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Bill Seeks to Close Consumer
Protection Gap for House
Buyers

Bill Seeks to Close Consumer Protection Gap for House Buyers

July 5, 2019
Tom Thain 0urg2zegmc Unsplash

Time to close the “lottery” when buying a new-build home.

In supporting The New Build Homes (Buyer Protection)(Scotland)Bill– proposed by Graham Simpson MSP in the Scottish Parliament, Ross Taylor, solicitor and dispute resolution specialist at Taylor Law, claims that currently “completion” may not be a reliable confirmation of build quality or adequate specification. For unsuspecting buyers, it’s an unacceptable lottery.

“When you purchase goods from your local store, or from an online retailer (particularly with your credit card), you can be fairly safe in the knowledge that there is a plethora of laws aimed towards giving you protection if the goods turn out to be faulty.

“You would think then, that you would have even greater legal protection if what is likely to be one of the biggest purchases of your life, turns out to be defective.  Unfortunately, there may still be a gap in protection against the development of defects when it comes to purchasing your new-build home.”

Current checks and gaps in protection

  • While your solicitor will check around title, access, planning consents, building warrants and completion certificates, none of these checks may fully inform you about how well the property has been built.
  • A home warranty scheme, which subsists for ten years from the date that the property was completed, generally only protects against serious structural issues.
  • The Home Buyer’s Report, in practice, may not amount to much. The survey is likely to have been limited to visual surface inspection and the report qualified in the extent to which it can be relied upon. In any event, any claim is likely to be based in loss of value, rather than the cost of repair of any defects.
  • A certificate from the supervising architect (if there was one) about the quality of the build cannot necessarily be relied on to found a claim for defects.

Standard Clauses and Missives – not yet strong enough

Ross Taylor agrees that ultimately, the buyer’s only anchor may be the contract of sale and purchase (the Missives) but he highlights that the Missives may be silent on defects, or they may give some limited right of recourse.  This largely depends upon how informed the acting solicitor is and how much protection the seller is willing to give, within the terms of the contract.

He explains the weaknesses:

“For example, in 2015, a set of Standard Clauses was produced with the assistance of the Law Society of Scotland.  These can be incorporated into Missives.  The make specific provisions relative to new build properties.

“There are two problems:  the first is that the conditions are not mandatory.  They can be adopted, adopted under revision or ignored. I have been involved in subsequent disputes about the quality of the new build property, founded upon Missives which make no reference to the Standard Clauses.

“Secondly, I suggest that the clauses do not give enough protection.

“For instance, within the Standard Clauses, “completion” is determined with reference to the local authority completion certificate and/or the home warranty scheme provider’s completion certificate.  Neither may prevent defects in build quality, or inadequacies in specification.  Indeed, broadly, both certificates focus on vouching that the property has been completed in accordance with the building warrant and Building Regulations.  At the time of “completion” it may appear that the new-build property is compliant, such that a certificate can be issued. Defects may materialise later. Tying completion to the issue of the certificate only, means that there may be no breach of the missives if such defects do later materialise.

“Also under the Standard Clauses, the property requires to have been constructed in a good and workmanlike manner.  Failure to achieve that standard would be a breach, giving rise to compensation.  Otherwise and provided the Building Warrant and home warranty scheme provider’s standards have been met (remember largely structural), there is no more protection. Therefore, defects in design may not of themselves breach the missives.”

New Bill a step in the right direction

The New Build Homes (Buyer Protection) (Scotland) Billseeks to “establish standard missives for the sale of new-build homes, including redress for purchasers in respect of defects in construction”.

Ross Taylor supports the proposals for the Bill:

“It is important to ensure that the clauses of the standard missives are compulsory, are carefully framed and fill the current gap in buyer protection.  It is not enough that they simply rehash obligations to comply with building regulations and warranty provisions.  Whatever the particular design, specification and workmanship standards that are marketed to the purchaser may be, the missives need to contain provisions to ensure that those standards are delivered and that shortfalls in– which exist at completion or materialise over a stated period of time thereafter – are remedied or compensated.

“At present, compensation is likely to be based in loss of value.  However, in a buoyant market, there is often no such loss, so that the purchaser just has to put up with the defect. Compensation ought not to focus on loss of value, but on cost of repair, and must of course be proportionate.  This may be the only way to allow the purchaser to put right the defect and gain the enjoyment from his or her new home that he or she was expecting.”

Adjudication: the way ahead

Mr Simpson proposes that the Bill will include “a clear statutory route for redress”.

Ross Taylor agrees and ventures that one already exists. The Construction industry has long been familiar with Adjudication to sort out disputes within it.  Since 1996 the process has had statutory backing. It is a fast-track process, in which parties make submissions to an Adjudicator.  The Adjudicator usually has a technical background.  He may arrive at a decision by using his own skills and experience.  Adjudication is intended to be completed within four to six weeks.  The Adjudicator’s decision is binding, unless and until a Court or Arbitrator decides differently.  In most cases that doesn’t happen, because the parties accept the Adjudicator’s decision.

At present, the residential occupier does not have a statutory right to Adjudication.   The Courts in England have suggested that he or she should.  Ross agrees and point out that:  “All that is needed is a one- line amendment to the existing legislation, which presently applies only to the industry.”

Follow Ross on twitter @RossTaylorLaw and on Linkedin for more views and comment on dispute resolution in the construction sector.

 

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