(4 years, 7 months ago)
Commons ChamberIn recent years, I have seen numerous examples in my constituency of shoddy and sometimes downright dangerous workmanship, and a lack of redress for homeowners. The all-party parliamentary group for excellence in the built environment highlighted similar issues in reports in 2016 and 2018. I therefore welcome the announcement in the Queen’s Speech of the Government’s intention to act. I hope that, by sharing some of my constituents’ experiences and concerns, I can urge speedy progress, and help to inform the Minister’s thinking as policy is developed. I also hope that he will carefully consider the issues relating to the regulatory regime, enforcement and the operation of warranties that I will raise tonight.
May I start by placing on record my thanks to Martin Scott and Paul Hargreaves of solicitors Walker Morris, and Geoff Peter of New Build Guru, who have all been generous with their expertise in helping me to prepare for this debate? I also thank my constituents for bringing their concerns to my attention. They have shown great fortitude, and a determination that the problems that they have endured should not be suffered by other homeowners in years to come.
Let me give the House some idea of the defects experienced by my constituents. At a development in Stretford—undertaken by Mr Selcuk Pinarbasi through his family companies Pino Design and Build, and Talbot Gate Developments—homeowners showed me numerous defects that they found when they moved into their new homes, including unfinished and damaged bathrooms and fittings; floors, skirting boards, bannisters, windows and doors out of true; the measurements of a downstairs WC not complying with statutory requirements to enable wheelchair access; breaches of electrical safety regulations; and an incorrectly fitted gas sleeve.
In another development, in Old Trafford, buyers found that there had been failure by the developer to comply with conditions relating to external works including boundary treatments, security, lighting, landscaping and waste disposal. That developer, Mr Jason Alexander, was also behind the development of Aura Court, an apartment block on the border of my constituency and Manchester city centre that has been the subject of a “Granada Reports” programme highlighting the dangerous and incomplete state of the block, such that Greater Manchester Fire and Rescue has put a number of enforcement notices in place. Issues there include damaged fire doors; cladding not installed on external walls and walkways; decking not installed on walkways; unauthorised window installation, affecting fire safety standards; waterlogging on escape routes; and dangerous staircase treads. Even so, the block remains occupied, despite its shoddy state.
This is a really important debate. I think lots of Members will have examples of such issues in their constituency. My constituents have also experienced a real difficulty getting the guarantees behind these developments actually enforced. Premier Guarantee, which is apparently endorsed by all household lenders, has been in dispute with some of my constituents for three years over a series of defects in the property—defects that are accepted by Premier. Premier is now suggesting that the case needs to go to independent arbitration—at my constituents’ expense—to resolve the issues, even though it accepts that the defects exist. Does that not show a fundamental need for the reform of the system?
I absolutely agree with my hon. Friend, who does excellent work through the all-party parliamentary group on leasehold and commonhold reform. I will be saying a little more about the deficiencies of the warranty arrangements, including those provided by Premier, in a few moments.
I most certainly would support that suggestion.
There are a number of other actions that the Government could take to address the slippery state of affairs that exists around warranties. Will the Minister consider, for example, standardisation of warranty policies, with the use of clear and unambiguous language, and an end to unreasonable exclusions? Would the Government consider amending the Housing Grants, Construction and Regeneration Act 1996 so that warranty policies are brought within the meaning of “construction contracts” under section 104 of the Act? That would mean that disputes could at least be settled by the relatively quicker and less expensive route of arbitration, rather than people needing to pursue a court claim.
The Minister will know that the problems I have described are compounded for those who own leasehold property. Management companies should be under a positive duty to act in leaseholders’ best interests, but often they are powerless to claim on the leaseholder’s behalf under the defects cover that is taken out by and for the benefit of the developer and his design team, usually for a 10-year period, to cover total or partial collapse or some other latent structural defect. The position of leaseholders could be strengthened through new legislation to make it compulsory for management companies, and leaseholders, to benefit from decennial insurance, specifically requiring such insurance to be taken out, specifying minimum levels of cover and the term of the insurance, and giving leaseholders and management companies third-party rights to claim directly under these policies.
