Building Balance: Restoring power to consumers in the housing sector. April Building Balance

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1 Building Balance: Restoring power to consumers in the housing sector April 2018 Building Balance

2 Foreword Housing is one of the biggest issues we face as a nation, but the current system for resolving complaints is broken. This is why we decided to withdraw from the property sector from August We had long suspected that the complaints landscape in housing wasn t working for consumers. During our ten years helping consumers with complaints in the housing sector we had seen time and again the impact of dealing with such a confusing and complicated system. Our Building Balance dialogue, which collected views from tenants, renters, homeowners, landlords and those working in property, confirmed our assessment; it s difficult to know where to go to complain, the current system is ineffective and, with patchy regulation, it doesn t provide the protection that consumers need. We believe a fair, balanced system is required. One that has the legal powers to put things right, serves the whole of society and gives people a voice when it comes to their homes. We agree with the assessment made by the former Secretary of State Sajid Javid in his November NHBC speech, that redress works more efficiently for consumers when a single ombudsman is in place. This report, which was submitted to the Government s consultation on housing redress in April 2018, is based on a detailed dialogue and research with consumers and feedback from stakeholders as well as wider academic context, supporting the formation of a similar model in housing. Introducing a single ombudsman for housing would allow the Government to put consumers at the heart of the housing sector, and help to rebuild trust between businesses and consumers. In the long run, the sector would be more fair and transparent for everyone. Lewis Shand Smith Chief Ombudsman, Ombudsman Services We know from our experience in the energy sector that an effective regulator, supported by a single ombudsman, and a strong advice and advocacy service for consumers can work extremely well for reducing consumer detriment and help companies in the sector improve their processes.

3 Contents About Building Balance 4 Setting the scene 5 Consumer experiences 6-7 Solutions 9 Recommendations About Ombudsman Services 15 Methodology 16

4 About Building Balance On 6 February 2018, Ombudsman Services announced that we would withdraw from handling housing and property complaints from 6 August 2018 as the confusing system for redress in the housing sector meant we were unable to add value for either consumers or businesses. Rather than continue to offer a broken solution to a broken market, we took a step back to listen to what consumers actually want and help them tackle an imbalance of power in the sector, launching a major new dialogue: Building Balance. The Building Balance dialogue ran online for four weeks between 9 March and 5 April 2018, with the support of charities, consumer groups and property professionals across the UK, including Resolver, Age UK and Generation Rent. As housing is one of the biggest issues consumers in the UK face, it is crucial that there is a fair, balanced redress system that serves the whole of society. By listening to consumers, we have been able to make recommendations for how consumers can be better protected and served by improving how complaints are handled in the housing sector. The findings from Building Balance were shared with the Ministry of Housing, Communities and Local Government in April 2018, as part of its own consultation on redress in the housing sector, making sure that the views of both consumers and businesses were represented. 4

5 Setting the scene The housing sector is fragmented in terms of standards, regulation and redress provision, which is confusing for consumers. Currently there are six companies providing redress within the sector: Ombudsmen specialising in property Ombudsman Services: Property The Property Ombudsman The Property Redress Scheme The Housing Ombudsman Other redress providers Centre for Effective Dispute Resolution Financial Ombudsman Service Each covers different areas of the housing sector, yet even this combination of schemes fails to fully protect consumers against all the potential issues they might encounter. Regulation and enforcement is also patchy, which means consumers are exposed to poor service without means of redress. According to research undertaken to support the launch of the Building Balance website, three in 10 (29%) consumers agree that there are too many different providers that look after complaints in the housing sector, and with so many services, it s no surprise that consumers are very confused about where to go when they experience an issue. Ombudsman Services believes this means that redress schemes see only the tip of the iceberg when it comes to complaints. Our Consumer Action Monitor 2018 indicated that there were 830,920 issues with property during 2017, yet only around 6,700 of these complaints were made to the four ombudsman schemes in the housing sector. Many complaints are resolved directly by the companies involved, but the size of the difference between the two figures indicates that some complaints are abandoned due to confusion around the existing system for redress. More than half (54%) of consumers who complained about housing issues said they found it hard to get their issue resolved, while one in 10 (10%) did not get their problem resolved at all. 830,920 54% 10% Complaints Found complaining hard Did not get their issue resolved 5

