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Legislation hat-trick hits home builders
26 August 2010
In an industry struggling to haul itself out of the worst property recession in post war history, it may come as a surprise to some home builders that they have been hit by a triple whammy of customer service regulation over the last 18 months.
Three recent rounds of consumer protection red tape will put pressure on a sector which suffered more than most in the global economic downturn.
To add insult to injury for an industry under siege, there is an acute housing shortage in the UK – set to get worse with public sector spending cutbacks – with ‘ConDem’ coalition talking about less red tape and regulation for all.
The Consumer Protection from Unfair Trading Regulations were implemented nearly two years ago and gave Trading Standards and the Office of Fair Trading (OFT) a very broad ‘sword’ to fight poor business treatment of consumers in relation to the purchase of goods and services.
They banned a number of aggressive sales practices and prevent unfair commercial practices in sales and marketing situations where information to ‘enable the average consumer to make an economic decision on the transaction’ is omitted or is provided in a misleading or ambiguous way.
The very widely drawn tests which favour the customer attract criminal prosecution of businesses and individuals as well as unlimited fines in the most serious cases.
Shoosmiths’ Regulatory Team has recently successfully defended one of the first prosecutions brought under the regulations, which resulted from customer complaint handling by a finance company, but more look set to arise in future.
The Provision of Services Regulations arrived in December 2009 and, whilst aimed squarely at service providers such as estate agents and architects, government regulators have confirmed they will apply to other businesses such as retailers where their activities are not exclusively concerned with the sale of goods (for example aftersales or customer advice).
The regulations require businesses to provide clear customer service information such as complaints handling, the legal entity with which the customer is dealing and details of any trade registrations as well as details of any dispute resolution procedure available under any code of conduct to which the service provider is subject (see below). Service providers must also objectively justify any different service levels or charges in different locations. Failure to comply may result in OFT complaints (where large numbers are affected) or direct consumer action by way of claims for damages.
Finally, the Consumer Code for Home Builders (with detailed guidance) arrived earlier this year.
It provides a raft of requirements with which home builders must comply to avoid misleading consumers. This includes detailed pre-contractual information (including health and safety requirements for site visitors), further rules on exchange and completion, rights of termination, aftersales service and on complaints handling.
Most significantly, perhaps, is the new Independent Dispute Resolution Scheme, which, following payment of £100, allows for compensatory awards of up to £15,000 for distress caused by poor quality construction and customer service issues. This runs alongside major defect issues which will continue to be dealt with by NHBC.
However, it provides a direct, cheap and quick right of action for consumers against home builders and may be attractive to many customers who have made the ultimate purchase, but who are unhappy with it.
These changes should prompt any home builder who has not addressed the changes to act.
Furthermore, those with high levels of customer complaints should be aware that regulators and customers have more sharp weapons in their armoury to attack unwitting businesses in the sector. If you are unaware of any of the above, it would be prudent to take advice before disgruntled customers take matters into their own hands.
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Philip Ryan
Associate
T: 03700 86 8915
I: +44 (0)118 965 8915
E: philip.ryan@shoosmiths.co.uk