New home buyers face 'delays, faults and unfair terms'

Thursday 25th September 2008

Buyers of new properties are regularly facing problems such as delays in moving in, faults in new homes and issues over reservation fees.

These are the conclusions of the Office of Fair Trading (OFT) after an investigation into the homebuilding sector.

Further problems include a lack of clarity in information provided to homebuyers and potentially unfair terms and conditions in contracts.

John Fingleton, OFT chief executive, said: "We have concluded homebuyers need more protection when buying a new home and we have worked hard with the industry to help it develop a new approach to self-regulation that will improve consumer protection."

As a result the homebuilding sector has agreed to form a body to deliver a code of conduct and redress scheme for consumers, which should be fully operational by March 2010.

Failure to provide such a scheme – or for the scheme not to work – will lead the OFT to bring in statuary body to oversee homebuilding with powers to fine firms failing customers.

The Royal Institution of Chartered Surveyors (Rics) has responded to the report calling on the government to introduce a single redress and complaints body for the entire property market.

Gillian Charlesworth, Rics director of external affairs, said: "The regulatory and redress proposals mirror what is already been done voluntarily in the estate agency arena.

"We urge the government to join up property regulation and redress to avoid the problem of confusion for consumers faced with numerous schemes for property transactions."

The OFT study into the homebuilding sector also found the market was running broadly competitively – with low barriers for new firms to enter the market and prices set by companies competing against each other.

The report found: "There is no evidence that individual homebuilders have persistent or widespread market power giving them the ability to restrict supply in order to inflate prices."

However, Rics maintains reform to the UK planning system is needed to increase competition.

Mr Charlesworth said: "Unless there is a serious attempt to reform the planning system and allow smaller firms greater opportunities, house building levels will continue to disappoint and demand which can not be satisfied will continue to escalate.

"Current procedures are not encouraging competition and are detrimental to the housing needs of the population. Demographic factors such as higher life expectancy will only exasperate the situation in the future."

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