6 Consumer experiences Responses to the Building Balance dialogue overwhelmingly indicated discontent with the system for redress as it stands, with feelings of frustration, confusion and powerlessness dominating the majority of the feedback. Seven in 10 (69%) consumers who submitted their views and experiences said that the system for complaining in the housing sector is confusing, while more than half (55%) do not know where to go to complain about housing and property. We also received detailed accounts of complex issues that UK consumers had faced, ranging from unauthorised parking to gas leaks, asbestos, dangerous electrics, damp and mould, poor building work and even theft. 69% 55% Think the system for complaining is too confusing Don t know where to go to complain about housing Most common issues For those who came forward to share their views and experiences through the Building Balance dialogue, the most common issues were: 56% - New Build properties 10% - Maintenance and upkeep 8% - Construction and renovations 6% - Lettings and renting 4% - Estate agents, selling or buying The sheer number of problems reported with New Build properties is cause for concern, and it can be particularly difficult to complain due to the number of stakeholders involved: freeholders, contractors, builders, surveyors, any of whom can potentially be responsible for issues that arise. If those involved cannot decide who is accountable for issues, consumers can end up being pushed from pillar to post, and may have to complain to multiple redress schemes to get a resolution. Maintenance and upkeep was also a significant issue for consumers, indicating that some landlords and housing associations may not be fulfilling their obligations to keep homes in good repair. In addition, the number of issues with lettings and sales suggests that agents should be strictly regulated and held to a higher standard. 6

7 New Build properties The quality of New Build properties seems to create significant issues for consumers, with snagging issues frequently mentioned by those who submitted experiences to Building Balance, particularly in relation to one large national building company. Another common complaint was poor customer service, with many consumers reporting unethical behaviour. [It has been] a lengthy battle to get all snags and issues resolved. We have dealt with site managers, regional directors, customer care and still many of the issues from when we moved in, in July 2016, have not been investigated, let alone resolved. We have had to pay for our own thermal imaging survey and building surveyors reports to provide us with confirmation of the issues. The whole experience has been stressful beyond belief. Male, 25-34, Bedford I have had many defects to the house that have effectively meant that for the past 8 months I have been project managing the finishing of my new build house. It should never have been sold to me as many faults were known throughout the builders stock nationwide. The effect this has had on me has been anxiety and family stress... I can t begin to tell you the horrible feeling of knowing you have worked so hard for so many years to then be ripped off in such an unscrupulous manner by a large mainstream housing developer. Female, 45-54, Penryn We have a structural problem with upstairs floor movement. It has been ongoing since we reported it about 6 months ago. [The builder] keeps sending us to NHBC and they refer us back to builder. Male, 35-44, Colchester Handover build quality and finish was very poor but the way my concerns were dealt with was appalling. Over three years the struggle went on for the builder to deal with issues identified in my first week of ownership. The customer care team were hard to get hold of, made appointments that weren t kept, sent wrong goods, didn t send materials... and backtracked on what was agreed as a resolution. It made me very angry, very frustrated and very low. It had a real impact on my mental health to the point where I stopped pursuing real outstanding issues. I had so many days off for trades to come that didn t turn up or didn t have the right equipment or didn t fix it so another appointment had to be made. Female, 35-44, West Midlands We have many issues with the design and build quality of a new build home we bought four years ago. The biggest problem is an integral balcony, built using sips panels, that is completely saturated and structurally compromised. We have spent 30,000 to date on lawyers, expert witness architects, expert witness surveyors, structural engineers...it s never ending. To have the issues made good, we will have to move out for six months and the claim is just short of 500,000! Our neighbours are in the same position. It may well end up going to court. We feel completely let down by the system and feel angry and frightened at what the future holds. There is no escape from it... it s our home. Female, 55-64, Bath 7

