the Company..

David will step down as Chief Executive of the Group and as a Board Director with immediate effect but will remain with the Group until 28 February 2017 to assist with the process of transition. The Board has appointed Earl Sibley, the Group’s Finance Director, as Interim Chief Executive with immediate effect and will immediately initiate a process to appoint a permanent successor which is expected to take several months.”

Shares in the house builder rose 2% – up 15p to 831p on the news.  Earl Sibley (44)  joined Bovis Group in April 2015.

David Ritchie said:

“It has been a privilege to serve Bovis Homes as its Chief Executive over the last eight years as the Group has doubled in size and delivered record profits. I believe now is the right time for someone new to lead the Group into its next phase of development. I have spent over 18 years working for this great company and I wish Bovis Homes every success in the future.”

So what did David Ritchie achieve?

When David Ritchie took charge in July 2008, the 2007 year-end annual report stated: turnover of £555m, profit was £123.6m (22.4%) with 2,930 new homes built in the 12 months. For 2016 turnover is forecast at £1,012.6m, profit is likely to be £165m with the number of homes built around 3,975. It can be seen that whilst turnover has indeed “doubled in size” due almost entirely to rising house prices with Bovis’ average selling price increasing from £83,400 in 2007 to £254,760  last year. However profit has increased just 33.5% and the number of new homes completed is up just 35.6% during Ritchie’s 8-year reign.Bovis salesIt is therefore hardly surprising that Bovis shares have gained just 128% since 2009. This is put into perspective when compared to the 600% rise Bloomberg UK Housebuilders’ Index. An analyst at Canaccord Genuity said Bovis share price has “substantially underperformed the wider sector over the last seven years. Production delivery issues have held the shares back over the last few years and the group’s returns are significantly below the sector average.”

Another analyst, Robin Hardy from Shore Capital, told the Evening Standard:

“We have long been concerned that there was something structurally wrong at Bovis and that — for reasons which were not wholly clear from the outside — Bovis was struggling to keep hold of key resources necessary to execute its growth plans. It has long been suspected there were cultural issues that ran right to the top of the organisation and that the business was less able to function freely and take best advantage of market conditions because of too much control.”

When Ritchie became CEO in July 2008, Bovis were rated just three stars by their customers in the HBF 8-week customer satisfaction survey, with just four other housebuilders rated higher. In 2015 and 2016 Bovis were again rated 3 stars by their customers. Only Persimmon and Avant being rated ‘as bad’ as Bovis Homes.

Bovis’ site managers have never excelled in the NHBC Pride in the Job competition either. With an average of just 4 NHBC Quality Awards each year since Ritchie took control and Bovis are the only major volume house builder that has failed to win a single NHBC Quality Award as they did in 2015!

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NHBC CEO Mike Quinton Quits NHBC

Mike QuintonQuinton Quits! 

Mike Quinton resigned yesterday, following four years as Chief Executive of the NHBC. He was appointed to the role in October 2012, taking over from his predecessor Imtiaz Farookhi, who stepped down on 28 February 2012 after 14 years in the role.

Isabel Hudson, Interim Executive ChairmanThe NHBC statement said: “From 1st February the current Chairman, Isabel Hudson, (e mail: ifhudson@nhbc.co.uk)will become Executive Chairman and Neil Jefferson, Business Development Director, will step up as Managing Director until a permanent successor has been appointed.”

“Since his arrival in 2012, Mike has taken NHBC forward and led the organisation successfully through a period of significant growth in the new build sector, supporting builders to deliver high quality new homes.”

Mr Quinton said in a statement:

“After four years, I’m pleased to leave NHBC in a strong position and well equipped to face the challenges ahead. I leave behind an organisation making a vital contribution to the UK housing sector. NHBC is valued, trusted and relied upon by housebuilders and homeowners and I am sure the organisation will continue to flourish in the years ahead. I wish the management team and all staff the very best for the future.”

With an accountancy background, Mike Quinton joined NHBC in October 2012, “bringing a wealth of experience gained in the insurance sector.” He had previously held several senior executive management positions with major UK insurance companies, including Zurich Financial Services Group, Prudential and RBS Insurance (as MD of insurer Churchill).

So what did Mike Quinton achieve?

I found Mike to be always accessible, replying personally to any enquiries I made. I also know from those homebuyers who were having issues with their claim, that he often replied to them personally. Compared to the CEO’s running the plc housebuilders, this was refreshing change in this broken, indifferent industry.

But given the NHBC core purpose is to be the standard-setting body and provider of warranty and insurance for new homes. Our purpose is to work with the house-building industry to raise the standards of new homes and to provide protection for homebuyers” just what has changed for the better in the last four years?

