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

China Evergrande just missed a bond payment. Does it matter?
China stockmarkets

China Evergrande just missed a bond payment. Does it matter?

Troubled Chinese property giant Evergrande has just missed making an interest payment to some of its bondholders. That's not a surprise, says John Ste…
24 Sep 2021
Evergrande: Chinese property giant spooks global markets
China stockmarkets

Evergrande: Chinese property giant spooks global markets

Global markets fell this week as investors worried about the fate of Evergrande, China’s most indebted property developer, which is teetering on the b…
24 Sep 2021
China’s property woes are coming to a head – so what happens now?
China stockmarkets

China’s property woes are coming to a head – so what happens now?

Chinese property giant Evergrande is in big trouble. And with no bailout plan yet, markets are getting nervy. John Stepek looks at how things might go…
20 Sep 2021
Evergrande: China’s epic property bubble hisses air
Chinese economy

Evergrande: China’s epic property bubble hisses air

Evergrande, once the world’s most valuable real-estate group, is now the world's most indebted as China's epic property bubble starts to deflate.
17 Sep 2021

Most Popular

A nightmare 1970s scenario for investors is edging closer
Investment strategy

A nightmare 1970s scenario for investors is edging closer

Inflation need not be a worry unless it is driven by labour market shortages. Unfortunately, writes macroeconomist Philip Pilkington, that’s exactly w…
17 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021