Previous SectionIndexHome Page

Housebuilding Industry

1.30 pm

Mr. Mark Lazarowicz (Edinburgh, North and Leith): I am pleased to have secured this Adjournment debate on consumers' rights and the housebuilding industry. My request for a debate was stimulated by two examples that arose in my constituency, but that, after close examination, raised wider issues that deserved an airing in Parliament, and action from Government. I shall focus on issues for which the Westminster Parliament has responsibility. In Scotland, some issues raised by local concerns are the responsibility of the Scottish Parliament, so I shall try not to overlap those two elements. No doubt, the Minister will pass on to our Scottish colleagues matters that fall outside our remit.

I shall provide details of the specific problems that have arisen in my constituency, and that have led me to table this debate. Both examples relate to new housing developments in my constituency. The first case is in the Granton mill development, which has been built by Wimpey Homes in Scotland, or a company associated with Wimpey Homes. The residents spoke for themselves when they wrote to me saying:

They have further complaints about the development that relate to driveways, roads that are too narrow, unfinished boundaries and various other external issues, which I do not have the time to go into.

The second local example arose from a complaint from a resident of the Sovereign court development. That development was constructed by Barratt, East Scotland, or a company associated with Barratt. A constituent complained about a defect that the builder would not put right because the building company said that it was not a construction defect. However, the property management company, which had been contracted by the builders to provide the maintenance, said that it would not repair it either, because it was a building defect—a clear Catch-22 situation in which wherever the purchaser turned she was told that the problem was no one's responsibility. Over the past few weeks, that instance has now been satisfactorily resolved. Nevertheless, it raises the issue of the relationship between the home buyer of new housing and the management company appointed by the developer, and between the home buyer and the developer. The issues may be different, but they have a similarity in that they deal with the position of the individual purchaser of new build housing in relation to the developer that has built it.

The purchaser of such housing is in a different position from someone who buys an existing property from its owner. In the latter case, there are two parties with roughly equal bargaining power, and the purchaser can see the house that he or she is buying. In the case of new build, the situation is different. The purchaser is an individual, but the vendor is normally a large organisation with financial resources many times greater than those of the individual purchaser, and with

16 Apr 2002 : Column 164WH

the ability to call on legal and other professional advice that the individual purchaser does not have. After occupying the new house, the individual is hardly in a position to move out should it turn out that they do not have the property for which they had bargained. It is a classic case of unequal bargaining power. As that is a case in which the consumer is in a much weaker bargaining position than the supplier, it is a prime candidate for the position of the consumer to be strengthened by legal intervention and/or voluntary codes of practice by the industry. In the limited time available, I want to suggest a number of ways in which the position of the consumer can be strengthened in what is for most people the most important purchase that they will ever make.

The industry's current voluntary schemes, which are designed to protect the rights of purchasers, need to be available to the consumer at a much earlier stage. In both the cases that I have described, the National House Building Council guarantee scheme, which is generally very good, was of no benefit to the consumers concerned, even in cases that at first sight would fall within it. In the first of my two examples, Granton mill, the developer did not dispute liability on many of the defects. Instead, it simply did not get round to dealing with many of the complaints. The current scheme ought to be strengthened to ensure that developers deal with complaints speedily, and if that does not happen that very delay should be a ground for compensation to the purchaser.

In the second case, Sovereign court, the delay in having the complaint dealt with led to another problem, which I want to highlight. Because of the delay in getting any action from either the builders of the property or the management company, the purchaser concerned eventually carried out the repairs herself. As she did not wait long enough to have the matter dealt with by the builders, however, it could no longer be dealt with under the NHBC scheme, even though she had made repeated complaints over a lengthy period. If that is correct, the NHBC scheme clearly has other shortcomings that need to be attended to. If the scheme cannot be changed as I have suggested, the Government need to consider other ways in which such changes can be made.

There needs to be a mechanism to give house purchasers an opportunity to obtain satisfaction when there are problems in areas that are not covered by the existing industry scheme provided by the National House Building Council. That issue was particularly important in the case of Granton mill. Most complaints in that development relate either to external works to properties that have, in the view of residents, been carried out incorrectly or not at all, or to work that needs to be carried out or completed in the public areas of a development, such as roads and other common areas. Neither of those types of problem seems to be covered by the current voluntary arrangements provided by the industry, but they should be. There needs to be a mechanism whereby complaints about such issues can be made to an independent body, and when they are not satisfactorily resolved, steps can be taken to ensure that they are dealt with or that compensation is paid to the purchasers affected.

