How New Build Conveyancing can reduce complaints against developers

In a recent article in the Gaurdian newspaper has revealed that complaints about defects in new build homes is on the increase. This particularly surprising in light of the slump in the number of new build properties sold in the current property recession.

Following a year of very little new build conveyancing when there was a 40% drop in the number of new homes sold, complaints were still at the peak levels of 2007/08.

The NHBC annual report discloses that whilst five years ago it paid £34m in compensation, in 2008/09 that was £59. 3m. In the last twelve months, the NHBC resolution service, which arbitrates disputes between developers and purchasers, found in favour of the purchasers in almost 70% of cases.

To add to the bad press of New Build homes a survey of 1, 000 buyers last year by the Office of Fair Trading found continuing problems. Approximately  32% could not complete in on the promised date and 3% had a year's delay. A full 70% of buyers found faults, with 2% waiting a year for them to be fixed. About 24% of buyers said quality was low.

Taking on board the comments from the OFT there are a couple of things your new build conveyancing lawyer can do to reduce the risk of a purchaser complaining formally to the OFT.

The first thing that a new build conveyancing lawyer should do is to manage purchasers expectations. Up until recently most new build developers would simply refuse to negotiate on amendments to the conveyancing contract which were invariably heavily weighted in favour of the developer. Developers would simply refuse to be bound to complete by a certain date or agree to deal with snagging items.

An extract of one of our new build conveyancing reports for a new build development in London reads as follows :

“The date for completion has not yet been agreed.   Completion will take place a maximum of 10 working days after we have received confirmation from the Vendor’s solicitors that the works are practically complete.   The vendor anticipates completion in Spring 2006 but there is no contractual obligation for the Vendor to complete the works by a certain date.   We have requested a clause is inserted in the contract to allow you to withdraw from the Contract if the notice to completion is not served by 21st June 2006, however the seller will not agree this. There is therefore no deadline by which they must finish works”.

“We tried to incorporate a provision in the contract which allows you to require the vendors to repair any defects within a period of 6 months following completion. The Vendors have not agreed to this. However the NHBC Guarantee which the Property will have benefit of imposes an obligation on the Vendor, for a period of two years from completion to put right any defects or damage to your flat or the common parts. It is therefore extremely important that you notify the Vendor of any defects or damage as soon as possible following completion”.

Times have changed in the last 12 month new build conveyancing may have changed in that there may be more opportunity to redress the balance in the conveyancing contract. New Build developers and their conveyancing lawyers when pushed are now seen to more flexible and are agreeing contractual provisions that would never have been agreed three or four years ago.   New build conveyancing lawyers for purchasers should be trying to have clauses along the following lines included in the contract:

1. 1    In this Clause

‘ARCHITECT’ means the person for the time being appointed to act as architect  by the Seller

‘BUILDING WORKS’ means the works of and in connection with the carrying out of the Development in accordance with the relevant planning permissions and building regulations and the drawings and specification attached

‘DEVELOPMENT’ means the project of development of the Property and the Estate in accordance with the Plans and comprises  the Building Works and a reference to the Development is to the whole or any part of it as the circumstances may require

‘PLANS’ means the plans drawings specifications bills of quantity engineering calculations and other data relating to the Building Works including, as they are from time to time made, any variations from alterations and additions to and revisions of the Plans

‘PRACTICAL COMPLETION’ means the practical completion of the Building Works  and references to the ‘date of Practical Completion’ are to the date on which the certificate of Practical Completion is issued by the Architect

‘REQUISITE CONSENTS’ has the meaning assigned to it by clause 1. 2. 2

1. 2    Requisite consents

1. 2. 1    The Developer will apply for and use all reasonable endeavours to obtain or has obtained all Requisite Consents from time to time as may be appropriate before and throughout the course of the Development.

1. 2. 2    The Requisite Consents are those permissions, consents, approvals, licences, certificates and permits in legally effectual form as may be necessary lawfully to commence, carry out, maintain and complete the Development, and to use and enjoy the Development as intended by the parties including (but without limitation):

1. 2. 2. 1        planning permission and approval of reserved matters;

1. 2. 2. 2        building regulations, consents and by law approvals;

1. 2. 2. 3        the requirements of all competent authorities regulating the Development and/or the use of the Property; and

1. 2. 2. 4        the consents of all parties having interests or rights in or over the Property who by the lawful exercise of their powers in the absence of such consent could prevent or impede the carrying out or progress of the Development or its use and enjoyment.