8 Other issues A recurring theme across complaints was not only that issues had arisen but that when problems had occurred customer service was extremely poor, increasing the stress and dissatisfaction experienced. In many cases, issues were often reported but not resolved until further action was taken, while in others consumers admitted they had stopped complaining about issues because they were concerned about eviction. Our kitchen is so damp we get sheets of black mould on the walls and ceiling; the kitchen cabinets are warped by the damp; stuff in the cupboards go mouldy if not used quickly; the Lino has mould coming through from the floor and is damaged; the whole room is cold, draughty, impossible to keep clean. We have tried going on rent strike (landlord did not notice); I rang the local council and was basically told... they can t do anything. I dare not complain any more in case we get evicted, we are in an area of expensive rents with houses in short supply so we would be homeless. Female, 45-54, Wareham I went through a winter without heating. The letting agent wouldn t fix it despite frequent requests. I looked into complaining to a redress scheme but they were not a member (as it was pre-2014). In the end we had to threaten legal action to get the boiler fixed. Male, 25-34, London An estate agent gave poor advice about valuation, marketing & presentation. There was also a conflict of interest... he eventually bought the house himself for a knock-down price, which he proceeded to gazunder a couple of days before completion. I am in the process of going through the formal complaints procedure, and currently the issue is sitting with the relevant ombudsman, for them to decide whether or not the complaint is within their remit. So the issue is currently unresolved. I ve found the whole situation extremely stressful and time-consuming. The buying and selling process is stressful enough, without the estate agent (who is supposed to be acting in my interest) not doing what I have engaged him to do. Female, 65+, Sheffield We owned a flat at the top of a two storey purpose built block, and water began coming in through the wall when it rained. I arranged for a damp survey after the housing association that owned the freehold and maintained the outside tried to tell me it was condensation. After nearly two years, two redecorations, lots of complaints, one set of re-plastering and some decoration vouchers, they finally replaced the tiles and sorted the damage to my flat out. Female, 25-34, Kidderminster I have made several complaints to the housing association which have not yet been fully resolved after 3 years. I have approached the Housing Ombudsman service and the Leaseholders Advisory Service... but neither were able to help me as an adjudicator as I am a freeholder This has resulted in me being stressed, losing sleep and not concentrating at work. Male, 55-64, North Somerset 8

9 Solutions - the consumer view As part of the Building Balance dialogue, consumers were given the opportunity to share suggestions for changes within the housing sector that would improve customer protection, reduce consumer detriment and help to prevent the issues that they experienced. Increased regulation Many consumers recommended the creation of a completely independent housing regulator, similar to Ofgem, Ofcom or the Solicitors Regulation Authority, with the ability to impose fines and sanctions. In addition, there were some specific suggestions for new legislation that could help to reduce incidence of some of the issues with New Build properties highlighted earlier. Stronger regulation with a universal code of practice. Female, 35-44, The Wirral The system should be more aligned to consumer protection legislation as there is an imbalance of power between the Home Builder and New Build Buyers. This imbalance is not currently addressed by existing complaints or redress schemes. There is therefore a lack of protection for [buyers]. Male, 55-64, Newcastle A housing watchdog that sets compulsory standards that if not met has the power to impose sanctions which actually have an adverse effect. Female, 45-54, Exeter perties New highlighted Build properties earlier. Building Balance received a number of suggestions, including changing the rules around house purchases so that a small portion of the balance is paid only after all snagging checks are complete, enforcing a time period for any issues to be fixed, extending the warranty on new build properties, and creating a New Build Ombudsman. 9

10 Better clarity on roles and rights One of the most common solutions put forward by consumers through the Building Balance dialogue is also one of the most straightforward. Consumers are confused about where to go when they have a complaint about housing, and want businesses to be transparent about their complaints handling processes. Clearer understanding about which area is covered by which redress provider, whether it s free to use, and when I can escalate a complaint to them. Female, 25-34, London Better information for the public. I was told housing tribunal was my only other option by the housing association I have a dispute with. They never even mentioned the housing ombudsman. No information given A simple step by [step] process which clearly indicates where to complain to first and how. I would prefer an online system, but I know that many... would not feel comfortable with this process. Female, 55-64, Worcester Failing a central scheme to complain to, the existing schemes need to advertise their services and consumers could do with more information about their rights. It s too easy for a housing or property firm to disengage and people don t know where to turn. Male, 25-34, Liverpool perties Signposting highlighted earlier. Many consumers also recommended better signposting, which according to our analysis only 12 per cent of companies do in accordance with the legal requirements of the Alternative Dispute Resolutions for Consumer Disputes regulations. In addition, 2016 data from Ombudsman Services: Property reveals that deadlock letters had been issued in fewer than half of cases it dealt with. A deadlock letter should be issued when a business has attempted to resolve a complaint to a customer s satisfaction and could not, or when eight weeks have passed since the initial complaint was raised and the customer in now eligible to take their complaint further. This is an essential part of the signposting process - without it, consumers are left to work out the complicated system for themselves. 10

