Suggested improvements concerning the current imbalance of bargaining position in the house-builder house-purchaser relationship.
It is interesting to note that in other areas of commerce where one party has a dominant position, steps have been taken by H.M. Government to level the playing field e.g. the relationship between large breweries and tied public houses; yet not in the case of house-builders and purchasers of new dwellings, where the former are in a dominant position.
It is also remarkable that the ‘lot’ of consumers is not shared by others that have a financial stake in the defective dwelling sold e.g. financiers such as banks and building societies. They could easily insist upon e.g. mandatory checking at any stages of the construction of the dwelling with duties of care being owed to the purchaser and the lender and insist on ‘Before the Event’ insurance as a condition of lending (which would greatly assist purchasers of defective new dwellings finance claims against those who provide and sell new dwellings);
It remains to be seen whether the policy of the law relating to the liability of e.g. Local Authorities and Approved Inspectors such as the NHBC Building Control Services Limited (who it is alleged inspect dwellings during construction solely for insurance purposes and not for the purposes of protecting purchasers of dwellings) will be perceived differently by the higher Courts, when the Grenfell Enquiry is completed. (I note in its 2017/18 annual report the NHBC list that as a risk). Let’s hope there is a subsequent tightening up of the law, in favour of purchasers/consumers of new dwellings. Reliance cannot be placed upon this happening.
It is suggested that in the absence of action by Parliament, Lenders etc, consumers need to group together and this association has been launched to be a focus for consumer action.
When a defective new dwelling is purchased, some of the issues that are needed to be resolved, and which requires close attention, in order to assist such purchasers who find themselves burdened with a defective new dwelling, including, if necessary, the introduction of legislation, are as follows.
This is because house-builders on many occasions (as experience informs) do their utmost to avoid liability, to maximise profits (and thus directors’ bonuses) at the expense of those whose good money has been taken, (very often after the dwelling is accepted as security for a mortgage). In the result, this scenario binds the purchaser for many years without the ability to sell at full value, sometimes resulting in negative equity. I do wonder whether the banks and building societies are complying with their obligations concerning whether loans are sufficiently secured and further consideration needs to be given to those rules or their insisting upon insurance as a condition of the mortgage:
i. The reporting of defects e.g. under warranty schemes, rely too much upon the knowledge of the purchaser who in most cases; is probably not a specialist in house building done properly, let alone defective design or defective house building;
ii. In such circumstances, and in any event, two years ‘cover’ under such warranty schemes, is on the face of it, properly characterised as a ‘ruse’, which is successfully deployed by house builders, to significantly dilute the house-builder’s primary obligations (including by statute following the said report in 1970), to provide a properly designed and constructed dwelling;
iii. The threshold ought to be raised from two years to at least six years from legal completion, to reflect the primary period for which the house-builder is ordinarily liable in contract and under statute;
iv. The insurance backed warranty to be provided must be expressly stated in the contract of sale and not by way of example “e.g. NHBC” (only to subsequently discover that a lesser warranty has been provided);
v. Each House-builder ought to have a streamlined reporting of defects computer system, which automatically emails a return copy of the email to the house-builder to the consumer (proving the defects’ notice has been received by the house-builder and the date the attempt at rectification has been made (and if satisfied the date the customer expressed satisfaction). The consumer must be notified of this system in the contract of sale and in the sales information and in the aftercare material. Warnings ought to be made to the purchasers in advance of when key dates approach;
vi. House-builders notionally discount purchase prices provided the purchaser goes to a named conveyancer entrusted by the house-builder (following competitive bidding by conveyancers). This is puzzling as House-builders are not well known for their generosity: Is it because the appointed conveyancers will give the transaction a ‘light touch’ where more is required? In practice, this requires further investigation by the professional bodies of the conveyancer; and warnings ought to be provided by those bodies to such conveyancers as to the need to give purchasers professional advice concerning all reasonable legal concerns the conveyancer has with the contract of sale that is drafted and put forward by the house-builder, and as to the degree of protection offered to the purchaser of the dwelling, should the same prove to be defective. (This is especially so given the incorrectly interpreted statutory law that was meant to strengthen house purchasers’ rights- but currently does not - see below);
vii. Such inducements must be reviewed as to whether they ought to be allowed or outlawed given the dominant position of the house-builders who are making record breaking profits; (Conveyancing is also too inexpensive with little attention paid to the meaning of the significant transaction that the purchaser has entered into);
viii. At the very least, purchasers ought to be advised by their conveyancers to take out (and the purchaser ought to take out) ‘before the event’ insurance that cover disputes with those who provide newly built houses with significant cover £250,000 to £500,000. Better still, this ought to be a condition of the mortgage offer from lenders;
ix. On the current state of statutory law, pending correction by higher Courts or Parliament. ‘unfitness for habitation’ and ‘not ready for occupation’ ought to be defined in the contract as a single or series of defects in the dwelling concerned, that cost 5% of the value of the purchase price of the property to remedy. If that threshold is breached the dwelling concerned is deemed automatically not fit for occupation nor ready for occupation.