Well standards have certainly not been raised. In the HBF customer satisfaction scores in the 2013 survey; 91% would “recommend their builder to a friend” and 91% were “satisfied with the quality” of their new home. In the 2016 HBF survey, those figures are 85% and 86% respectively. The cost of claims under the Buildmark warranty has increased by over 23% from £73million in 2012/13 to £90million in the year to 31 March 2016.

The NHBC Annual Report covering the year to 31 March 2016, stated that 153,430 (110,255) homes were registered, £90million (£73million) was paid out in claims, 90% (86%) of buyers rated the NHBC service as “excellent” and there were 798,000 (527,273) inspections on new homes. The NHBC warranty covered 80% (80%) of all new homes built and it has 10,953 (13,074) Builders on its the register. (2012/13 figures in brackets). Perhaps the most notably improvement is that the NHBC now carries out 98.5% of its stage inspections.

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Commons Debate Leasehold New Houses Scandal

“The PPI of the house building Industry”

The APPG for Leasehold and Commonhold Reform managed to secure a debate in the commons chamber on Tuesday 20th December 2016 to discuss the leasehold new houses scandal. With 53 APPG members, it was surprising that only 13 MPs and Housing Minister Gavin Barwell attended initially. I previously highlighted the scandal of leasehold new houses on 7 November 2016 entitled “The next mis-selling scandal” This phrase apparently being picked up, with the Labour MP for Ellesmere Port and Neston, Justin Madders calling the practice during the debate as “the PPI of the house building Industry”. See also Never buy a leasehold new house 28 October 2016

leasehold new houses scandal

Leasehold new houses scandal

LeaseholdAn analysis by the excellent campaign group  Leasehold Knowledge Partnership (LKP) in November 2016, revealed that 8,775 new-build leasehold houses totalling nearly £2billion were sold in England and Wales last year. In all around 45,000 new houses have been registered as leasehold. Many of these bought with help from taxpayers’ through the Help to Buy scheme. In most cases, the housebuilder sells the freehold after a couple of years to a private company, which can then demand extortionate fees from homebuyers.

The LKP say that housebuilders are collectively making an extra £300-£500 million a year from selling new homes as leasehold and then selling freeholds to third parties. The only conceivable reason is to produce an income stream, whilst not illegal, it’s not morally right. The Sunday Times recently reported that over the last two years, Berkeley Group has made a £136million profit selling ground rents that generate £153million a year. In their 2015 annual report Berkeley stated During the year, the Group sold a portfolio of ground rent assets at a gross profit of £85.1 million.” In their 2016 annual accounts, Barratt Developments declared an income of £51.6 million (£34.7 million in 2015) under “other income … which principally comprises the sale of freehold reversions, ground rents, property management income and management fees receivable from joint ventures”.

On 13 September 2015 the LKP said:

“politicians supposedly concerned with issues of leasehold should be questioning this matter. Indeed Persimmon should be under further scrutiny for holding its freeholds in offshore companies – the easier to flog off to anonymous entities and avoid the leaseholders’ right of first refusal. Jeffrey Fairburn, CEO of Persimmon, says he wants to engage with ‘stakeholders’, but is less enthusiastic to explain why he is building leasehold houses around the country”

Following pressure from MPs and the LKP Taylor Wimpey has undertaken to cease building and selling leasehold new houses from 1 January 2017. The government said it will scrutinise the enthusiastic monetisation of leasehold by other housebuilders in the New Year, including Bellway, Redrow and Persimmon, whose leasehold houses are built and offered for sale nationally.

Some housebuilders have been selling leasehold houses since 2007. Housing minister Gavin Barwell confirmed that 43% of all new build registrations in England and Wales in 2016 were leasehold.”

According to a survey by LKP of 105 leaseholders with onerous ground rents: 58% bought their properties using the solicitors recommended by the housebuilder. When asked whether the solicitors highlighted or indicated the ground rent terms, most replied “no”. All respondents claim solicitors did not inform them that the ground rent terms could affect resale values, as legal practitioners are obliged to do. 25% bought through the taxpayer-backed Help to Buy scheme.”

MP’s debate the leasehold new houses scandal

For the full Hansard transcript of the debate click

Sir Peter Bottomley comprehensively exposed the abuses and he named names. He said this “goes beyond sleaze”. A CBRE report stated that some people who are developing property with leaseholds are now selling the freehold in advance so that they escape the responsibility of offering it to the leaseholders after two years. He said: “I own some shares in Persimmon and some in Taylor Wimpey, and I might buy some shares in other builders. If necessary, I shall go to their AGMs, giving notice in advance, to ask what they will do to unwind the problems that they created in the past.”

