Protection for Homebuyers

Melanie Onn Excerpts

Thursday 13th December 2018 Westminster Hall

[Melanie Onn (Great Grimsby) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I thank my hon. Friend the Member for Stretford and Urmston (Kate Green) for securing this important debate. I commend the exceptional and knowledgeable contribution that she made in opening the debate, which has taken us far beyond the debate’s title. The contributions have been wide and varied, but they all fall within the subject of justice and fairness for people buying their own homes.

If we are to end the housing crisis, we need to build hundreds of thousands of new homes every year, but what is sometimes lost in a number-focused, target-based approach to house building is the issue of quality. The desire or requirement to complete at speed overshadows the checks and details that people buying brand-new homes expect to have within the system of sign-off before properties are exchanged. Unfortunately, far too many new homes fail to live up to the standards that homebuyers should be able to take for granted.

A YouGov survey commissioned by Shelter found that almost all homeowners of recent new builds experienced some problems when moving in, with more than half of new homes having major faults. As a consequence, there is a crisis of confidence in the quality of new homes, with only two in 10 people thinking that new homes were built to a higher standard than old ones, and only three in 10 preferring to live in a new home rather than an old one.

My hon. Friend the Member for Stretford and Urmston made some alarming statements in her contribution. There was a higher level of danger in some new homes because of poorly installed heating or electrics; a lack of security when front doors did not close; and a public health risk when drainage from bathroom facilities was not properly fitted. We surely cannot consider that acceptable in this day and age, so there is a clear quality problem within some new homes. The worst of it is that homeowners experiencing difficulties suddenly find that they have limited protections and guarantees regarding their new home’s standard.

All political parties accept the need to significantly increase house building output in this country, and that brings with it an urgent need for a more accountable system to check on new builds and restore confidence that buying a new home does not come with a Pandora’s box of problems and headaches for owners. That includes the issue of leasehold, which my hon. Friends the Members for Poplar and Limehouse (Jim Fitzpatrick), for Washington and Sunderland West (Mrs Hodgson) and for Ellesmere Port and Neston (Justin Madders) dealt with in great detail. My hon. Friend the Member for Poplar and Limehouse said that the Government recognise that there are gaps and failings in legislation relating to leaseholders, but no concrete action has yet been taken. I am sure he feels the Government owe it to his constituents to get it sorted.

My hon. Friend the Member for Washington and Sunderland West talked about the lack of information about leaseholds. There is a real lack of knowledge and understanding, so perhaps the Minister will set out what she is doing to make sure that people are aware of their situation when they buy a home. Clear, concise information is needed. When people buy a new home, the amount of information they are sent is enormous, so how can we make sure that leasehold information is at the top of their list of concerns and is addressed and explained properly? My hon. Friend also highlighted the purchase of freeholds. The price is often set far out of the reach of individuals, or the freehold is sold to third parties.

There is also the issue of rip-off fees charged by freeholders. The Minister has overseen changes to rip-off fees in the rental sector to some extent. She took on board many of my comments in the Tenant Fees Bill Committee, and I thank her for that, but when will she take further action? If rip-off fees are not acceptable in the rental sector, we cannot say that they are acceptable in the home ownership sector.

My hon. Friend the Member for Ellesmere Port and Neston talked about the rip-offs around ground rents rising to extortionate levels, making homes unmortgageable and unsellable. He described the valiant efforts of his constituent, Katie, who led a campaign on behalf of leaseholders around the country to highlight that scandal in all our minds. There is an opportunity to take retrospective action, but the Government have been reluctant to talk about it. I have no doubt there are complications, but, as my hon. Friend said, this matter is the PPI of the homebuying and leasehold sector. If we can take action on PPI contracts, why can we not take action on those leasehold contracts?

The creation of a new homes ombudsman is welcome news for consumers, but when can we expect to see that ombudsman in action? Precisely what powers will they have? The Government must press ahead with greater enthusiasm to give homebuyers the sense of security they need when buying a new-build home. Despite a home being the most expensive and important purchase that most of us will ever make, homebuyers too often do not enjoy the same protections that we enjoy when we buy even the most basic everyday goods and services. If somebody bought a book with missing pages, a box of chocolates with their fillings missing or a TV that did not produce a picture, they would be able simply to return the product for a refund or a replacement. But when it comes to a new house, consumers are left to navigate a complex and inadequate warranty system, the whims of developers and the small print of warranty providers. When problems arise, new homebuyers have to go through toil and stress simply to get what they paid for and what they should rightfully be entitled to as consumers.

