Protection for Homebuyers

Heather Wheeler Excerpts

Thursday 13th December 2018 Westminster Hall

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Mrs Heather Wheeler)]

It is a pleasure to serve under your chairmanship, Mr Sharma, as it was to serve under Ms Ryan’s.

I thank the hon. Member for Stretford and Urmston (Kate Green) for securing the debate and providing an opportunity to debate all the issues. I understand that she and many of us present today want better protection for purchasers of new-build homes. The Government are committed to making the housing market work. We aim to increase house building to an average of 300,000 net new homes a year by the mid-2020s. As we move towards achieving that target, we will not sacrifice higher quality and standards. They must go hand in hand. It is vital that as housing supply increases the quality of new-build homes continues to improve. In our housing White Paper we set out our ambition for a housing market that works for everyone. We expect all housing developers to deliver good quality housing, to do it on time, and to treat house buyers fairly.

I, like other hon. Members, was shocked to hear about the terrible experiences of the poor families featured on “5 live Investigates”, including the home with 354 faults. For families who worked hard to save and buy their new home it should have been an exciting time, as so many hon. Members have said. The programme highlighted the plight of Mr Wakeman and his partner Tracey Bickford. It was heartbreaking to hear Mr Wakeman read the list of issues with their home, and describe the disgraceful disruption to their lives, including having to move out of their home. Although theirs is an extreme example, such cases happen far too often. We all hear of them happening. I have heard it from many constituents who write to me through their Members of Parliament, and also in my own constituency correspondence.

Equally familiar are stories of houses not completed on time and purchasers who are not kept informed, which the hon. Member for Blaydon (Liz Twist) discussed. Families and households save for years to afford a new home. Those of us who are fortunate enough to have bought a home can remember the feeling of excitement and joy at getting the keys. Everyone deserves to be able to enjoy their home and start a new happy chapter in their lives.

We know that mistakes will happen. Building new homes is a complex undertaking, involving many different skills and trades, which necessarily means that there is a higher risk of something going wrong. The critical thing, however, is that when things do go wrong, house builders and warranty providers fulfil their obligations to put things right. The Government have been absolutely clear on that point. In too many cases problems with build and finish quality are not resolved quickly enough. The after-sale service that developers provide must improve. We shall therefore be keeping the pressure up on industry, not only to put things right but to prevent them from going wrong in the first place.

The Government are committed to reforming the process for purchasers of new-build homes to obtain redress. I acknowledge that the current process is complicated, and that the proliferation of schemes and warranties has resulted in varying levels of service and protection. That is why we are taking action.

In October—only two months ago—we announced our intention to bring forward legislation to require all developers to belong to a new homes ombudsman, because it is absolutely right that consumers should have fair, quick and easy ways to get things put right when they have a problem. Earlier this year we consulted on how we could improve redress, not just in relation to new-build homes, but for residents across all housing sectors. I will return to this later, but let me say now that we will be publishing our response to that consultation soon. At the same time as exploring more substantive reforms, we are challenging industry to simplify redress now and to provide proper support for consumers in the early years of a house purchase, when most problems occur, until we have the ombudsman in place.

In November—one month ago—I met the executive chairman of the Home Builders Federation, which is taking forward proposals to implement a better redress system, based on the recommendations in the reports by the all-party parliamentary group for excellence in the built environment published in 2016 and this year. I believe this work is a positive step in the right direction.

The hon. Member for Stretford and Urmston was very agitated, as were many other hon. Members, about the potential conflict of interest with solicitors. It is not acceptable that there is a conflict of interest. The Secretary of State has written to the Law Society on the issue and has also written to the Solicitors Regulation Authority, in the context of leasehold reform and conflicts of interest between developers and conveyancers. I expect those two authorities to take note and come back to us on the matter.

A number of hon. Members mentioned that we often hear that new-build homes are not completed to the standards required under building regulations. These regulations set the standards for the design and construction of new homes. The primary responsibility for compliance rests with the people carrying out the work. Work on new homes is subject to building control either by the local authority or a private approved inspector. However, it is the responsibility of the building control body to take all reasonable steps to assess compliance. It is a spot check process carried out at certain points during the building work. A building regulations compliance certificate issued by a building control body is not a guarantee of the highest standards and the responsibility is not removed from the builder or developer. If a consumer feels that the building control body did not carry out its functions properly, they may complain to the local government and social care ombudsman in respect of a local authority. A complaint about an approved inspector can be made to CICAIR, the Construction Industry Council Approved Inspectors Register, which is the body that approves inspectors.

The hon. Member for Poplar and Limehouse (Jim Fitzpatrick) asked about sections in the Housing Act 2004 and about local authority powers to make developers undertake remediation for unsafe cladding. I will write to him about that and also about retrospective fire sprinklers.

[Melanie Onn]

I recently visited London Fire Brigade to talk about building regulations and the checks that are undertaken. The issue with spot checks is a real concern for safety. The failure to put an insulation sock underneath a window caused a new-build block of flats to be engulfed by fire just weeks after people had moved in. Can the Minister think of anything more that can be done to strengthen the system, to make sure it goes further than spot checks, so that key factors that support people’s safety in their homes are not missed?