The leasehold new houses scandal
Justin Madders
Labour MP for Ellesmere Port and Neston

“This is nothing short of a national scandal. It is the  PPI of the house building industry.

Thousands of people around the country who bought new homes in good faith are the victims of what can only be described as a racket by some of the country’s best-known developers, who between them have received millions of pounds from taxpayers to provide affordable homes and have also been the recipients of generous subsidies as a result of policies such as the Help to Buy scheme.

When people buy their home, they like to know who they are buying it from, but leaseholds are often sold on to third parties who can then vary the agreed terms of the leasehold, at which point—this is a scandal—developers claim that it is no longer anything to do with them

The prices quoted [for buying the freehold] can vary significantly for almost identical properties, suggests that the buy-out costs are calculated on nothing more than what the investors think they can get away with.

One constituent received advice from solicitors who were recommended to her by Taylor Wimpey, and she felt under some pressure to appoint them. She was advised that the lease did not impose an unduly onerous or prejudicial burden. This was for a leasehold Taylor Wimpey house with a ground rent that doubled every ten years.

It is a cynical business decision, which will in the long run damage the reputation of those involved.

It is also disappointing that the newest development in my constituency, currently being constructed by Redrow Homes, is also being sold on a leasehold basis. Redrow tells me that this fact is made known to purchasers before they reserve their property, although I note that on its website the promotion of that particular development makes no mention of that. What is particularly disappointing is that Redrow, despite my asking twice why it feels the need to sell large detached family homes on a leasehold basis, offers no justification whatsoever.”

“Does he [Housing Minister Gavin Barwell] agree that developers should be prohibited from recommending a particular solicitor to purchasers because of the clear potential for a conflict of interest and the clear failure, as we have seen here, to provide the best advice?”

“Will the Minister consider withdrawing and recouping taxpayer subsidies to any development found to be ripping off householders in this way?”

I am sure Oliver Colville will recall my presentation to the APPG Inquiry Into the Quality of New Homes, when I called for an “end state funding and government help for failing and indifferent housebuilders.” I am not sure how this funding can be retrospectively “recouped” from particular housebuilders, but Help to Buy and other schemes are no longer necessary as low-rate mortgages are now freely available. I also suggested that No housebuilder should be allowed to encourage their buyer to use any particular firm of solicitors or mortgage broker.” Now MPs can see the damage that housebuilder suggested/recommended solicitors does and how this clear conflict of interest adversely affects and disadvantages new homebuyers.

Oliver Colville said that housebuilders are selling the freeholds in advance so they do not have to be offered to new home leaseholders.

Housing Minister Gavin Barwell said that he acknowledges that many of the examples raised by MPs in the debate are not exceptions and that there are widespread problems that need addressing. He said:

“Analysis by LKP suggests that nearly 9,000 houses were built and sold last year as leasehold. Some have no shared services or estate management functions. In fact, they seem to exist only to create a reliable income stream from the ground rent, permissions to alter the property, and selling on the freehold at some point in the future. Developers can maximise their return by selling the freehold interest to the leaseholder at a higher value after they have moved in, or by selling it to a third party without informing the leaseholder. That is a critical point: if a freeholder wishes to sell a leasehold flat, the leaseholder has the right of first refusal, but that right does not extend to those in leasehold houses. The Secretary of State [Sajid Javid] and I have been looking closely at the issues raised in recent weeks and we are both absolutely determined to stamp out unfair, unjust and unacceptable abuse of the leasehold system.

We should not be under any illusions. The problem does not just concern one company; a number of our larger developers are involved in it. They would do well to remember that they are building homes for people to live in, not investment vehicles for financial institutions. Except in a very few exceptional circumstances, I cannot think of any good reason for houses to be built on a leasehold basis. If the industry does not put a stop to the practice and help existing homeowners, we will look to see what Government can do.

Both this House and the Government want to hear more from the developers about what they are going to do to put the situation right.

The motion states that the House “has considered” this issue, and I want to reassure my honourable Friend that it will be considered by the Government and that we will come back in the New Year with proposals about how to tackle it.”

Quite frankly, the housing minister should be telling the housebuilders what they must do, not asking them for their proposals to end this leasehold new houses scandal. After all, it is the lack of any law prohibiting this that has enabled the housebuilders to get away with this practice for nearly ten years, yet only now is government recognising the problem.

On 5th October 2016 Prime Minister Theresa May told the Conservative Party Conference that she was about:

“Righting Wrongs : Challenging vested interests : Taking big decisions : Doing what we believe to be right : Getting the job done : That’s the good that Government can do and that’s what I’m in this for : Standing up for the weak, standing up to the strong.”