1. 3    The Seller will use his best endeavours to procure that the Building Works are carried out:

1. 3. 1    in a good and workmanlike manner and in accordance with good building practice;

1. 3. 2    with good and suitable materials;

1. 3. 3    in accordance with the Plans and the Requisite Consents;

1. 3. 4    in compliance with planning and other obligations, whether under section 106 of the Town and Country Planning Act 1990, section 38 of the Highways Act 1980 or other statutory provisions applicable to the Development;

1. 3. 5    in compliance with all statutory orders and regulations made under or deriving validity from them and any requirements and codes of practice of local authorities and competent authorities affecting the Development and/or the Property;

1.     1. 3. 6    without infringement of any rights, reservations, covenants restrictions, stipulations or other encumbrances binding on or affecting the Property; and

1. 3. 7    to the reasonable satisfaction of the Buyer and his advisers and its mortgagee’s     surveyor

1. 3. 8    with due diligence.

1. 4    There may not be used on or in connection with the Development any materials or substances which at the time of specification are not approved or not recommended by the current British Standards and Codes of Practice (so far as they may be applicable to the Development) as being of deleterious, unsatisfactory or unsuitable quality including (but without limitation) the following:

1. 4. 1    high alumina cement;

1. 4. 2    calcium chloride in blockwork or brickwork;

1. 4. 3    calcium silicate bricks or tiles;

1. 4. 4    asbestos products;

1. 4. 5    wood wool slabs in permanent shuttering form;

1. 4. 6    aggregates which do not comply with British Standard Specification 882: 1992 and 8110: 1985 (as amended); and

1. 4. 7    urea formaldehyde.        

1. 5    Practical completion

1. 5. 1    The Developer will give notice (and use his reasonable endeavours to give at least 21 days’ notice) to the Purchaser of the pending issue of the certificate of Practical Completion in order to allow the Purchaser and his professional advisers the opportunity to inspect the Building Works and consider whether the Building Works have been completed in accordance with this agreement.

1. 5. 2        The Purchaser may make representations to the Architect as to whether the certificate of Practical Completion should be issued at a particular time or what qualifications should be made to the certificate of Practical Completion upon its issue.

1. 5. 3    If the Purchaser is of the opinion that the certificate of Practical Completion should not have been issued or that the certificate as issued has not been properly qualified, the Purchaser may notify the Developer within a reasonable time giving details of the Purchaser’s objections, and the Developer and the Purchaser will endeavour to resolve what if any action should be taken but if they cannot or do not do so the objections not so resolved are to be submitted to arbitration.

1. 5. 4    The Developer will take whatever action may be required in consequence of the resolution of the objections of the Purchaser or the decision of the arbitrator.

1. 6    Defects liability

1. 6. 1    The Developer will enforce the defects liability provisions in the Building Contract.

1. 6. 2    The Developer will inspect the Property and prepare a schedule of defects itemising defects, shrinkages and other faults due to materials or workmanship not in accordance with the Building Contract or to frost occurring before Practical Completion; and will:

1. 6. 2. 1    deliver a copy to the Purchaser in time for the Purchaser to consider it and notify additions to the Developer; and

1. 6. 2. 2    then deliver the schedule (with any additions notified to the Developer by the Purchaser) to the Building Contractor within the appropriate time limits for doing so under the Building Contract.

1. 6. 3    The Purchaser is not obliged to prepare any such schedule of defects, but the Developer will include in his schedule any defects notified to him by the Purchaser within the appropriate time limits, and the Purchaser will allow the Developer the facilities necessary to enable the schedule of defects to be prepared.

1. 6. 4    If compliance is made by the Developer with the provisions of paragraph [  ], the Purchaser may not complain that an item omitted from the schedule of defects has not been dealt with under the defects liability provisions in the Building Contract.

1. 7        Limitation of the Developer’s liability

1. 7. 1    The Developer is not to be relieved of liability for breach of obligation in this Schedule by:

1. 7. 1. 1    the issue of the certificate of Practical Completion;

1. 7. 1. 2    the absence of objection by the Purchaser to the issue or the terms of the certificate of Practical Completion or;

1. 7. 1. 3    the performance of any  building contractor of his obligations with respect to defects liability.

1. 8    Arbitration

1. 8. 1    A dispute or difference arising between the parties under this Schedule is to be referred to the arbitration of a person to be agreed by the parties to act as arbitrator, or, failing agreement within 14 days after either party has given to the other written request requiring the appointment of an arbitrator, to a person to be appointed on the request of either party by the President or a Vice President for the time being of the Royal Institute of British Architects.

1. 8. 2    The person so appointed is to act as an arbitrator under the Arbitration Acts 1950 to 1979.