Customer Satisfaction In The UK Housebuilding Industry

A Response To The OFT From Nabarro

Introduction

We refer to the OFT's market study into the Housebuilding

Industry in the UK and, in particular, the factors influencing the

OFT's decision to carry out the market study, one of which is

the view that customer satisfaction has not improved substantially

since the Barker Review of Housing Supply in March 2004.

The scope of the study and the "issues which the OFT wish

to work with the industry to examine" include the level of

consumer protection and redress. This is to consider "consumer

legislation and investigate whether new home warranties adequately

insure home buyers against poor quality housing".

About Nabarro

We act for numerous UK Housebuilders and we advise them on

Customer care and support issues.

Our paper is submitted independently as an "interest

party." We are the 23rd largest law firm in the UK with

offices in London and Sheffield. We have a great deal of experience

in the property sector, (both commercial and residential). In the

residential sector, we currently act for numerous Housebuilders

(both major plcs and smaller Housebuilders). We advise them on

customer related issues and have a team of lawyers who understand

the industry and deal with such work on a daily basis. We are,

therefore, in a position to be able to provide an independent

perspective and comment from outside the industry.

Background

In relation to 'new build' properties the following

factors need to be recognised:

Only 10% of houses bought in the UK are "new build"

with 90% being second hand or previously owned. The protection

afforded to customers buying 'new build' properties far

exceeds the protection available to consumers who purchase

previously owned properties. Their main legal protection is

'caveat emptor' (ie let the buyer beware).

Complaints are very few in number when compared with the number

of houses built annually in the UK;

Most new home buyers are reasonable and sensible and work with

Housebuilders to resolve any issues which arise.

By far, the vast majority of customer queries and complaints

are dealt with directly by Housebuilders and their 'customer

care' teams, to the customers' full satisfaction.

Of the small number of complaints that grow into disputes, the

question to be addressed is why these disputes arise. This

submission will seek to address that issue based on our

(substantial) experience;

A small but growing number of customer complaints are

unreasonable, unjustified and vexatious. The motivation and key

driver for these customers is to obtain financial compensation

grossly exceeding that to which they may be legally entitled.

Sometimes compensation is claimed and pursued as a priority over

providing access to the property for the Housebuilder to remedy any

snag or problem.

Frequently, customers fail to utilise the Housebuilders own

Complaints Procedures, the NHBC, Zurich or Premier Warranty

protection, or the NHBC Resolution Service (all of which are

available at no cost to the customer).

NHBC 'Buildmark' warranties are recognised worldwide as

one of the most extensive warranties provided to customers in any

industry sector.

Customer Protection

Customers have the benefit of a raft of measures and procedures

(which offer them more protection than any other industry) at the

pre-contract, exchange of contract, completion and post completion

stages. These include:

The opportunity for customers to visit show homes.

Building Control Protection during the building phase.

Visits to the new property and inspections before exchange of

contracts.

Final Inspections and 'handover' meetings at the

property.

'Snagging' Inspections before completion.

Legal advice from their own lawyers throughout the conveyancing

transaction.

Home Information Packs.

Pre-Contract Searches and Enquiries before Contract.

A written legal contract for sale (in plain English).

Protection provided by legislation including the Property

Misdescription Act 1991 and the Unfair Terms in Consumer Contract

Regulations 1999 and other consumer legislation.

Council of Mortgage Lender Certificates ("CML").

Compliance with Planning Permission and Building

Regulations.

Express and implied terms in the contract for the property to

be built to a "good and workmanlike" standard.

10 year NHBC "Buildmark" Warranty or Zurich or

Premier Guarantees.

NHBC Resolution Service (non-binding upon customer but binding

upon Housebuilders).

Housebuilder Customer Care Departments.

Housebuilder Customer Charters.

Availability of information for customers on the internet on

rights, obligations and performance.

Residents Action Groups.

(If Leasehold) Residents Management Company

Housebuilder's own Dispute Resolution procedures.

Some customers have their own legal expenses insurance.

It is relatively easy for customers to pursue claims through

the Small Claims Track in their local County Court at little

cost.

Manufacturers Guarantees and Warranties for white goods,

boilers and components.

Snags, Defects And Protection

We are not aware of (or acted for) any UK Housebuilder which

does not care for its customers or who is not prepared to resolve

issues that arise quickly and proactively.

"Snags" almost always occur with "new

build" properties. (This is why Housebuilders offer a 2 year

guarantee period via the NHBC "Buildmark" warranty or via

the Zurich or Premier Guarantees.) "Snags" largely occur

because of the materials with which houses are built. There is a

high water content in the materials used in Housebuilding and that

means that after completion properties have to be given time to

"dry out" and settle. All properties when built move to a

very small degree. This inevitably creates "snagging"

items (some of which are cosmetic and some of which are not). The

occurrence of snagging items is to be expected and is normal and

unavoidable. Housebuilders (almost without exception) always

promise to remedy them free of charge.

We often find, however, that customers fail to understand that

'snags' will occur and regard them as 'defects'. A

small (but growing) number then claim that the property is

defective and believe they are automatically entitled to financial

compensation. This is hardly surprising when so many snagging

companies exist. These companies offer homeowners a snagging

service for a fixed fee. They often 'guarantee' to find a

minimum number of 'snags'. They also often disregard the

standards to which the majority of properties in the UK are built

(i.e. to NHBC standards). Amongst the number of 'snagging'

companies that exist are PTG Snagging, Brick-Kickers, Force 10

Surveyors, Survey Homes 2000, TPH Property Services, Inspector

Home, NE Surveyors, Snagging.org and New Build Inspections. Some

have been known to identify minor cosmetic blemishes and describe

them as "defects." This can encourage homeowners to

regard the "snags" as "defects" and seek

compensation. This creates a wholly unrealistic expectation amongst

homeowners that they are entitled to compensation when often they

are not.

The NHBC booklet and/or DVD entitled "A Guide to your New

Home" (handed to all new homeowners when they purchase a

property which has the benefit of an NHBC warranty) clearly sets

out purchasers' duties in relation to "running-in"

and maintaining and decorating their home once they own it and

states that the property should be...