--- Later in debate ---

[Mrs Wheeler]

I thank the hon. Lady for that very useful intervention. My team will take that back and we will write to her with an answer.

We know more needs to be done and expect more to be done. That is why the Government announced measures to champion the rights of buyers of new-build homes, including a new homes ombudsman. That will provide one obvious place for consumers to go, and will have the powers such a body needs and the interests of consumers at its heart. It will ensure that when people buy a new-build home and do not find the standard of build they expect, they are treated fairly and their concerns are dealt with quickly. We will work with consumers and the industry to develop our proposals, which will be published in more detail soon and will set out the scope and powers of the ombudsman.

In the meantime, we have been challenging industry to improve redress in the shorter term. The work being done by the Home Builders Federation could lead to a voluntary new homes ombudsman and better redress for consumers in the short term, while Government works towards legislation. In our response to our redress consultation we will set out the standard we expect these voluntary arrangements to meet. We also expect that any new redress scheme for buyers of new-build homes should be free to the consumer, as in other sectors.

We believe there should be a clear and quick escalation route for issues of building safety and are exploring a number of options. Again, we call on the industry to implement actions and processes so that the examples we heard on BBC “5 live Investigates” do not happen in the first place. We want to see a marked improvement in the standards of new homes and will ensure that home buyers get those standards, not only for new-build homes but across the market.

Further to building regulations and standards of new-build finish, the leasehold system needs to be fair and transparent to the consumer, so that their home truly feels like their own. Unfair practices in the leasehold market have no place in the modern housing market, nor do excessive ground rents, which exploit consumers who get nothing in return. In July, the Government announced that no Government-funded scheme would be used to support the unjustified use of leasehold for new houses.

[Sir Peter Bottomley]

We are all grateful for what the Government have said in the past and what the Minister is saying now. One of the problems with ground rent is the question of what it is there for at all. The commonhold gets rid of ground rents. We do not know whether the help to buy scheme is used to commonhold. Can the Minister make an announcement about how that problem will be solved, so that commonhold homes can be accepted for help to buy?

[Mrs Wheeler]

There are discussions going on about commonhold. I will be happy to talk to my hon. Friend about this offline.

Our technical consultation on how to improve the leasehold market and make it fairer for consumers has now closed, and we are analysing the responses. We want to see developers support everyone who has onerous ground rents, including second-hand buyers, and for customers to be proactively contacted. We are helping existing leaseholders by making it easier and quicker for leaseholders to form residents’ and tenants’ associations. We are proposing a single, mandatory and legally enforceable code of practice covering letting and managing agents, giving people a clearer and simpler route to redress. We are publishing a how-to-lease guide for consumers and looking carefully at how we currently give support and advice to leaseholders.

The hon. Member for Washington and Sunderland West (Mrs Hodgson) was very interested in educating leaseholders. We are publishing the how-to-lease guide, which will educate leaseholders. We have also held workshops with the industry to develop the how-to-buy and how-to-sell guides, which will be published in 2019.

The hon. Member for Poplar and Limehouse asked about leasehold reforms. LEASE, the group that we use to help give information, is unambiguously on the side of leaseholders. LEASE no longer pursues any commercial interests and it does not advise leasehold professionals. [Hon. Members: “Good.”] Yay—I just had a good. Get that in Hansard—sorry, I shouldn’t say that.

The hon. Member for Washington and Sunderland West asked about permission fees. Lord Best has a working group that is considering permission fees and whether they are reasonable or they should be banned in total.

The hon. Member for Ellesmere Port and Neston (Justin Madders) mentioned the £10 ground rent. For a peppercorn to exist there must be a consideration of exchange of money. We are concerned that peppercorn could be open to abuse and therefore we have considered that an amount should be specified in statute. We have chosen £10 because that is the annual amount used for right to buys.[Official Report, 21 January 2019, Vol. 653, c. 1MC.]

[Justin Madders]

It is helpful to have that explanation, because I have been mystified about what led to that situation. Obviously, peppercorns have been around for centuries; I do not know whether there is some legal advice that the Minister may be able to share, even confidentially, about why we still have to have a financial figure rather than a peppercorn.

[Mrs Wheeler]

Given the previous week’s history of sharing legal advice, I might skip over that one, if the hon. Gentleman does not mind. Perhaps he and I could have a cup of tea. The £10 peppercorn ground rent was part of our recent leasehold consultation and we will be considering our approach in light of the responses to the consultation.

[Sir Peter Bottomley]

How about 10 lbs weight of peppercorns?

[Mrs Wheeler]

Black pepper or white pepper?

[Melanie Onn]

Or pink?

[Mrs Wheeler]

Or pink—yes, please—or green; we could have green pepper as well. This poor Hansard writer, dearie me.