“Standing up” to housebuilders and “righting wrongs”. Banning the sale of leasehold new houses and ending Help to Buy on 1st January 2017,  making it illegal for housebuilders to nominate, suggest, recommend or offer homebuyers cash inducements to use a preferred firm of solicitors and setting up a New Homes Ombudsman would be a good place to start Mrs May!

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Affordable home building has dipped to a 24-year low

The latest data figures from the DCLG on Affordable Housing supply April 2015 to March 2016 published yesterday, show that the number of affordable homes built in England in 2015/16 has fallen to its lowest level for 24 years. In total, just 32,110 new affordable homes were added – a 52% decline on the previous twelve months (66,600).

Affordable housing

Figures for affordable housing are split into three catagories: social rent, affordable rent and affordable home ownership/shared ownership.

The DCLG figures showed the number of new homes for ‘social rent’ fell to just 6,550 – 83% lower than the 39,500 built in 2010/11. The number of homes for private rental at ‘affordable rent’ has now fallen 41% from a peak of 40,730 in 2014/15 to 16,550 in 2015/16. The total constructed for ‘affordable home ownership’ has also dropped 21% from 15,970 to only 3,430 over the same period.Affordable housingLabour housing spokesman John Healey said:

“The figures showed the government was building the lowest number of social rented homes since records began. This all-time low results from Conservative ministers who have washed their hands of any responsibility to build the homes families on ordinary incomes need. We’ve seen six wasted years with the Tories in charge of housing. They have no long-term plan for housing and they’re doing too little to fix the housing crisis for millions of people who are just managing to cover their housing costs.”

Mr Healey also claims the government was trying to hide its “failure” classifying homes as “affordable housing” when they are available at 80% of market rent or can be being sold for as much as £450,000.

“Public concern about housing is at the highest level for 40 years. Millions of families are struggling with high housing costs.”

Affordable housing 2001 to 2016A spokesman for the DCLG explained the drop, saying:

“Delivery is normally lower in the first year of any new housing programme and so these figures are expected as part of a five-year housebuilding cycle. Building more homes is an absolute priority for this government, which is why we have doubled the housing budget to £8bn and we now have the largest affordable housing programme in 40 years. Furthermore, latest figures out this week show overall housebuilding is at its highest level in eight years and we will be publishing our White Paper shortly, setting out our plans to build more homes and more quickly.”

On average house prices have increased by 7% per year since 1980. Unsurprisingly, home ownership is now at its lowest level since 1985 at 63.5%.  So why has the government relaxed and abandoned affordable housing and social housing planning (section 106) requirements?

home ownesrhip rates 2006-2015

Councils spend £3.5bn on temporary accommodation since 2011.

Anne Baxendale, head of policy and public affairs at Shelter told the BBC:

“At a time when this country is crying out for more genuinely affordable homes, these figures are not only shocking but unacceptable. With 120,000 children set to spend Christmas homeless and in temporary accommodation and a whole generation of private renters living from one pay cheque to the next, the new government needs to get a grip on this problem once and for all.”

Meanwhile figures obtained by the BBC through the Freedom of Information Act show councils in Britain have spent more than £3.5bn on temporary accommodation for homeless families in the last five years. During that time the annual cost has risen 43%, with councils spending £851m on temporary housing in 2015 alone, which could have been used to build around 8,500 new council houses on publicly-owned land.

According to data acquired by the BBC, around 61% of the £3.5bn has been spent in London, while 85% of the increase in costs there since 2011/12.

Homeless charity Crisis said the number of people in temporary accommodation was rising at an “alarming rate” and the Local Government Association said the costs were “unsustainable”.

A spokesman for the Department for Communities and Local Government said:

“Time spent in temporary accommodation ensures people have a roof over their head and the number of households in temporary accommodation is well below the 2004 peak. This government has invested £500m to tackle homelessness – including prevention funding and £40m for councils to help rough sleepers. We are also backing Bob Blackman’s [MP] Homelessness Reduction Bill, which will also provide vital support for many more people.”

The Local Government Association said councils must be able to replace sold homes and reinvest in building more of the genuine affordable homes.

University research shows housebuilders are profiting from government policies

Research by Sheffield Hallam University Centre for Regional and Economic Social Research, analysed the UK’s nine largest housebuilders between 2010 and 2015.  It found that housebuilders are growing profits from the housing shortages across the country.

