House builders using settlement agreements to disguise poor quality buildings

New houses roofs

The chairman of the Parliamentary Housing Committee says house builders should be forced to let home owners know when systematic defects might affect their new property. Clive Betts MP said some home owners are being asked to sign settlement agreements or non-disclosure agreements (NDA) before repair work is carried out on the property by the builder. He said:

“If this kind of thing happens in the car industry for example, car companies have to tell their customers, issue a recall and get the problem fixed. I don’t see why that should be any different when it comes to buying a house.”

Those homeowners who have been required to sign settlement agreements have been so worried about the potential for legal action that they have been reluctant to speak up, making it difficult to establish how often the practice is happening. However, several experts within the housing industry say it is widely used.

Former chief executive of the Chartered Institute of Building, Chris Blythe, said that developers used them quite commonly. He said: “Unfortunately, because of the nature of the agreement i.e, non-disclosure, no-one knows very much about it.”

Mr Blythe explained that developers used the practice for commercial reasons – to save money – in order to protect house builders from other home owners expecting the same remedial work to be carried out for them.

House builders also use settlement agreements to ‘protect’ their reputations.

Around a quarter of a million new homes have been built over the last twelve months, many of them with defects. Some property defects are easy and cheap to correct, but more serious defects can be very expensive, with costs in the several thousands of pounds.

More serious property defects include problems with brickwork, foundations, windows and doors, structural roof weakness or plumbing and sewerage problems. Pursuing costly remedial work often results in delays and owners can sometimes fight for years with no guarantee that the house builder will carry out the work.

The Home Builders Federation (HBF) is the trade association for private sector home builders in England and Wales. A survey conducted by the HBF in October 2020 reported that the new regional house price thresholds would be a barrier to SME house builders selling new homes in some regions.

Help to Buy home buyers paying huge sums for their new homes will have little left to take on a house builder in the courts, but 76% of SME house builders said the Help to Buy scheme helped them sell an average 39% of properties.

The HBF said that settlement agreements were used widely by businesses in all sectors but within the house building industry were usually associated with compensation payouts.

If you’re buying any type of property, it’s important to have a building survey carried out before you buy. A Property Surveying Independent Chartered Surveyor will carry out a suitable building survey for your type of property.

An Independent Chartered Surveyor can also help if you have problems with your new build property and may be able to assist you in encouraging your housing developer to complete remedial works – without the requirement for settlement agreements. Phone us on 0800 880 6824.