Something needs to be done to redress the imbalance between the bargaining positions of the purchaser of a new house and the developer that sells it. The first of my

16 Apr 2002 : Column 165WH

two cases is a very good example of that problem. The purchasers saw a show house, as the actual houses had not been built, which is a very common situation with new developments. When the purchasers moved into their houses, some of them discovered something unsatisfactory. In such circumstances, sometimes the only remedy for the purchaser is to refuse to proceed with the purchase. In many cases, such a remedy is of little use to potential purchasers because they have probably sold their old house, bought furniture and made all the arrangements to move in, in which case not proceeding with the purchase is not a real option. It might be said that the purchaser should deal with such problems by making detailed provisions in the contract to ensure that nothing is left unclear, but the nature of the bargain is that it is for a house that is unbuilt, and developers do not normally enter into negotiations over terms, which means that that is also not an option for the purchaser.

I know that that is a complex matter, especially in the Scottish context. Although consumer rights and sale of goods and services law is reserved to Westminster, property law is devolved to the Scottish Parliament. There is a real problem here that must be addressed. The purchasers of new houses need to have stronger rights when they buy property, and I ask the Minister to consider how that can be done.

The relationship between the purchaser of a new house and the property management company appointed by the developer must be investigated and clarified. I have described my concerns arising from the example of Sovereign court in my constituency, and add that those are not just my concerns. I note that the Scottish Executive's recent report "Issues in Improving Quality in Private Housing" states:

That excerpt from paragraph 100 of the report says it better, perhaps, than I can.

I call today for investigation, and if necessary action, by the competition authorities, which come within the responsibility of Westminster, to ensure that such arrangements are fair to purchasers and do not tend to favour the interests of developers and the management companies that they appoint. A management company might have several contracts with the developer and therefore have an interest in maintaining good relationships with it beyond the interest of a particular instance in which a purchaser has complained.

To clarify the relationship between property management companies and new purchasers on one hand and builders on the other, I suggest that, first, such management companies should, after the initial period, be selected by the purchasers collectively and be fully accountable to them. Secondly, there must be complete transparency to the owners of a property about the charges levied and the expenses incurred by such management companies. Finally, there should be a system that allows property owners to raise complaints about such management companies and that also provides for ensuring compliance and awarding

16 Apr 2002 : Column 166WH

compensation when mediation fails. That scheme should, perhaps, be similar to the NHBC scheme, which, in my view, is very good as far as it goes.

I am aware that such policy areas are complex, and involve competition policy, a reserved matter, and property law, a devolved matter. However, they need to be tackled by the Government at Westminster and in the Scottish Parliament. I am grateful to have had the opportunity to raise this matter today. I ask the Minister to examine what I have said and consider what further action can be taken. Most immediately, will she take up with the industry bodies the matters that require changes and improvements to the relevant voluntary codes, and pass on to and discuss with her Scottish colleagues any matters arising from this particular case that she considers would be better dealt with by the Scottish Executive and Parliament?

I emphasise that the issues that I have raised are not just local issues, of concern to a few residents in my constituency, or of Scottish concern alone. There are numerous new developments in my constituency, as in many other parts of Edinburgh, in which similar issues have already arisen or will arise in the future. As I have said, the purchase of a new house is often the single biggest financial transaction undertaken by a consumer. First purchasers must have rights, and an ability to take advantage of those rights that reflects the importance of that transaction to them and their families. That is why I am glad to have had the opportunity to raise the matter here today, and why I hope that the Minister can give an idea of what action she can take in response to my concerns.

1.44 pm

The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Ms Sally Keeble) : I congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) on securing the debate and on choosing a subject of real concern: consumer rights in the housebuilding industry. He focused in particular on the problems for people buying new houses.

My hon. Friend may be aware that in February 2002 the Housing Forum published its second national customer satisfaction survey, which highlights the standards of consumer care in the housing industry. It backs up some of the wider messages about customer care that the industry needs to take seriously and to which he referred.

To put my hon. Friend's concerns in a national context, the survey shows that new home buyers remain generally satisfied with the design, amenities and value for money of their homes, but that those positive aspects are countered by a much less favourable view of build quality and after-sales service, about which he was concerned. Figures show that nearly half of those who buy new homes are neutral or critical of the builder, one third are not satisfied with the after-sales service, and only 54 per cent. want another new home or one from the same developer. That is a measure of the concern that he drew from his constituency experience.

