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.


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.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

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.

Sarah is MoneyWeek's investment editor. She graduated from the University of Southampton with a BA in English and History, before going on to complete a graduate diploma in law at the College of Law in Guildford. She joined MoneyWeek in 2014 and writes on funds, personal finance, pensions and property.