Why you shouldn't pay full-price for a shoddy new-build house

Housebuilder Persimmon is to allow buyers to hold back some of the purchase price of their new-build home until problems are resolved. It's a start, but it's hardly revolutionary.

940_MW_P32_Inv-Prop

Persimmon's properties: riddled with problems

Persimmon's gesture is a start, but hardly revolutionary

Housebuilder Persimmon is to allow buyers to hold back 1.5% of the purchase price of their home until problems with their property are resolved. This comes after several years in which Persimmon, along with other major UK housebuilders such as Bovis Homes, have been widely criticised for selling new homes that are riddled with problems or delivered far behind schedule, as well as for the salaries they pay senior staff.

Persimmon is the first UK housebuilder to offer buyers (or, more accurately, their solicitors) the opportunity to hold back some of the purchase price. It says it hopes this move will encourage others in the industry to follow suit. However, given the scale of the problem of quality in new-build housing, they could have done more.

On average, people will be able to hold back £3,600, which is hardly a huge sum. It's been suggested that 5% would have been a more appropriate amount (this is the case in the Netherlands). As Patrick Hosking notes in The Times, "there's a danger the scheme will descend into countless legal disputes, with buyers' solicitors quickly swallowing up that cash buffer in fees".

Moreover, buyers can only take advantage of this option if they report problems on the day they get their keys. This means people must spend that first day in their home checking thoroughly for snags, even though many problems such as faulty plumbing will not come to light immediately. What would be more sensible was if the buyer had, say, a month in which to report problems. Persimmon customers can submit a one-month inspection form to report early problems, but this is separate from the ability to hold back money.

What to do if your new-build is shoddy

It's important to be aware of what protection you're entitled to as the owner of a new-build home. It's not always as much as you might hope. Nine out of ten new homes built in the UK are protected by one of the main new home warranty bodies. They include the National House Building Council (NHBC), Premier Guarantee and LABC Warranty. Under NHBC Buildmark, builders cover any defects that occur in the first two years of ownership that are not general wear and tear.

After that, NHBC will provide a further eight years of insurance against failure to meet their requirements. Depending on the policy, you may also be covered for failure to comply with UK building regulations. These regulations set minimum standards for the design, construction and energy consumption of buildings, but compliance with these regulations is not necessarily "sufficient...to ensure good quality", warned the 2007 Calcutt Review of Housebuilding Delivery.

Finally, any housebuilder registered with a home warranty body should also adhere to the Consumer Code for Home Builders, which requires them to arrange a system for dealing with customer complaints.

Recommended

Cladding crisis: what new proposals for mean for housebuilders and leaseholders
Property

Cladding crisis: what new proposals for mean for housebuilders and leaseholders

The government is seeking an extra £4bn from house developers to fix the UK’s cladding crisis. Saloni Sardana explains how the new proposals affect bo…
17 Jan 2022
What does 2022 hold for UK house prices?
House prices

What does 2022 hold for UK house prices?

UK house prices are rising at their fastest rate since the financial crash of 2008. John Stepek looks at where they might go in the coming year.
7 Jan 2022
Evergrande has finally officially defaulted – what does that mean for your money?
Corporate bonds

Evergrande has finally officially defaulted – what does that mean for your money?

Evergrande, the Chinese property giant, has defaulted on its debts. John Stepek asks if it is just the first in a long line of Chinese property compan…
10 Dec 2021
Regional Reit: office rents provide a steady growth in income and dividends
Investment trusts

Regional Reit: office rents provide a steady growth in income and dividends

Open-ended funds struggle when it comes to illiquid assets such as property, but things are looking good for this real-estate investment trust.
7 Dec 2021

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022