The modern home – A battleground for consumers?
In the last few years, homeowners have reported an increase in the ineffective actions of property developers, particularly with respect to poor quality construction and unanswered snagging lists.
A number of whistleblowers at developers have also raised the flag about the customer service practices at large firms and their inability to rectify issues when presented to them in a reasonable time.
A high profile example of this at Bovis Homes led to a pay out of £3.5 million in 2017 to new homeowners for poorly-built homes, which was part of £10.5 million of repairs the group has been forced to carry out in recent years.
The company was also awarded a lowly two-star rating by the House Builders Federation in the same year following a series of failings that left customers living in faulty homes.
Bovis are certainly not alone and this issue has been flagged up hundreds of times by new homeowners on forums, review sites and in the press.
In fact, a National New Homes Survey by the Home Builders Federation from 2013 found widespread issues among buyers of new homes, with 91 per cent reporting snags and defects, amongst which 11 per cent said there were more than 16 issues reported.
Four years on and the same body found last year that the problem had got worse, with 99 per cent finding issues when they moved in, and 25 per cent reporting 16 or more problems.
Despite this 76 per cent of new homeowners said they were satisfied with their new homes, while only 16 per cent described being dissatisfied.
Looking further into the problem, the All Party Parliamentary Group for Excellence in the Built Environment released a new report in 2016, called More homes, fewer complaints in which they called for a number of key changes, including the formation of a New Homes Ombudsman to mediate on matters, giving buyers the right to carry out a full survey before completion and the standardisation of Housebuilding sales contracts.
Whilst these measures have yet to be implemented they do highlight the growing concern amongst new homeowners and legislators about the quality of the properties that are currently being built.
With these proposals still in the pipeline, we look at what protections and actions are open to new homeowners today.
Most owners of new homes are protected up to a maximum period of 10 years by the National House-Building Council’s Buildmark warranty.
This provides fairly comprehensive warranty and insurance protection to newly built or converted homes, which starts from the exchange of contracts.
Initially, the warranty provides insurance cover for deposits in case a builder becomes insolvent or some form of fraud is committed, which prevents the home from being constructed. This will cover either 10 per cent of the value of the house or £100,000, whichever is lower.
However, for those facing issues with their homes once they are finished, it is the protection offered post-build which is most essential.
In the first two years after legal completion of the first purchase, the homeowners have the right to inform the builder that they have failed to meet the NHBC requirements and they must put right any issues within a reasonable time.
This includes repairing physical damage to the property caused by failings during construction, removal of contaminated land and paying for the reasonable cost of removing and storing possessions and providing alternative accommodation, if necessary, while the work is being done.
After the initial builder warranty period of two years has expired, the scheme is intended to protect against damage where the construction of the home fails to meet the NHBC’s strict standards. This typically only applies to the core construction of the property, including walls, ceilings, foundations, roofs, glazing and stairs – excluding fixtures and fittings.
However, the Buildmark warranty does have its limitations. For one there are a number of exemptions, which include damage caused by flooding or fire, cracking, spalling or mortar erosion which does not impair the structural stability or protection from the weather, changes in colour, texture or staining of external finishes and any additional work done to the property after the completion date that is not as a result of the responsibilities of the builder.
After the expiry of the initial two-year builder warranty the NHBC will also not accept claims if they fall under the minimum claim value, which is currently £1,700.
What about consumer rights?
The Consumer Rights Act 2015 (CRA) has been one of the largest shake ups to consumer rights law in decades and replaces three previous Acts, all of which affected housebuilders and developers and their contractual arrangements with customers.
Under the CRA, all terms in a contract, both negotiated and non-negotiated consumer terms and contracts, which are deemed unfair, will not be binding on the consumer.
In order to assess this, the CRA uses a “fairness test” that provides that any term is unfair if it causes a significant imbalance in the positions of the parties to the detriment of the consumer in a way which is contrary to the requirement of good faith.
This is accompanied by the “transparency and prominence test”, which requires a business or seller to use plain and intelligible language in its written terms. These terms must be brought to the consumer’s attention in such a way that the average consumer would be aware of them.
Thus any attempts to exclude or restrict liability to consumers for breach of implied terms as to fitness for purpose and satisfactory quality of goods and as to the supply of services with reasonable skill and care are ineffective.
It also provides additional and extended remedies, including rights to reject, repair, replacement and to price reductions/refunds, where businesses fail to meet the original agreement.