The nine largest housebuilders, responsible for almost half of all new housing starts in the country, increased their housing output by 33% in the period from 2012 to 2015. In the same period their revenues grew 76%, with profit before tax rising by 200%. The research also showed that accounting end of year profits for the five largest housebuilder increased from £372 million in 2010 to over £2 billion by the end of 2015 – an increase of over 480%.

The research report states:

“In 2015, the biggest five housebuilders returned 43 per cent of their annual profits to shareholders, an amount totalling £936m. This raises questions about the potential volume of new supply that could have been provided through reinvestment of at least some of this money.”

On Help to Buy

“Help to Buy has so far generated a 14 per cent increase in supply, which is well short of the fundamental uplift in output that is required. The risk with demand-side initiatives is that they end up simply subsidising households to afford high prices, and for a temporary period.”

“there is scope for the government to do much more to increase investment by local authorities, housing associations and other non-profit bodies for housebuilding. It needs the political will to do it.”

A spokesman for the research team also said:

“Reliance on the private sector alone is not enough: unless there is also a major upscaling in housebuilding by local authorities, housing associations and other non-profit organisations, the crisis in housing supply will continue”

Housing minister Gavin Barwell commented:

“We know there is more to do to ensure the housing market works for everyone and not just the privileged few, and we will be setting out further details in our Housing White Paper shortly.”

A few suggestions for the White Paper:
  • Change government policy from subsidising and promoting home ownership and start building 100,000 council houses a year fro people to rent.
  • Impose a 50% windfall tax on land value planning uplift.
  • Compulsory purchase at pre planning values (less planning costs) any land not started within two years of planning approval.
  • Use this revenue to build new councils houses on confiscated land.
  • Require housebuilders to build 15% affordable housing and 25% social rent out of their total output each year.
  • End Help to Buy and divert the funding to local authorities to build council houses.
  • Cancel the “right to buy” for rented social housing and council houses.
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Leasehold new houses – the next mis-selling scandal?

Caught in a trap – Leasehold new houses

Given the information, no new homebuyer would ever choose to buy a house with a leasehold title. Perhaps this is why some housebuilders hide this extremely important information from new homebuyers. Even if they do think to ask about the property title, it’s no good saying “People are scared of change because it’s something new. But it’s virtually freehold.” As a Persimmon sales advisor told a reporter from The Guardian.

leasehold new houses

Is it Freehold? New homebuyers are getting caught out by newly-built leasehold houses.

Justin Madders MP for Ellesmere Port and Neston, is calling for a ban on leasehold new houses:

“It is clear this system is being abused to drive huge profits at ordinary ­homeowners’ expense. There is no need for there to be leasehold properties, particularly those on an estate where the properties are mainly detached houses.

“They need to be banned – it may be a convenient way for developers to get extra profit from their building work, but once they get in the hands of these private equity companies the profit motive overrides any considerations that there are real people living in their homes, who are being asked to stump up eye-watering sums.”

As Patrick Collinson reported in The Guardian on Saturday 29 October 2016, a new house built by Taylor Wimpey in Ellesmere Port was sold for £155,000 on a 999-year lease in 2009. Seven years later, the owner was quoted £32,000 to buy the freehold from E&J estates who had bought the freeholds from Taylor Wimpey. Another buyer was quoted up to £40,000 by E&J estates for the freehold of their 2011, 4-bedroom £122,000 house and despite a long lease, another new homebuyer in Manchester is was forced to pay £38,000 to buy the freehold on their recently built home.

Escalating ground rent is another issue. Taylor Wimpey set the ground rent at £295 a year on the Ellesmere Port development, with the contract stating that ground rent will double every ten years!

The Guardian reports:

“Like thousands of others in England and Wales, buyers have been trapped by a controversial trend among housebuilders to sell homes as leasehold when they previously would have been freehold. The buyers are given reassuringly long 999-year leases – but later find that buying the freehold is prohibitively expensive.”

Government figures show that around 6,000 new houses were sold as leasehold last year. Previously, houses on new-build developments were sold as freehold, but leasehold new houses are becoming more common with the likes of Persimmon, Taylor Wimpey and Bellway selling houses as leasehold on their developments. Indeed a third of new houses sold by Persimmon are leasehold, around 4,372 in 2015, nearly three-quarters of all new leasehold houses registered in 2015.

Justin Madders, MP for Ellesmere Port and Neston, whose constituency covers the Taylor Wimpey development says the situation is: “morally indefensible”. 

“I have had a number of constituents contact me, saying they were aware at the time of purchase that the freehold was extra. However, they didn’t know the original developer sold the leaseholds to private investors who have ruthlessly exploited the law to line their own pockets.