The Government could also strengthen the Defective Premises Act 1972. This legislation extends protection for a period of six years—a period that is obviously out of line not only with decennial insurance cover but with actions in tort, where claims are allowed for a three-year period from the date of knowledge, subject to an overall maximum of 15 years under the Latent Damage Act 1986. The limitations period in the Defective Premises Act could be extended to be consistent with tort actions to give owners more protection. This is particularly important following the case of Murphy v. Brentwood District Council, which means that the residential property owner cannot claim for economic loss in tort.
There is a further adjustment to the Defective Premises Act that I invite the Minister to consider. Section 1(1) sets a test that work should be done
“in a workmanlike or, as the case may be, professional manner, with proper materials…so that as regards that work the dwelling will be fit for habitation when completed.”
That is a high bar when measured against the relevant test in consumer legislation, which refers to goods needing to
“meet the standard that a reasonable person would consider satisfactory”
under the Consumer Rights Act 2015.
I will not, if my hon. Friend will forgive me, because I think we are going to be tight on time for the Minister to respond, and I am covering—we are all covering—a lot of territory.
Is it right, Madam Deputy Speaker, that the law should offer more protection when you buy a toaster than when you buy a house? Why is not the standard similar in relation to the purchase of residential property?
I would like to mention two issues that are outside the direct remit of the Minister’s Department but that none the less impact on the overall picture of protection for homeowners. The Legal Aid, Sentencing and Punishment of Offenders Act 2012 means that, even if a householder does successfully pursue a defects claim in court, they may struggle to recover costs from their unsuccessful opponent. Although conditional fee arrangements are still possible, success fees and after-the-event insurance costs cannot be recovered from the losing party. This is a big issue for defects actions, since these costs can leave successful litigants so out of pocket that they still cannot afford to carry out the work to remedy the defects that were the subject of the case in the first place. Will the Minister press his counterparts in the Ministry of Justice to exclude defects actions for residential property from the prohibition on recovery of success fees and after-the-event insurance costs so that a successful owner can use the damages awarded to carry out repairs?
The operation of company law also seems to assist rather than hinder unscrupulous developers, who can set up a new company for each development, then place the company in liquidation, leaving defects unaddressed and sometimes avoiding tax and money-laundering rules in the process too. One constituent has found neither Companies House nor the Insolvency Service very willing to act to prevent this from happening, even when the same developer has blatantly and repeatedly breached registration and company law requirements. How will the Ministry work with Her Majesty’s Revenue and Customs and the Department for Business, Energy and Industrial Strategy to ensure that company law operates robustly against such practices by developers?
While I am aware of attempts by the industry to address homebuyers’ concerns through the five-star system, of proposals for a new homes ombudsman, of the Royal Institution of Chartered Surveyors’ intention to draft new guidance for its members and regulated firms on the inspection of new residential building works and snagging, and of UK Finance’s role in relation to mortgage lenders and improving building standards, these protections will still be insufficient.
The more I have looked into this matter, the more shocked I have been by the extent of the problem, the utter unscrupulousness of some developers and the absence of meaningful protection for homebuyers, many of whom are making the most significant purchase of their lives. I am sure the Minister will recognise from this brief description of the problems experienced by my constituents and those of my hon. Friends that the case for holistic, far-reaching, regulatory and legislative reform is both urgent and compelling and that any measures introduced must have real teeth. The Government’s stated intention to act to strengthen buildings standards and safety is a real opportunity, and I look forward to the Minister’s response.
(5 years, 1 month ago)
Commons ChamberI will not speak for too long, because I am sure the House has heard enough from me today, but I have a couple of queries, following what I said in the previous debate about this only being a staging post to our final destination.
The Gemma White report says that
“contributors to this inquiry have expressed considerable concern about using the new procedures and scepticism as to what the ICGS can realistically achieve. Many of them told me they would not contemplate making a complaint under the new ICGS procedure, because it would be ‘career suicide’… Some are concerned about the independence of the ICGS process… and the lack of clarity as to the sanctions which could be imposed on an MP.”
