How a New Homes Ombudsman could improve housebuilding and help customers

In July 2016 the All Party Parliamentary Group for Excellence in the Built Environment Inquiry published a report on the quality and workmanship of new housing in England. The report 'More homes, fewer complaints’ revealed a high level of frustration and disappointment from buyers of new homes, both in terms of the number of defects that new homes often had on handover, and also the problems they encountered on getting them fixed.

As detailed in the report, lack of market competition, skills shortages and an imbalance in bargaining power are combining to short-change buyers of new homes. Housebuilders were too frequently handing over poor-quality homes because they could get away with doing so.

As the previous report found, and new evidence reinforced during this Inquiry:

• Consumers faced a confusing landscape caused by a plethora of warranties, housebuilding codes and complaints procedures, each offering something slightly different. Buying a new home is stressful enough; but buying a defective one, as they heard from submissions and witnesses, can take a massive toll on people’s wellbeing as they wrestle with an almost Kafkaesque system seemingly designed to be unhelpful.
• Consumers are confused by what warranties cover, which is far less than consumers assume; and neither warranties nor building control functions provide any sort of comfort that items such as finishings and fittings will be defect-free when the house is handed over.
• The house inspections are performed primarily to prove to underwriters and mortgage lenders that the property is a ‘standard risk’.
• Few consumers appreciate that for the first two years after completion, it is down to the builder to sort out the defects – and that for years three to ten the warranties cover purely structural matters.

While prevention is always better than cure, APPG believe an ombudsman system would provide quick and fair redress and help bring about a change of culture amongst housebuilders.

Recommendations relating to a New Homes Ombudsman

1. Principle: The principle of the ombudsman scheme is that it should be independent, free to consumers and provide a quick resolution to disputes. APPG would like to see housebuilders consistently building defect-free homes so that the number of complaints are reduced.
2. Consumer clarity: All Party Parliamentary Group are advocating that there is a single portal for ombudsman services spanning the entire residential sector, covering the conduct of estate agents through to social housing, in order to reduce confusion in the market place. Within this single entity, there would be either a number of specialist ombudsmen or specialist divisions. One of these would cover new homes – and this is the aspect the report is concentrating on, a New Homes Ombudsman.
3. Remit: They would expect to see the New Homes Ombudsman cover all those organisations and processes involved in the building and selling of new homes, except those which already have their own ombudsman, such as solicitors and estate agents.
4. Tough sanctions: APPG recommend that it should be a statutory requirement for any organisation building and selling new homes to belong to the New Homes Ombudsman to be able to trade.
5. Industry-wide code of practice: They are recommending that government, warranty providers, housebuilders and consumer groups work together to draw up a code of practice which would be used by the New Homes Ombudsman to adjudicate on disputes.
6. Awards: APPG are advocating that the New Homes Ombudsman would be able to make awards to consumers of up to £50,000 and that these awards are made public.
7. Timescale for settling disputes: The New Homes Ombudsman should be obliged to settle disputes within certain time limits.
8. Funding: It is recommended that the New Homes Ombudsman is funded by a levy on housebuilders, rather than a case fee. However, we think that volume housebuilders should pay proportionately more than small to medium enterprises.
9. Relationship with existing complaints procedures: The New Homes Ombudsman would cover disputes between housebuilders and consumers for the first two years.
10. Review warranties: They are advocating that the Ministry of Housing, Communities and Local Government commissions a review of warranties to ensure they are fit for purpose for homebuyers
11. A minimum standard should be set for compliance inspections by Government