“The prices they have been quoted to buy the freehold have rocketed beyond any reasonable sum people can afford. I have found constituents are unable to afford the fees being quoted and there are extortionate charges associated with obtaining permission to alter the property. Just over £2,500 was quoted for permission just to build an extension.”

The Guardian said it is easy for buyers to miss the fact that the new property is leasehold. For example, at Persimmon’s Agusta Park development in Yeovil, Somerset comprising of 2, 3 and 4-bedroom homes, all are being sold leasehold. Yet The Guardian reported there was no mention that the houses are leasehold on either Persimmon’s website, or in the site brochure.

Asking about the lease, Guardian reporters were told it was 999 years and the ground rent was £150, then £190, and eventually that the ground rent would go up every 10 years using a formula linked to the RPI. The Persimmon sales advisor said:

“It’s a 1,000-year lease. If she lives to 100 there will still be another 900 years to go. It’s virtually freehold. Flats are always sold as leasehold. Lots of [house] developments are going this way now. People are scared of change because it’s something new. But it’s virtually freehold.”

And regarding buying the freehold?

“It’s not available at the outset, but can be bought within two years. I’ve no idea. We don’t quote on the price of the freehold.”

Potential buyers allege they are not told about the leasehold until late in the process.

One Guardian Money reader said: “We were about to purchase a new house when we noticed that part of the communal charge for the upkeep of open spaces was for ground rent.” alleging that at no stage was the word leasehold used by the salespeople, nor was it in any of the documentation they signed. The reader said they pulled out of the purchase of the Persimmon home after seeing stories of housebuilders charging large fees just to give permission to make alterations, such as installing a conservatory and tens of thousands of pounds to purchase the freehold.

Developers were asked why they are selling houses as leasehold?

Persimmon told the Guardian:

“Persimmon sells a mixture of both leasehold and ­freehold properties. As Persimmon has acquired other ­companies over the decades, it has inherited the freehold reversions of leasehold properties sold by those businesses. There are around three million leaseholders in Britain. All Persimmon leasehold houses carry an extremely long ­999-year lease and customers are informed at ­purchase what type of property they are buying.”

Persimmon refused to state the typical ground rents charged, how much the company makes from selling freeholds, or the fees charged to leaseholders for approval for alterations or things like building a conservatory.

Taylor Wimpey ­confirmed it had sold freeholds to E&J Estates, but did not disclose the price, and would not comment on the £32,000 E&J Estates wanted for a freehold. They told the Guardian:

“At Taylor Wimpey the vast majority of our houses are sold on a freehold basis. However, in a small number of developments, ­predominantly in regions of the ­country where it is common practice in the market, we sell houses on a leasehold basis. Throughout any sale process, customers are fully informed of the ownership structure of the home. If a customer is interested in such a property, the sales team advises them whether the property is being sold on a leasehold basis.”

­Issues concerning leasehold properties will be top of the agenda for the all-party parliamentary group on leasehold and commonhold next month. Chaired by Labour MP Jim Fitzpatrick and Tory Sir Peter ­Bottomley, has attracted 43 MPs and lords.

Sebastian O’Kelly of the Leasehold Knowledge Partnership – a support group set up to protect and campaign on behalf of ordinary leaseholders said:

“It is disgraceful that plc ­housebuilders are building leasehold houses that ­ordinarily – and until recently – would have had freehold title. This is an ­erosion of the wealth of ordinary people at the expense of the rich.

Young people, after years of paying rent, finally buy a home and then find they are still, in fact, tenants – which is what a leaseholder is – with all the ­vulnerability that that implies.

The housebuilders are evasive over this issue and it beggars belief that the ­outrageous ground rent multiples come from household-name builders. There is no attempt to justify the adoption of leasehold tenure for these houses, which are not complex communal sites such as blocks of flats.”

 

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Government push to build prefabs to meet its housing target

Prefab Sprout! Flat pack new homes – no Allen keys required! But will  prefabs be the answer to Britain’s housing crisis?

As reported in The Telegraph last Saturday, the government is to embark on a building programme to “embrace the first new generation of pre-packed homes since the reconstruction after the Second World War.” prefab-post-warBy using prefabricated homes that can be delivered to site and built [thrown up] in 48 hours. While the Department for Communities and Local Government [DCLG] is not expected to set a hard target, (one lesson learned at least!) government sources said it was hoped that more than 100,000 prefabs could be built by May 2020 – around 2,500 a month.  Theresa May’s Government is struggling to work out how to meet a commitment to build a million new homes by 2020.