Those are still the issues with getting a process that we and, most importantly, staff can be confident in. Until we have a process that does not involve Members at all—I appreciate that work is going on in respect of that—staff will feel a bit inhibited in making a complaint.
The other issue is sanctions. I am not at all clear, and I hope the Leader of the House can clarify when he responds, what sanctions will be levied against an MP for a complaint being upheld under this procedure. For the procedure to have the confidence of staff, it must have proper sanctions.
To clarify, on behalf of the Committee on Standards, we are conducting an inquiry into exactly the question of what sanctions would be appropriate in a number of different situations. We would be more than happy to hear from my hon. Friend and, indeed, all Members.
I thank my hon. Friend for that intervention. I am aware that a consultation is ongoing, but it begs the question of what will happen with complaints that are being dealt with now if sanctions have not been clarified. Presumably some complaints will be resolved before the Commission reports. If I am wrong about that, I am happy to be corrected. Will sanctions be applied retrospectively after they have been agreed, or will investigations be reopened? Those are the questions that I hope the Leader of the House can clarify when he responds.
Question put and agreed to.
(5 years, 8 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
I am grateful to my hon. Friend for making that point. The issues of protections through statute and of information to purchasers will be among the many points that I hope to draw to the Minister’s attention during the remainder of my speech.
A couple of weeks ago, the BBC’s “5 live Investigates” reported on the shocking experience of a couple who had moved into a new Bovis home in Worcestershire. During that programme, homebuyer Craig read out a list of a staggering 354 defects in their new house. Last week, the “Victoria Derbyshire” programme reported on homebuyers who found that the mortar in the walls of their new Barratt and Taylor Wimpey homes was crumbling. Buyers report that once they have decided to buy a house, they are placed under considerable pressure to complete the purchase speedily, so that the developer is paid and managers meet their sales targets. Quality is clearly being compromised as a result of those pressures.
The pressure that buyers are put under to conclude purchases quickly is something I hope to talk about later on. Is my hon. Friend aware of issues with developers insisting that particular solicitors complete the transactions?
Indeed I am, and that too is a point to which I hope to return in the course of my remarks.
It is a pleasure to serve under your chairmanship, Ms Ryan. I congratulate my hon. Friend the Member for Stretford and Urmston (Kate Green) on securing this extremely important debate and on the way she managed to cover a whole range of issues. There are many aspects to this issue. As my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) said, I am vice-chairman of the all-party parliamentary group on leasehold and commonhold reform. I pay tribute to him and the hon. Member for Worthing West (Sir Peter Bottomley) for the work they have done, ably aided by the Leasehold Knowledge Partnership, in raising the many issues in many debates here.
The title of the debate is “Protection for Homebuyers”. The truth, as we have heard, is that there is little protection, if any. We have a system based on the historic principle of caveat emptor—buyer beware—which is a principle I often hear quoted back at me when I raise concerns about some of the more insidious practices developers have adopted over recent years. Buyers should beware, because caveat emptor relies on a buyer and a seller having equal bargaining power, and that is simply not the reality in 2018. We have a huge shortage of housing, there are significant barriers for buyers in getting on the housing ladder and there are a handful of huge companies responsible for the vast majority of housing delivery.
The situation has been exacerbated by the Help to Buy equity loan scheme, which offered support to first-time buyers for new-build homes only. That led to an effective monopoly being held by some developers. If someone wanted to purchase their first home in the area where they grew up, the only choice would have been to visit the sales office of an individual supplier.
Does my hon. Friend agree that it is not just individual homebuyers who are being ripped off by some developers, but the taxpayer, because it is public money, through the Government’s Help to Buy scheme, that is helping to boost their profits?
I absolutely agree. The reliance on this small group of developers has been a very poor deal for the taxpayer, and it is against that backdrop that the leasehold scandal has emerged. Once-trusted household names such as Bellway, Persimmon, Redrow, Taylor Wimpey and Countrywide acted in, I believe, a deliberate way to exploit the circumstances and rip off thousands of people around the country—and the taxpayer, in the process.