x. As a result of current state of the law (see below) subcontractors ought to provide warranties of quality directly to the purchasers, (the terms of which the vendor is also responsible) in the event the subcontractor fails or is unable to fulfill its obligations thereunder;
xi. Additionally, as contractual terms:
a. the plans lodged and approved by building control authorities ought to be made freely available to successive purchasers for 10 years from legal completion -what are house-builders afraid of?;
b. planning permission ought not to be allowed to be amended by house-builders concerning any matters that affect purchasers who have already exchanged contracts on a development, without their express permission (e.g. ploys by House-builders to remove play areas already promised);
xii. A test case needs to be made to the Court of Appeal or Supreme Court concerning erroneous decisions involving s. 1 of the Defective Premises Act 1972 and legal aid funding ought to be made available for that purpose; Until that happens purchasers’ conveyancers ought to spell out in the contract of sale what Section 1(1) what was actually meant to mean by the insertion of a contractual clause to that effect. The High Court has comparatively recently found difficulty in interpreting the law in the same way as an earlier Court of Appeal found it to mean; (an alternative to this is to change the wording of the section by legislation which would be very easy to do – by adding the word “or” twice - see the petition before Parliament reference below);
xiii. As there is a Money Laundering (Officer) requirement in transactions involving the purchase of new dwellings, there ought to be an officer/director (a human being and not a company) of the house-builder that is responsible for defects management and documents including plans (see above) with director disqualification and personal financial sanctions available to the Courts for persistent offenders who do not properly fulfil that office;
xiv. The contract of sale ought to include provision for swift statutory adjudication under the Housing Grants Construction and Regeneration Act 1996 (as amended) permitting rapid statutory adjudication and the adjudicator ought to be permitted to be able to award legal costs and disbursements in his or her decision; alternatively an ombudsman ought to be appointed with similar powers;
xv. 100,000 signatures are needed for the issue of strengthening remedies for those who purchased freehold and leasehold Defective Dwellings to be discussed in Parliament. That petition is open for signature today. Please see the appropriate page on this web site or go tohttps://petition.parliament.uk/petitions/258558 and lend your support;
xvi. Greenwashing is the practice of making unsubstantiated or misleading claims about the environmental benefits of a product, service, technology or company practice. Greenwashing can make a company appear to be more environmentally friendly than it really is. Its all about transparency: Asset managers, Pension funds and Insurers that buy shares have now managed to ensure that company reports/accounts have such information at the front of the reports and no longer hidden at the back of the same – where they once were;
xvii. It is suggested that transparency also needs to be available to investors who invest in house-builders and developers - in their company reports ‘Defectswashing’ ought to be introduced for that purpose and for companies large and small. This will mean transparency for investors concerning the companies’ compliance with their contracts of sale alerting all investors to hidden company costs of expenditure that is required to be spent on rectifying defects (and shedding light on whether director’s bonuses are justified);
xviii. Accordingly purchasers of defective dwellings need to give more consideration and focus more attention on asset managers, pension funds and insurers who own and recommend the shares in the wayward house-builders (and the lenders to the purchasers of the defective dwellings);
xix. Thus, and e.g the UK’s Legal & General is a top 10 worldwide manager of money and is listened to by other financial companies around the Globe. There ought to be a better investment framework to make sure that the said investors are well informed of the social impact of their investments. See e.g. the following;
However better impact is made by presenting such matters by this association on behalf of consumers as a whole.
xx. The rules of the stock market may therefore need to be tightened to make investors more aware of the performance of wayward listed house-builders and developers in rectifying defects at an early stage. The Association is currently looking into this and ‘defectswashing’. The stock market is currently ignoring several emails sent;
The implementation of the above will hopefully restore the current significant imbalance in bargaining position in favour of purchasers.
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