Written evidence submitted by the Property Ombudsman (TPO) [BSB 273]

 

 

 

Introduction

 

  1. TPO welcomes the provisions in the Building Safety Bill to create a New Homes Ombudsman which is demonstrably independent from the industryAs more new homes are built and converted, homebuyers should be confident that when they purchase a new build home, they will get the service and the quality of build and finish they have been promised and expect. In the event that things go wrong, there should be a route to an effective single point of redress which ensures that problems are put right. Where systemic problems occur, the New Homes Ombudsman must assist industry to ensure standards are raised.

 

 

TPO’s Background and Context

 

  1. TPO has been providing an Ombudsman service for 30 years and is the only registered and validated Ombudsman which delivers redress to Ombudsman Association Standards for Real Estate activities including real estate agencies, buying, selling, letting and renting of private residences. Accordingly, our response focusses solely on the provisions for the New Homes Ombudsman contained within the Bill.

 

  1. TPO has also, until recently, provided redress for a New Homes Warranty Company.  We were, however, concerned that the code of practice used by the warranty company and upon which home-owners had to rely on, did not meet the consumer protection standards we expect as an Ombudsman scheme.  We therefore welcome the provision in the Bill for a single Code of Practice to be adopted by the industry and support the concept of an Independent Board developing such a code for consultation as soon as is practicable. TPO has considerable experience of developing codes in collaboration with industry, consumer and regulatory stakeholders and, for the last 15 years, has operated the most widely used codes within the property agency sector. We have also taken a leadership role with the RICS to develop an overarching Code of Practice to meet the recommendations of Lord Best’s Regulation of Property Agents report.

 

 

Access to the New Homes Ombudsman

 

  1. TPO believes the provisions in the Bill generally meets the scope of the Government’s policy to include all organisations who commission or build new homes for the purpose of selling them, such as:

 

 

      However, we would suggest that the provision also applies to:

 

 

  1. TPO also believes the provisions in the Bill generally meets the scope of the Government’s policy to allow relevant homeowners to access the New Homes Ombudsman. However, TPO would make the point that access should also be extended to potential buyers of new homes (i.e. those that do not complete the purchase).

 

Over the many years of operating an Ombudsman scheme, TPO has resolved a significant number of complaints where buyers have withdrawn from purchases through no fault of their own. Often their reasons surround the timing and accuracy of the information provided by the businesses selling the property (a subject the CMA are currently investigating[1]) which can result in buyers losing significant sums of money (for example fees and reservation deposits) and enduring weeks of inconvenience with no satisfactory end result. 

 

TPO would therefore recommend that Part 5, Section 106, Point (4) is strengthened to ensure the inclusion of potential buyers is a mandatory rather than optional requirement.

 

TPO is aware of situations where new build properties are re-sold within 2 years of their initial purchase. In this respect, we would recommend that Part 5, Section 106, Point (4) also includes the provision for the new, 2nd owners to access the New Homes Ombudsman during the initial 2 year period.

 

TPO would also suggest that consideration is given to allowing access to the New Homes Ombudsman for small businesses (to include Charities and Trusts) and small investors defined as:

 

 

  1. The draft legislation allows the opportunity for a New Homes Ombudsman to provide a service which is free to homebuyers and to specify the period within which an unresolved complaint can be escalated to the Ombudsman, which is anticipated will be within the first 2 years following the initial purchasers completion date. This aligns with the warranty providers’ timescales and, in common with all Ombudsman schemes, does not limit the homebuyers rights to pursue claims and disputes through the courts, nor does it limit any other legal rights the homebuyer has. The legislation as drafted also allows the New Homes Ombudsman to undertake joint investigations and issue joint decisions through, for example, a memorandum of understanding with other Ombudsman schemes. This is an important point as multiple parties can play a role in building and selling a new home and removes the current onus on homebuyers to decipher to whom they should direct their complaints.