Clearly the large housebuilders, supported in every respect by this and previous government policy, have failed to deliver any meaningful and desired increase in production – even now, they are building fewer new homes than were built in 2007. Profiteering from landbanking? – Channel 4 Dispatches ‘Britain’s Homebuilding Scandal’ due to be aired on Monday 7 November 2016 will no doubt highlight this.

But is there really a housing crisis? Or at least a crisis caused by a shortage of housing? Surely if this were the case migrants, both economic and genuine refugees, would not be allowed to enter the country as presumably, there would be nowhere for them to live. In 2015,  30,000 migrants were given social housing and around  9,000 servicemen currently sleep rough after leaving the military.

The real crisis is working British people cannot afford to buy a home of their own, due to a combination of low wages and house price inflation stoked by government policies such as ultra -low interest rates and Help to Buy. Insufficient homes to rent or so-called affordable homes making an already bad situation worse.oxley-wood-prefabs-2007But is building prefabs a solution? Has the Government forgotten the nightmare suffered by buyers at Taylor Wimpey’s Oxley Woods development in Milton Keynes? These pre-fabricated properties built in 2007 for just £60,000 each, which they claimed could be knocked-up in 24 hours. The site at Oxley Woods was the then Deputy Prime Minister John Prescott’s flagship scheme to develop low-cost, energy-efficient homes. But as reported in the Daily Mail in 2014, a secret leaked report stated that “wooden supporting structures of some of the homes, from scheme developer Taylor Wimpey, are saturated.” It also found examples of ‘poor workmanship and practice’ in laying part of the roof. Seven years later this modern day, pre-fabricated, system-built new housing, has been shown to be as bad if not worse, than the traditional new homes that have been built for many years. Some of these prefabs may even be irreparable requiring demolition.

Ronan PointBefore this was Ronan Point, part of the wave of tower blocks built in the 1960s as cheap, affordable prefabricated housing for inhabitants in West Ham and other areas of London. The tower was built by Taylor Woodrow Anglian, using a technique known as Large Panel System building (LPS), which involves casting large concrete prefabricated sections off-site and bolting them together to construct the building.

Despite this, Britain is to get a new wave of prefabs as the government plans to offer help to build 100,000 factory-made homes. Industry buzzwords like Modern Methods of Construction [MMC] and “modular homes” are being used to describe the new generation of prefabs, aimed at young first-time buyers to “help them on to the housing ladder.”  These prefabs should be allocated to migrants and non-working Britons. It is patently unfair that young working British people are expected to take on a mortgage (if they can get one!) to pay for a sub-standard, prefab kit new “home” while non-workers on housing benefit are able to live in traditionally-built houses. It is easy for ministers to be misguided into thinking, after visiting these new home factories, that modern day prefabs will be of ‘good quality’. They won’t be built to the exacting standards of German made and constructed Huf-Haus new homes that’s for sure!

Even a “Wee House” can take 8 weeks to build!

Whilst the issue regarding the dire quality of new homes that are currently being built, along with the implementation of additional measures to protect new homebuyers is ignored, such as the DCLG setting up a New Homes Ombudsman, this headline-grabbing Government plans to publish a white paper next month, that will include measures to encourage banks to lend to small firms that build houses off-site, which are then delivered to a final destination. Ministers have apparently, taken a “huge interest” in 21st-century prefabs after being impressed that some were erected on site in just 48 hours. However, these homes were not fully 100% complete. Ministers would do well to recognise, there is no shortcut to quality housing!

The Telegraph reported that Accord Group, a housing association in the West Midlands, can produce a three-bedroom house from scratch in a day in its factory and has been visited by government figures. But claims by Accord Group of two homes “put up in one day” are misleading. The film below shows the assembly of little more than a timber frame kit, of the type that large housebuilders have been using for over 30 years, yet still appear incapable of constructing them to the required standards. Furthermore, foundations, substructure, drainage and ground floor and scaffolding were all completed before the “one day” started. In addition safety on site appears to be being compromised in the ‘rush to complete’ as there is no fall arrest system in place when the first floor ‘cassettes’ were lifted into position. Of course the likes of Gavin Barwell and Sajid Javid will not know any of this, anymore than they realise that there will be more delays connecting gas, water and electrical services and the time it takes to construct road infrastructure on developments.

Gavin Barwell, the housing minister, said that the Government sees a “huge opportunity” in manufacturers building houses off-site as it tries to find new ways of “achieving” its home building targets. Barwell said: “Offsite construction could provide a huge opportunity to increase housing supply and we want to see more innovation like this emulated across the housebuilding sector.”

If Barwell is serious, he would do well to fund the building of council houses for working families at affordable rents. To be built by local building contractors on fixed-price, fixed-term contracts, rather than yet more subsidised headline grabbing policies, which will have little impact on this failing industry.

