Written evidence submitted by the Law Society of Scotland [BSB 284]

The Law Society of Scotland is the professional body for over 12,000 Scottish solicitors.  With our overarching objective of leading legal excellence, we strive to excel and to be a world-class professional body, understanding and serving the needs of our members and the public.  We set and uphold standards to ensure the provision of excellent legal services and ensure the public can have confidence in Scotland’s solicitor profession.

We have a statutory duty to work in the public interest, a duty which we are strongly committed to achieving through our work to promote a strong, varied and effective solicitor profession working in the interests of the public and protecting and promoting the rule of law. We seek to influence the creation of a fairer and more just society through our active engagement with the Scottish and United Kingdom Governments, Parliaments, wider stakeholders and our membership.  

We welcome the opportunity to consider and provide written evidence to the Parliament’s Housing, Communities and Local Government Committee[1] on the Draft Building Safety Bill[2] and have the following comments to put forward for consideration.

General remarks

We have previously responded to the UK Government’s consultations on Strengthening consumer redress in the housing market[3] and Redress of Purchasers of New Build Homes and the New Homes Ombudsman[4], and to a consultation from Graham Simpson MSP on a Proposed New-Build Homes (Buyer Protection) (Scotland) Bill[5].

Our comments are restricted to those parts of the Bill which extend to and apply to Scotland – Part 1 and some clauses in Part 5 of the Bill and the associated Schedules.

We have previously highlighted that we consider that it is important to understand the issues experienced by purchasers of new build property before considering the detail of mechanisms for redress. It would be helpful to have evidence to demonstrate if there are particular issues with new build properties as compared to other properties; the extent of these issues; and the nature of these issues in practice.

Clause 106 – 109 and Schedule

Clause 106 is an enabling provision which requires the Secretary of State to arrange for there to be a redress scheme available for people who are ‘relevant owners’ of new build homes. We note that this, and the subsequent clauses and Schedule 7, provides a high-level framework for a redress system. The detail of the scheme will be found in the regulations when made. As a result, it is difficult to assess the full impacts of the proposed scheme at this stage.

We note that the Explanatory Notes to the draft Bill state: “The purpose of such a scheme is to enable relevant owners to make complaints against scheme members (developers) and to have such complaints investigated and determined by an independent ombudsman.”[6] We recognise the potential benefits in consolidating routes of redress for consumers by having a single Ombudsman. This will help to ensure consistency in standards.

Clause 106(7) sets out the definition of ‘relevant owner’. This definition is limited to individuals, who own the building and who occupy the building. We suggest that consideration is required as to whether the definition of “relevant owner” should be expanded. For example: (i) spouses/civil partners who occupy the new build property, but who do not hold a title interest, or (ii) a beneficiary under a trust, where for example, a trustee(s) purchasing a property for a disabled individual, have a right of recourse to the ombudsman.

Also due to Clause 106(7) requiring a “relevant owner” to have a relevant interest in the land (as defined in clause 106(10)), i.e. the interest of an owner of land in Scotland, this would mean that redress to the new homes ombudsman would only be available after the purchase of the new home had completed. If the intention is to allow the new homes ombudsman to deal with issues arising both before and after the completion of the sale and purchase of the new home (for example, poor communication, retention of deposits or reservation fees, delays in construction etc), then this would not be consistent with that ownership test, based on the definition of ‘relevant interest’. The definitions of ‘new build home’ (clause 106(9)) and ‘developer’ (clause 107) would also need to be reconsidered accordingly as these both refer to relevant interest.

We note that clause 106(4) provides that the scheme may also include “provision for persons other than relevant owners of new build homes to have complaints against members of the scheme investigated and determined under the scheme”.  This clause could be used to address the issues with the restricted definition of “relevant owner”, but we would consider it preferable for the principal definition of “relevant owner” to be as clear and complete as possible.

In addition, if clause 106(4) was applied to allow any third parties to raise complaints under the new homes ombudsman scheme this could open floodgates to complaints from parties with no direct link to the developer and with no direct link to the issue being raised with the ombudsman. We suggest that consideration be given to whether the range of third parties referred to should be defined on the face of the Bill so that it is clearer about the potential range of third parties who could raise a complaint. 

The provisions allow for flexibility as to how the scheme will operate – either the Secretary of State may arrange with a person to establish and implement the scheme, or the Secretary of State may establish and implement the scheme itself (clause 106(5)).