 

 


Sanctions, compliance and compensation funds

 

  1. In order to ensure that homebuyers have trust in the effectiveness of the New Homes Ombudsman, it is vital to ensure that the scheme has an appropriate range of sanctions at its disposal and that scheme members’ compliance with Ombudsman decisions is extremely high. In order to assist in achieving this we would recommend that:

 

 

 

 

 

 

Independence of the New Homes Ombudsman

 

  1. The New Homes Ombudsman must be, and be seen to be, independent of the industry. This is vital if homebuyers are to have confidence in the Ombudsman and its decisions. Accordingly, TPO would suggest that Schedule 7 requires:

 

 

 

 

 

 

 

Financing the New Homes Ombudsman

 

9.     TPO’s view is that the New Homes Ombudsman should be financed on four key principles:

 

a)      Fairness – Each registered business would pay a proportionate fee towards the running costs of the scheme.

b)      Transparency – Fees should be published and clear for all to understand

c)      Value for Money - To operate in a cost-efficient manner delivering a quality redress service to its members and consumers alike, whilst providing the added value Ombudsmen services of signposting, addressing systemic issues and providing feedback to the sector to increase standards

d)      Access is free to all consumers

 

In addition, TPO would make the following points:

 

  1. The legislation makes redress a mandatory legal requirement. The fee infrastructure of the scheme needs to be on a sustainable platform that allows the scheme to operate effectively and with certainty to achieve the provision of redress and to increase standards in the industry in a collaborative fashion.

 

  1. Fees should be based on the scheme achieving a cost neutral position allowing for continued investment in the scheme to improve the service and with contingency. The ability to review the scheme charges should be available to ensure the membership income keeps pace with inflationary costs and demand on the service.

 

  1. A mixture of fee types is achievable to ensure the scheme fees are proportionate to usage and the scheme is sustainable. This could include registration only of the smallest builders with case fees being applicable based on usage.

 

  1. There should be a mechanism to validate the units as the basis for charging.

 

  1. Case fees could include lower fees for an early resolution to promote swifter response from developers yet still with a quality outcome.

 

  1. Set up fees could likely be at the higher end of the estimate to scale quickly given there is likely to be pent up demand.

 

  1. Ongoing costs may quickly reach the higher end of the estimate if scale up is at pace to meet demand but appear reasonable.             

 

 

Standards to improve the Quality of Customer Service, Processes and Build

 

  1. TPO has noted that point 119 of the ‘Regulation of Property Agents Working Group’ report (RoPA) (July 2019) acknowledges that Government was consulting on proposals for a New Homes Ombudsman and had previously announced plans to require private landlords and freeholders to belong to a redress scheme. The Report recommends that a regulator be established for the property agent sector but notes if its remit could be expanded to cover these parts of the property industry, then it would seem logical for the regulator to approve the providers of redress in these areas.

 

  1. TPO agrees with this point and would make the observation that the establishment of a regulator that appoints and then works in partnership with the New Homes Ombudsman would be best placed to enforce the sanctions for non-compliance. Furthermore, the regulator could also take ownership of the ‘new build’ code within the wider framework of the suite of property sector codes currently being developed by the RoPA Codes Steering Group.

 

 

Conclusions

 

  1. TPO welcomes the provisions in the Building Safety Bill to create a New Homes Ombudsman which has the potential to not just help consumers resolve complaints but to also provide the industry with valuable and insightful best practice guidance to help improve standards.

 

  1. As longest standing private sector Ombudsman schemes with 30 years of experience in resolving complaints withing the property sector, TPO would be happy to provide oral evidence to the Committee on the subject of a New Homes Ombudsman.

 

 

 

September 2020

 

 


[1] https://www.gov.uk/government/news/leasehold-homes-cma-launches-enforcement-action

[2] https://www.ombudsmanassociation.org/docs/OA-Rules-Schedule-1.pdf

[3] https://www.ombudsmanassociation.org/docs/OA17%20Service%20Standards%202017_Final.pdf

[4] https://www.ombudsmanassociation.org/docs/CaseworkerCompetencyFramework2019.pdf