Last week, Ed Lister, chairman of the Homes and Communities Agency said the government should encourage a wider range of firms to build homes, including those with no prior experience! Lister, a former deputy mayor of London told Building Magazine: “Why can’t any company come along and set up a development company using MMC (modern methods of construction) and build homes?”

The government has also indicated it wants a wider range of firms building homes. Gavin Barwell told Building last week that Theresa May is “very keen” to see a wider range of organisations building new homes in the UK. So not only will we have 100,000 prefabs but they could be thrown up by organisations, that have little or no building experience too!

 

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NHBC and David Wilson Homes on BBC Radio 4 You and Yours

The BBC Radio 4 ‘You and Yours’ programme on 26 October 2016, was  a great opportunity to further promote the setting up of a government-appointed New Homes Ombudsman and the implementation of the other nine APPG report recommendations. This is necessary because as the APPG Inquiry discovered, both housebuilders and warranty providers are failing new homebuyers despite a record £81million being spent on claims under the NHBC warranty to April 2015. It was disappointing that this Petition to Government was not mentioned.

The recent repeat of a BBC TV documentary, “Inside the Commons” – showed how government works and without a parliamentary debate, the APPG recommendations are very unlikely to be implemented anytime soon. Individual MPs, even if they are successful in the Private Member’s Bill ballot, rarely see their bill become law.

This You and Yours broadcast on BBC Radio 4 featured the ubiquitous new home buying “victim” selected to tell their ‘tale of woe’ with possible practical solutions to the widespread problems the industry is causing, overlooked or touched on very briefly. The programme gave housebuilder David Wilson Homes the opportunity to issue the usual insincere housebuilder  statement:- “rare isolated incidence – we are truly sorry – working with the homeowner to remedy as soon as possible”

Factual Errors:

There were factual errors made in statements with the BBC presenter referring to the NHBC ‘warranty’ as a ‘guarantee’.

nhbc-buildmark-warrantyFor the avoidance of doubt:

Warranty: 1) A written guarantee promising to repair or replace an article if necessary within a specific period. 2) An engagement by an insured party that certain statements are true or certain conditions shall be fulfilled.

Guarantee: 1) A formal assurance that certain conditions will be fulfilled, especially that a product will be of a specified quality. 2) Something that makes an outcome certain.

The new home warranty, is in essence an insurance policy paid for by the builder, to provide cover against any latent defects that may occur in the new home. It is not and never has been, a guarantee of any kind.

NHBC warranty claims

The £87million “compensation” figure for “2015” mentioned by the presenter was in reality the amount the NHBC spent rectifying defective new homes after claims were made by buyers under the warranty to April 2015 – not “in 2015” as stated. It was most definitely NOT compensation directly paid by housebuilders as the presenter implied. Nevertheless the NHBC do receive the majority of their funding from the housebuilders as insurance premiums for new home warranty policies. The NHBC do not pay buyers any compensation under the warranty.

This is why a New Homes Ombudsman is so important and so essential!

On the feature the presenter said that new homebuyers “can’t get problems fixed. The NHBC can recommend that the builder does repairs but the builder can refuse to do them.”

New homebuyers Lee & Jackie Gilcrest moved into their 5 bed £480,000, David Wilson Home in December 2014. They told the BBC they have had constant problems with it ever since they moved in. It was cold so the radiators were upgraded to double radiators. The owners claim that in the winter it was costing £10 a day to heat their home – £300 month. They said the EcoTherm insulation installed was only 100mm thick and should have been 190mm. They also claimed that none of the windows and doors had been installed correctly and none have been sealed.

They said:

“We were talking to David Wilson Homes and getting nowhere. When you think you are finally making progress, in the end they turned around and said they are not prepared to do any more of your issues anymore despite it being under two years and their responsibility, handing over all our defects to the NHBC. The NHBC ruled in our favour and the builder had to rectify it, David Wilson Homes have turned round and basically spat us out, the NHBC are pretty much back-tracking on what they’ve been saying. We’ve been given a pot of money and been told to be quiet.”

David Wilson Homes told the BBC in a statement that they are sorry and are working hard to fix the problems. The overwhelming majority of buyers on the estate were happy and they had had few complaints.

The NHBC say they are: “committed to treating homeowners fairly as a central philosophy within our business strategy.” They aim to understand homeowners’ need and be recognised, understood and appreciated by homeowners for the ongoing development and delivery of high standards to improve the construction standards of new homes. Leading the industry in providing solutions to remedy new home construction problems and when home construction problems occur, provide homeowners with a fair and simple claims service which offers a lasting solution.

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