Clause 106(6) concerns financing of the scheme. We note that the Explanatory Notes state: “the intention is for the new homes ombudsman scheme to cover its own costs and to finance itself through fees charged to developers.”[7] We consider that it is important that these measures do not become a barrier for new developer entrants into the housing market and therefore suggest that costs be considered carefully.

Clause 106(8) sets out the test for occupation. As per our comments in relation to relevant owner, a tenant could be a trust which the Bill does not cover.

Clause 106(9) defines ‘new build home’. We consider that clause 106(9)(a)(ii) requires greater clarity -  can conversion be interpreted as meaning substantial alteration, or if it is intended that conversion is related to both the use and the form (i.e. that the property has been used for a non-residential purpose before)? This interacts with the meaning of develop under clause 107, in particular clause 107(1)(a)(ii). For example, if an individual had a bungalow and added a second storey to the property, is that a conversion potentially falling within the scope of the scheme by virtue of clauses 106(9) and 107(1)(a)(ii)?

We consider that the two-year period set out in clause 106(9)(c) is anomalous: if the intention is to tie in with existing warranties, then the two-year period does not match existing warranties. If the two-year period is intentional, then the purpose of the New Homes Ombudsman would seem to be limited to snagging issues which seems to be unduly limited in scope.

Clause 107 sets out the definition of ‘developer’. In our earlier consultation response we suggested that consideration be given to whether a de minimus level should apply for developments, and, if so, what the level should be. The impact on the self-build and ‘amateur’ developer markets, such as the conversion of a single flat or home, may impose a disproportionate cost and administrative burden.

Clause 108 is an enabling provision which gives a power to the Secretary of State to make regulations requiring developers who are within scope of clause 107 to join and remain members of the scheme. The clause also provides for enforcement mechanisms, by way of civil penalties and orders prohibiting a person carrying out any activity specified in an order (clause 108(3)) and provides that regulations may provide for the breach of such orders to be a criminal offence.

Where the creation of criminal offences is contemplated, drafting of such offences must be clear and are more appropriately detailed on the face of the Bill, rather than in regulations. In the absence of offences being set out on the face of the Bill, we welcome the requirement that regulations under this clause are subject to the affirmative procedure. Members of the scheme must have a clear understanding of what actions will amount to a civil penalty or criminal offence in order that they may guide their conduct appropriately. Any penalties and offences should be proportionate and seek to balance the rights of the individual in relation to the regulatory needs of the state.

We welcome the requirement that provisions relating to sanctions must include provision for appeals. However, we consider that it would be appropriate for powers relating to appeals to be detailed on the face of the Bill.

Clause 109 is also an enabling provisions which provides that the Secretary of State “may issue or approve a code of practice about the standards of conduct and standards of quality of work expected of members of the new homes ombudsman scheme.” We consider that there may be merit in having a single code of practice for members of the new home ombudsman scheme to ensure consistency. We note that the Bill does not provide for consultation on any code of practice to be issued or approved by the Secretary of State. We suggest that this be provided for on the face of the Bill. This will provide an opportunity for scrutiny and critical comment from stakeholders, which may help to improve the code.  

Clause 110 and Schedule 8

Clause 110 and Schedule 8 provide a power for the Secretary of State, by regulations, to make provision in relation to the marketing and supply of construction products in the UK, to be known as ‘construction products regulations’. We note that the Explanatory Notes provide: “The existing regulatory framework does not cover all construction products that might present a safety risk. These regulations seek to correct this by extending the regulatory framework to all construction products.”[8]

Paragraph 13 concerns enforcement and provides that the construction products regulations may make provision for penalties, which may include the creation of criminal offences and civil penalties (paragraph 13(5)). We reiterate our comments above in relation to the creation of criminal offences. In the absence of offences being set out on the face of the Bill, we welcome the requirement that construction products regulations are subject to the affirmative procedure.

Paragraph 13(6) provides that provision for a civil penalty may include provision for appeals. We consider that if civil penalties are being created, there should be a requirement for provision for an appeals process.

We note that the UK Internal Market White Paper makes reference to construction matters, including building regulations and “the processes of obtaining construction permits”[9]. In our response to the White Paper[10], we noted a number of questions in relation to the comments made, including noting that The Technical Standards and Regulations Directive 2015/1535/EU requires any regulation which might restrict the placing on the market of goods to be pre-notified. However, the White Paper does not refer to pre-notification and we questioned whether the Government plan for such a system to be part of the new arrangements.

We note that the United Kingdom Internal Market Bill, as introduced, preserves existing requirements in each part of the UK in terms of clauses 4 and 9, and clause 25 relating to professions.

Clauses 111 – 119

We have no comments on these provisions.

September 2020