My hon. Friend raised local issues, but the survey shows that there is a nationwide need for better quality and after-sales service in the new homes sector.

16 Apr 2002 : Column 167WH

If he is prepared to write to me with more details of the cases that he cited, I shall ensure that they are taken up with the National House Building Council to discover whether lessons can be learned.

I want to examine some of the wider issues that my hon. Friend raised concerning new homes and consumer rights. The key to more consistent quality in the building of new homes lies with builders' quality management systems. The work of the Housing Forum is contributing and grew out of the "Rethinking Construction" initiative, which has been under the aegis of my hon. Friend the Minister for Industry and Energy since June last year. The forum is showing the way in which to improve quality in housebuilding through the dissemination of best practice. Warranty schemes such as the NHBC's Buildmark scheme also have an important role to play in helping builders to achieve better build quality. Those schemes should first and foremost help to prevent defects, but they should also help owners to reach a quick solution when defects come to light after handover.

Ministers in the Department for Transport, Local Government and the Regions keep in close touch with the chairman and senior management of the NHBC. We encourage them in their objective of continuous improvement in the terms and operation of the Buildmark scheme. The NHBC has made useful changes in the coverage of its scheme over the past three years or so, including contaminated land cover and 10-year cover for double glazing failure.

My hon. Friend said that the NHBC scheme does not cover various external features. He also referred to management issues, and I shall deal with those later.In fact, the scheme standards include a section on drives, paths and landscaping, and the definition of "home" in the Buildmark agreement includes common parts for which an owner shares legal responsibility with other owners. The definition also includes shared paths, drives, garden areas and paved areas. That means that in some circumstances defects in such areas can be the subject of claims against the builder under the Buildmark scheme.

My hon. Friend also raised concerns about defects that come to light some time after the occupants move into their new house. Changes have been made to the rules of the NHBC scheme relating to disputes between owners and builders when defects come to light within two years of completion. Those changes provide for the NHBC to intervene at an earlier stage to undertake remedial work in place of the builder if the builder is slow to carry out repairs that have been recommended by the claims investigator.

My hon. Friend referred to delay by builders in carrying out remedial work. The current NHBC procedures should mean that delays will not arise if the repair work has been recommended by the NHBC following a dispute resolution process.

My Department has no specific locus in cases arising in Scotland, but I will ensure that the NHBC examines the specific cases to which my hon. Friend referred.

My hon. Friend called for Government intervention in problems of defects in new homes. I very much appreciate that buyers of new homes may experience

16 Apr 2002 : Column 168WH

distress and inconvenience if defects arise after handover. However, from my perspective at the Department for Transport, Local Government and the Regions, I prefer to give the industry an opportunity to take voluntary action. Its efforts, aided by the work of the Housing Forum and by schemes such as the NHBC's Buildmark, should lead to better consistency in build quality, better after-sales service and higher customer satisfaction levels. Obviously, we will look for evidence of that in future customer satisfaction surveys and in other ways.

My hon. Friend raised issues about the management of common parts and about some of the management schemes for external areas on housing estates. As he said, the law on property management is different in Scotland. However, in England and Wales, several remedies are available under existing legislation to people who buy properties under leasehold and who pay for the upkeep of common parts through service charges, including the right to ask a leasehold valuation tribunal for a determination of reasonableness of service charges, and the right to seek the appointment of a new manager if they feel that the existing one is providing a poor service. Service charges are payable only to the extent that they are legitimate and reasonable. That should provide assistance for some property owners in dealing with such issues.

An LVT will be able to consider whether the costs in question were reasonably incurred and whether the relevant services or works were of a reasonable standard. It will then determine what amount should be paid by the leaseholder. The Commonhold and Leasehold Reform Bill, which applies to England and Wales, introduces several changes in respect of service charges, including widening the definition of service charges and simplifying and strengthening leaseholders' rights to be consulted on major works and long-term contracts.

The Bill also makes a significant change to the rights of leaseholders who are subject to an estate management scheme. Since estate management schemes were first permitted under the Leasehold Reform Act 1967, Parliament has legislated to provide protection for tenants in respect of service charge payments. Leaseholders who pay service charges have rights and protections against unreasonable charges. The Commonhold and Leasehold Reform Bill will improve and extend the rights, and introduce comparable ones for administration charges made under a lease.