My hon. Friend the Member for Kingston upon Hull North (Diana Johnson)—a democratically elected Member of this House who is of some civic standing—said it took her five years to get a meeting with a developer. Developers must understand the potential for embarrassment when being held to account publicly in this place. It should not take a Member of Parliament to have to address this matter. It should be simple and straightforward for an individual to get action from developers, and it certainly should not take my hon. Friend five years to get an audience with these incredibly important people in the developer sector.

[Helen Goodman]

My hon. Friend on the Front Bench is making a strong speech. Does she not agree that the large number of cases presented today and previously shows that the situation is not accidental? We are talking not about one or two mistakes, but about a deliberate strategy by the developers to set things up so that they have all the cards and the homeowner has no rights.

[Melanie Onn]

My hon. Friend is right. Some of the dismissive responses from some developers have been mentioned in the debate: “Have you been doing this?” “Well, yes.” “Has it previously been to the disadvantage of leaseholders?” “Well, yes.” “Have you been able to do anything about it?” “Perhaps, but it is only now that we are prepared to do it.” It just goes to show that highlighting such things and putting pressure on the companies can have a swift effect, not least if they want to save their reputational skins.

It is not acceptable that people have to put up with major problems with their home or delay moving in, or even that they have to move out during belated repairs to bring the house up to scratch. The Government should bring forward a full suite of consumer rights for homebuyers when they introduce the measure on the new homes ombudsman. However, when more than half of new homes are built with major problems, it is clear that problems in providing protection and standards to homebuyers run deeper than consumer rights. There are clear failings across the house building sector, allowing homes to be built systematically in a way that quite clearly falls below the standard that anyone should expect.

That was highlighted well by my hon. Friend the Member for Blaydon (Liz Twist), when she talked about unfinished estates and issues of completion, adoption and delays. She mentioned people living for too long on building sites when there are delays in completing properties, as well as lack of transport and infrastructure, and the failure to provide basic amenities such as shops, play areas and community centres—the things that build a community. Instead, estates are left full of Lego houses, with no centre or heart.

We have a planning permission bidding system with too much flexibility on both affordable housing and standards of building, and bidders can see the building of a home to a high standard as a costly extra. Too often, they fail to recognise that they are not simply building houses; they are building communities, which confers on them a corporate ethical responsibility. They should take pride in the work they do, the homes they provide, and the communities they are building around the country. It sticks in the craw when large companies exploit the system and fail to live up to their moral duty to deliver affordable housing of an acceptable standard, but still pay uncomfortably high bonuses—despite benefiting from the Government Help to Buy system.

We have already heard about Persimmon’s horrendous customer service. My hon. Friend the Member for Kingston upon Hull North may be surprised to learn that it gets three out of five stars for customer satisfaction. Perhaps she would think that that rates it rather too highly. It will no doubt be disappointed that it is not getting five stars in the HBF customer satisfaction ratings, but rather than concentrating on improving building standards or communication with customers, it insists on paying out £75 million in bonuses to its executives. That is alarming.

Last year, I met the new bosses of Bovis Homes, another company that was struggling to meet acceptable standards, because of a combination of over-expansion, too much subcontracting and being too distant from customers. For a long time it had a five-star building rating, of which it was incredibly proud, but it lost it. It was heartening for me—and it did not take me five years to get a meeting—to hear that Bovis bosses were determined to turn things around. They were quite crestfallen that the company’s reputation had been hit so hard. They had been known as a high-quality, trusted home building brand. Customers were pleased at the change of heart, but there were those who had hoped to move into their dream-forever home for whom the game change was too little, too late.

The need to build hundreds of thousands of homes a year should not lead to reduced standards in house building or allow companies to exploit the housing crisis by making a fortune from an under-regulated housing system. The Government should consider the call from the Federation of Master Builders for a licence to practise, to root out cowboy builders who forgo the rules during construction.

My hon. Friend the Member for Stretford and Urmston talked about a single homebuyers code, developers not being able to insist on particular solicitors to be used by homebuyers—who would have a free choice—and an information pack post-sale. She also highlighted the issue of training for subcontracted staff, and looked forward to high-quality apprenticeships in the building sector. Those are issues that it is well worth considering.

My hon. Friend the Member for Poplar and Limehouse talked about safety and retrofitting sprinklers, and that should not be forgotten. The issue is not just about houses; it is also about flats, of course. When we think about high-rises, the Grenfell tragedy and its effects should not soon be forgotten if we want citizens to be safe.

I hope that the Government will take seriously what has been said in the debate, which was a good and helpful one. I hope they will seek to tighten regulation of planning standards and materials quality, and ensure that the homes we build are safe and up to scratch. Like the HomeOwners Alliance, the Government should want better new build, and should take much stronger action, including retrospective action for leaseholders.

[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]

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.