For no other reason than profiteering, houses in many areas gradually began to be sold on a leasehold rather than a freehold basis. Punitive permission fees—where a leaseholder is forced to pay a significant sum for everything from putting up a shed to changing a carpet—were hidden in the small print of the leases. Service or maintenance charges were then added, charging leaseholders for the same services that they are already paying council tax for. If that was not enough, the developers then added onerous clauses, causing the ground rent in many cases to periodically double, taking them from an initial modest sum to thousands of pounds after a few decades, rendering the properties unmortgageable and unsellable in the future. The ground rent is, of course, being levied for absolutely nothing in return.
When purchasers query the leases on the properties, they are offered a range of scripted reassurances, being told that the properties are “virtually freehold” and that they would have first refusal to buy out the lease. In almost every case, the lease is then sold without the knowledge of the person actually living in the home, to become an income stream for a network of opaque investment companies. People are then told they can purchase the freehold of their own home only if they are prepared to offer tens of thousands of pounds.
As we have heard, purchases of these properties take place in an extremely tight and completely artificial timescale, imposed by the developer through a hard-sell approach. To compound the unequal relationship between the parties to the transaction, a variety of pressure and incentives are used by developers to encourage the use of a solicitor on their own panel. While the solicitor of course has a duty to act in the interests of the purchaser, the reality is that when hundreds of cases are being provided by the developer, that independence is inevitably put under some strain.
My constituent, Katie Kendrick, has helped to lead an incredible campaign on behalf of leaseholders around the country against this scandal, and I pay tribute to her for everything she has done to bring it to the attention of the public. Her own case is a textbook example of the kind of issues we have talked about. In July 2014, with her husband, she bought what transpired to be only the lease to her home from Bellway, a company with a revenue of more than £2.5 billion last year. It was bought through the Help to Buy scheme, and they had only 28 days to complete the purchase following payment of the £500 deposit to reserve the plot. Because of this developer-imposed and completely arbitrary timeframe, Katie and her husband were pressured into using the Bellway-recommended solicitors.
They were informed during the process that, after two years, they would have the right to buy their freehold without any problems and that it would cost in the region of £2,000 to £4,000. Less than two years later, in February 2016, they received notification that the freehold to their home had been unilaterally sold to Adriatic Land 4 (GR1) Ltd. When they inquired whether they could purchase the freehold, they were quoted an amount of £13,350.
I have concluded that Katie’s experience was deliberately manufactured, because it is simply not feasible for the exact same actions to have become standard practice across a range of developers throughout the country. If this situation, as I believe, was deliberately manufactured to exploit thousands of people up and down the country, what is the Minister going to do about it?
If the situation is so serious and inequitable that it should be banned from ever occurring in the future, as is the Government’s apparent policy, how can she justify taking no action to help those people who have already been affected? What examination has been undertaken of the Government’s role in the leasehold scandal? Does she accept that Help to Buy—a scheme created with good intentions—not only helped to create a monopoly position that was exploited, but has also subsidised the perpetrators? What is going to be done about that?
The Housing, Communities and Local Government Committee investigation into these issues is extremely welcome, and I would urge anyone who has not yet done so to look at the evidence provided to date. Some of the responses from developers are completely incredible, in the literal sense. All the developers were unanimous in their support for ending the leasehold scheme that they have already inflicted on thousands of people around the country. Taylor Wimpey told the Committee that when the doubling ground rent issue
“came to our attention...we made a very quick decision to convert the homes that we sell to freehold.”
That implies that until that point they were unaware of the basis on which they were selling their homes.
When Bellway was asked why it sold the freehold off to a third party rather than to the people actually living in the property, their chief executive, Jason Honeyman, replied:
“It is how we have always operated as a business. I am sure that is not the answer you want.”
A member of the Committee pressed him further on this point:
“I am asking why your customers do not get the chance to exercise the opportunity to buy their freehold. You are selling the freehold out from under them without their knowledge.”
His response was simply:
“Yes, we are.”
We know from many Bellway customers that they were specifically told by the sales staff they would be able to buy the freehold, yet here is the chief executive admitting that they have always sold them on to third parties. That, more than anything, shows that when I first called this scandal the payment protection insurance of the housebuilding industry, I was right to do so.