Developers are also bound by the Consumer Code for Home builders and should adhere to it.
This industry-led code of conduct for builders was developed to make the home buying process fairer and more transparent for purchasers, while ensuring consumers know their rights before and after they move into their home.
Under the code, builders are required to have a system for dealing with complaints provides an indication of the levels of service homebuyers can expect and give reliable information about their purchase.
The Consumer Code applies to home buyers who, on or after 1 April 2010, bought a new or newly converted home built by a home builder registered and insured by either the National House Building Council, Premier Guarantee or LABC Warranty.
Builders must give reliable and realistic information about when the home will be finished, the date of legal completion and the date for the handover of the home, according to the code.
If an unreasonable delay occurs in finishing the home, consumers have the right to cancel the purchase and get a full refund of their reservation fee.
Unfortunately, some developers often provide overly ambitious timings, which can result in snagging issues or delays in the move-in date.
Under the code, which works alongside the warranty already discussed, homeowners need to contact their builder once a problem is identified. In some cases, homeowners will be provided with the results of a snagging survey before they move in which will identify if there are any problems.
The code also makes it the responsibility of the builder to rectify the issue(s). Homeowners may sometimes feel like they are being ignored, but are advised to be persistent as small problems can add up and be costly.
Homeowners who are unhappy with how a complaint is dealt with by their builder and who have exhausted the complaints process can ask for the case to be referred to an independent dispute resolution service.
The purchaser has three months from the date of the builder’s final response to the initial complaint in which to request to be referred to a dispute resolution service.
The dispute will then be determined by the Consumer Code for Home Builders’ Adjudication Scheme at a cost of £100 (plus VAT) to register the complaint.
The adjudicator can make a £15,000 maximum award, which could include compensation for inconvenience, which the builder is required by law to honour.
If a homeowner doesn’t feel that the award is sufficient they are free to reject it, but if they do so any subsequent legal action is likely to take the decisions reached by the adjudicator into account.
While this may cover some repairs in some instances, more serious action may need to be taken if problems persist or they are not rectified within a reasonable time period.
An initial period of meditation led by a mediator may be one solution for those wishing to avoid more costly litigation. This is one way of initially attempting to resolve an issue where the middle-ground is fairly narrow and the case is clear cut.
However, where mediation is not appropriate and the builder refuses to work within the guidelines of the NHBC, or where a home is not covered by the initial two-year warranty, litigation may be the only solution available to the homeowner.
As with any claim in the civil courts the burden of proof is on the Claimant to prove that, on the balance of probabilities, the Defendant was more likely than not liable for the failings in construction.
It is, therefore, essential that Claimants build up a robust case and should have good presentable evidence of failings by the developer that contravene any agreements they may have made.
Providing only circumstantial evidence pointing to the Defendant’s liability could lead to the case being dismissed before it reaches trial, which may then prejudice subsequent claims.
It may be useful to call in the expertise of a surveyor if it is not clear what the full extent of the problem may be to produce a report which can then be presented in court.
In most cases, the Claimant will need to show that the issue is fundamentally a result of poor construction by the developer and not damage caused after they moved into the home. For this reason, it is useful for all new homeowners to conduct a thorough, evidenced check of their new home, including dated photos, where possible, of each room.
This can be presented before the adjudicator or a judge in a civil case to identify initial problems during the move in alongside a snagging list or highlight deterioration of the home during a short timescale.
The burden of proof may shift in a civil case in circumstances where, for example, the Defendant makes a separate accusation of some form of fraud being committed by the Claimant. It is then for the Defendant to prove that such an act has been committed. Once again evidence is key in a homeowner’s defence.
As there are often counterclaims in civil cases, and apportionment of liability rather than just an all-or-nothing outcome, each side will usually bear the burden of proof on some matters.
In some rare cases, Claimants may be able to rely on strict liability if the claim relates to a breach of statutory duty. This could the case if the work conducted poses a health and safety risk to the owner of the home. In such a case, Section 40 of the Health and Safety at Work Act would shift the burden of proof of onto the Defendant, who would need to demonstrate compliance in respect of reasonable practicability.
Evidence suggests that there is an underlying issue with the construction of some new homes, but those affected should not jump into taking immediate action without seeking professional advice first.
Taking time to build up a case and establish key arguments in advance of any action could be critical to any eventual outcome and the award paid, so it pays to get a helping hand.
Shared by: Tony Kent, Head of Property Litigation at Mackrell Turner Garrett