However, there are no similar provisions in respect of charges made under estate management schemes. At present, anyone who enfranchises and is subject to a scheme will move from having protection against unreasonable charges under their lease to having no protection against unreasonable charges under the scheme. The Bill will provide that charges under estate management schemes should only be payable to the extent that they are reasonable and that an LVT will have the power to determine the extent to which such charges are reasonable.

It is worth mentioning that some protection already exists for buyers with respect to property misdescriptions. Hon. Members may be aware that it is an offence for a property developer to misdescribe any of 33 matters relating to the sale of property that are listed in an order made under the Property

16 Apr 2002 : Column 169WH

Misdescriptions Act 1991. As my hon. Friend may know, the Act also applies in Scotland. The matters include aspect, view, outlook or environment. If the surroundings of a new property are misdescribed in a brochure or on plans, for example, the property developer may be subject to prosecution under the 1991 Act by the local authority.

My hon. Friend discussed at some length the position of people who buy new properties. In some instances, properties may be bought off plan: in effect, unbuilt homes are sold. He gave examples of the problems that can occur in such cases. Buying off plan is a popular method of buying and selling new homes. It can have a number of advantages for the developer and the home buyer. It might help if I mention some of them. For the developer, the main advantage is that a buyer is lined up at an early stage, which helps to ensure that the transaction can be completed quickly on completion of the building work.

For the buyer, buying off plan can provide more choice—for example, over plot location, fittings and fixtures, and appliances where the house is being sold with a fitted kitchen. Buying off plan provides buyers with early certainty that the home will be sold to them, and not to someone else, when it is completed. As my hon. Friend may know, in England and Wales, there are problems of gazumping—the law in Scotland is different in that regard—and buying off plan allows breathing space for buyers to sell their present home.

Often there are problems of uncertainty for off plan home buyers. Such uncertainties will decrease as construction progresses, but in the early stages they can involve issues that are particularly important for a prospective buyer. For example, the developer may not be prepared to give a firm completion date, either because of the vagaries of the weather or because of reliance on the availability of construction materials and skilled craftsmen to get the work completed on schedule. Whether or not that is acceptable to a prospective buyer will depend on the extent of uncertain matters and the priorities of individual buyers. It is a question of trade-off between the advantage of early certainty that the home is theirs when built and the possibility that in the interim there may be changes to the development that could impact on their enjoyment of their new home.

Uncertainty can also feed into price. House values can change markedly between the time a home is reserved off plan and the time it is completed. Therefore, particularly during early stages of construction, the developer may be prepared to give only an indicative price to a buyer seeking to reserve a home, in exchange for a small, non-

16 Apr 2002 : Column 170WH

returnable deposit. Professional advice is particularly important in identifying potential obligations and liabilities that will pass to the buyer. Such obligations are not always apparent from the initial sales material.

One of the issues that will help in ensuring that property buyers have more rights will be our manifesto commitment to introduce a seller's pack, which will help in England and Wales. We will introduce the necessary legislation as soon as parliamentary time allows.

My hon. Friend raised the issue of managing agents and expressed his concerns about how some of them operate. He might want to know that on 8 April my Department issued a consultation paper on improving the standard of residential leasehold management. Although the scope of the consultation is limited to England and Wales, he may well have some views on the matters contained in that document, which considers various options on how best to improve standards, including voluntary controls regulation. I would welcome the input of all hon. Members, and especially my hon. Friend.

We have no current plans to legislate specifically in England and Wales on the position for buyers of new homes, although there is the seller's pack that I mentioned. Most of the relevant legal framework in Scotland is different, and is a matter for the Scottish Parliament and Executive. I can assure my hon. Friend that my Department liaises closely with the Scottish Executive. We are open to the possible lessons that we can learn from each other in this area. We share a common objective, which is a better deal for buyers of new homes. I will ensure that his views and concerns are passed on to colleagues there.

The efforts of the industry, aided by the work of the Housing Forum and by schemes such as that of the National House Building Council, should lead to better consistency in building quality. We will be looking for this in future repeats of the Housing Forum customer satisfaction survey.

Once again, I congratulate my hon. Friend on securing the debate and raising this important issue, which has been raised previously in Westminster Hall. I believe that raising the profile and repeating the concerns is one of the measures that ensures that the industry is aware of the concerns of MPs and the public, and it is one of the ways in which MPs can realistically increase pressure and ensure that standards are improved for the benefit of their constituents.

Question put and agreed to.

 IndexHome Page