Although the initial response to this emerging scandal from the Government was the right one and was positively received by leaseholders, there is a huge amount of frustration at what are perceived as broken promises. Leasehold houses are no longer to be completely banned, as was promised by the Government. Ground rents will not be reduced to a peppercorn, but to £10, which creates an asset and again amounts to a broken promise by the Government. Will the Minister explain why there has been this backtracking from removing ground rents altogether to having a minimum cost? For all those people already trapped in leasehold properties more than two years on from the scandal coming to public attention, we have little more than warm words from the Government, and no action.
One of the reasons for people’s anger is that, although obscene bonuses have been awarded to Persimmon executives, the bulk of the profits have come from the taxpayer through the Help to Buy scheme. The Government need to accept that they are not simply a bystander, but a financer of the scandal. They cannot simply watch from the sidelines as our constituents continue to be ripped off while a handful of predators generate profits. It cannot be right that the companies that are guilty of this industrial-scale rip-off are the very same ones that we will end up relying on to get us out of the country’s very real, very damaging housing crisis. There seems to be an over-reliance on the market to deliver the new homes that we desperately need. I have seen very little evidence to suggest that developers will act responsibly.
As the leasehold scandal shows, developers have become ever more adept at squeezing cash out of homeowners. Another way of doing that is through the provision of grounds maintenance and other communal services. It seems that the idea of the developer paying the local authority a commuted sum to cut the grass and maintain common paths has had its day. I am not clear whether the blame for that lies with local authorities for asking for too much or with developers that are not prepared to cough up enough funds in advance. I am sure they will always blame each other. The net effect is that more and more homeowners now have, in effect, to pay twice for the maintenance of open spaces—once through the management fee and once through their council tax.
Of course, council tax pays for lots of things, but something as visible and obvious as grounds maintenance leads people to ask why they face a double-whammy. My suspicion is that developers will always be tempted to save themselves the expense of an up-front payment to the local authority by letting their customers pay further down the line long after they have fled the scene. It is not only a double payment; it is also inefficient and lacks accountability. If the grass is not cut on the verges in most parts of my constituency, either I or a local councillor will hear about it and respond. It is not that easy to get a response from a management company.
I want to say a few words about the difficulty in getting developers to comply with their legal obligations once they have completed the bulk of the work. Yet again, the name Bellway crops up. Although it finished building the properties on an estate several years ago, the roads have yet to be adopted by the local authority, because they are not yet up to highway standards. Years of wrangling and paperwork followed the work. We all know about the significant cuts in funding that local authorities have experienced, and yet they have to waste their precious resources chasing developers that are reluctant to face up to their responsibilities.
Another example of that in my constituency is in the Mostyn House development in Parkgate. Originally, it was a boarding school in a listed building. Once the school shut, the site was an attractive one for developers. It is now an impressive mix of new builds and apartments woven into the fabric of the old school, but it suffers from one major disadvantage: although some people have lived there for five years, it still does not have planning permission. The reason for that is that the revised plans were submitted halfway through the redevelopment. Despite the best efforts of the local authority enforcement officers, the developer, PJ Livesey, continually dragged its heels, and as a result there is still an outstanding long list of works.
Our Front-Bench spokesman, the hon. Member for Great Grimsby (Melanie Onn), is not someone who goes around fishing for compliments, but she and the shadow housing team are very engaged on these issues. I hope they continue to develop a full suite of important policies that will tackle many of the injustices we have heard about.
The net effect of all this is that there is no protection for homeowners. Once the developers have left town, they show little interest in keeping to their legal responsibilities. Worse, they continue to market their properties as a revenue stream for third parties.
As my hon. Friend the Member for Stretford and Urmston said earlier, why can we not have a retention scheme for snagging? Part of the purchase price could be held by an independent third party, only to be released when everyone was satisfied that things had been resolved. We do that with deposits for tenancies, and we are talking about something much more significant—sometimes a once-in-a-lifetime investment. People deserve more protection than they currently get. The cowboys in the developer sector need to be consigned to the history books.