I recognise that many freeholders have to pay charges toward the maintenance and upkeep of communal areas on an estate. That is especially prevalent on new estates, exactly as the hon. Member for Blaydon mentioned. Freeholders who are unhappy about the transparency of those charges are becoming an increasingly frequent part of my ministerial postbag, and I understand why they are unhappy. Leaseholders have a whole suite of protections and rights that enable them to hold management companies to account, but freeholders have no such equivalent, even though they may be paying for the same or similar services.

The Government agree that the current situation is unfair to freeholders, and we are committed to legislating to plug that gap. We have set out our proposed approach to implementing those measures in part 4 of the recent leasehold reform consultation, which closed on 26 November. We intend to create a new statutory regime for freeholders, based on the rights enjoyed by leaseholders, which will ensure that maintenance charges must be reasonably incurred and services provided of an acceptable standard, and include a right to challenge the reasonableness of charges at the property tribunal.

[Helen Goodman]

The Minister is being generous in giving way. I do not know whether she noticed my ten-minute rule Bill on that precise point, but when she brings forward the legislation or proposals on freeholders, would she consider capping the charges and making it possible for the freeholders to buy and self-manage the common areas, which, as she knows, are being sold on and on and on to a series of exploitative management agents?

[Mrs Wheeler]

The hon. Lady poses a number of questions, all of which are very interesting. I will reread Hansard after the debate and take on board what I can.

The Government agree that the situation is unfair, so we intend to introduce a new statutory regime and are considering whether freeholders should have a right to change the provider of maintenance services by applying to the tribunal for appointment of a new manager, which may be useful if a freeholder is dissatisfied with the service they are receiving. As it happens, my officials are now analysing the responses and the Government intend to bring forward legislation to implement changes as soon as parliamentary time allows.

We move on to another area in this vast debate, home buying and selling. Around 1 million homes are bought and sold in England each year, but another 25% to 33% of planned sales fall through, costing consumers around £270 million and creating stress for far too many people. The Government published our response to the home buying and selling call for evidence in April 2018, setting out an ambitious programme of action to make the buying and selling process in England cheaper, faster and less stressful, in line with our manifesto commitment. There is no silver bullet that can change everything at a stroke and fix the process. Instead, we will need to make a number of practical changes, some big, some small, which taken together will make the experience much better. To put hon. Members’ minds at rest, we as a Government are here to tackle those issues.

We have already started work. We have created a new working group focusing on the regulation of property agents, chaired by Lord Best. We have begun working with industry and the National Trading Standards estate agency team to develop guidance on making referral fees more transparent and to look at the case for banning them. We have also doubled the funding available to that team. We have written to all local authorities reminding them of the Government’s ambition to have a property search request completed within 10 working days. We have consulted in implementing reforms to the leasehold system, seeking views on fixed timeframes and maximum fees for freeholders and managing agents to provide leasehold information.

We have held workshops with industry to develop detailed and thorough how-to-buy and how-to-sell guides to inform consumers, to be published in 2019. We have started work with industry and consumers to make conveyancing data more transparent so that buyers and sellers can make a more informed choice and we have worked with industry to develop a standardised reservation agreement. We will commission behavioural insight analysis to support its implementation; it will increase commitment between buyers and sellers much earlier in the process. Together, our reforms will create a much better process, which guides buyers and sellers and gives them the information they need at the time they need it, allowing them to make the biggest purchase of their lives with confidence.

I confirm to the hon. Member for Poplar and Limehouse that I will write to him regarding cladding and sprinklers. My hon. Friend the Member for Worthing West kindly brought up the question of VAT on service charges. As he will know, that is a matter for Her Majesty’s Treasury, but it is something that has only recently raised its head, so I will write to him about that.

On bonuses for those larger businesses, we announced in August that we are helping to improve shareholder scrutiny of executive pay, strengthen the employee voice in boardrooms and build confidence in how large companies are run. Under those reforms, all quoted companies will be required to disclose and explain annually the rationale for the chief executive’s pay and the ratio to the average pay of their UK employees. The new reforms will provide greater transparency on the impact of share growth and executive pay.

The Government have been clear that this should be a country that works for everyone. That means building more of the right homes in the right places and ensuring the housing market works for all parts of our community. We must ensure that ordinary people purchasing a new home have the protection they deserve and are treated fairly.

[Mrs Hodgson]

I was listening carefully to the Minister, but I may have missed this—if I did, I am very sorry. I wonder if she could say something about a point that both my hon. Friend the Member for Bishop Auckland (Helen Goodman) and I mentioned, about referring some of these dodgy lawyers, conveyancers or solicitors to the Law Society when they are not acting in the best interests of their client, who should be the buyer.

[Mrs Wheeler]

Absolutely. I am sorry that the hon. Lady did not hear me say it, but the Secretary of State has written to the Solicitors Regulation Authority, the SRA.

[Mrs Hodgson]

Thank you.

[Mrs Wheeler]

My absolute pleasure. We must ensure that everybody has the protection they deserve and is treated fairly, and that all efforts are made to ensure that builders build to the standards and finishes that we expect. Once again, I thank the hon. Member for Stretford and Urmston for securing this valuable debate, and I look forward to her summing-up speech, right now.