11 Single ombudsman for housing Almost everyone (84%) who submitted to the dialogue thought it would be helpful to have one place to go to make a complaint about housing, with a number of people suggesting that a strong, independent ombudsman that can effectively hold companies to account would be the best approach. If there was such a service, many consumers suggested that it should provide an indication of how long the process should take and when and how they will receive a decision. A single housing ombudsman and a clear regulation and enforcement is required. It is like the Wild West in the housing market. The public don t stand a chance. There is no consumer advice body either. Male, 45-54, Rochdale There should be a one-place shop - somewhere that handles complaints across the sector. Female, 35-44, South East Have one ombudsman scheme who deals with all complaints, having some KPI s [performance indicators] and share these with the tenants. I have no idea how long I should wait for a response. Female, 45-54, Warrington A strong, independent ombudsman, who will ensure service providers are held to account. I would think the Financial Ombudsman could provide a good model. Male, 25-34, Stevenage I think an ombudsman with sight over housing associations, councils and private landlords could be very useful in identifying global abuses. Male, 45-54, Leamington Spa Stakeholder support perties highlighted earlier. In 2017, a report from MoneySavingExpert, produced on behalf of the All-Party Parliamentary Group on Consumer Protection, clearly argued that there should be only one ombudsman per consumer sector. The confusion created by multiple ombudsmen is the clear factor driving support for the single ombudsman model. Previous reports from both Citizens Advice (Confusion, Gaps and Overlaps: A consumer perspective on Alternative Dispute Resolution) and Richard Kirkham (Regulating ADR: Lessons from the UK) conclude that sectors with more than one provider are more confusing for consumers, mean that consumers are less likely to complain, and the fragmentation of data and insights limits their effectiveness. 11

12 Solutions - the industry view Single ombudsman for housing In addition to support from consumer advocacy groups, those working in the housing industry also support the single ombudsman model. There should be one scheme that all agents must be a member of. This scheme should be well publicised, so that all consumers know about it - and should know that all agents must belong to it. There should be an easy way for those consumers to check an agency is registered, as well as a way to report an agency that is not registered. It would be good to have one ombudsman that covered the whole market, and make the whole system faster. One single ombudsman with a panel of property experts / key stakeholders in an advisory capacity. One ombudsman would be a much better and more consistent form of complaint. Education and standardisation Like consumers, the housing market also recognises the need for a more consistent process, but many also suggest that there needs to be a drive to educate consumers on their rights, and make sure that the help available is well-publicised. Some industry wide guidelines and standardised processes for common complaints might be helpful. Balancing complaints and security of tenure is a very difficult balancing act for people - whether the complaint is [about] landlord actions or repair needs. Better clarity and free to tenant methods of resolving disputes are crucial. Most tenants, particularly the young and inexperienced expect to be treated badly by landlords or lettings agents, but don t have a clue about their rights or any forms of redress open to them. Their inexperience and lack of knowledge about who to ask, where to complain and when they ve got the right to is the issue. 12

13 Recommendations Ombudsman Services has developed the following recommendations using our own industry knowledge and the views and experiences shared by consumers and the industry as part of its Building Balance dialogue. 1 We recommend that the Ministry of Housing, Communities and Local Government takes the opportunity presented by its recent consultation on housing redress to review the whole sector, placing consumers at the heart in terms of common standards. This should include: A simple complaint journey when things go wrong Strong regulatory action when firms and individuals working in the sector do not meet the required standards Easy access to help and advice for consumers, particularly vulnerable consumers 2 A single ombudsman, backed by strong regulation and supported by advice and advocacy groups, can reduce confusion amongst consumers and take a 360-degree view of processes and problems, identifying issues across the sector and with individual companies, helping to tackle problems at the root. 3 There needs to be a more straightforward and consistent complaint journey for consumers in the housing sector. Along with a single ombudsman for the housing sector, we think there should be consistent standards that firms and individuals operating in the sector should comply with when handling a complaint to provide clarity for consumers, including making complaint procedures clear on all communications, bills and websites, as well as when a customer makes a complaint. 13

14 Recommendations 4 Any new single ombudsman scheme in the housing sector must adhere to the three specific roles of an ombudsman scheme. It s roles and responsibilities should be clearly set out, along with key performance indicators and service level agreements. Governance should be transparent and include a lay majority to ensure a high standard of service that is clear to both consumers and businesses. 5 In line with calls for strong regulation in the housing sector, a new single ombudsman for the housing sector should be underpinned by statute from the start. If the legislative timetable is too congested for that to happen immediately, then the option of a reserved powers model could be introduced, which would see statute come into effect in two or three years time. 6 The process of tendering for a single ombudsman in the housing sector should begin as soon as possible. With a high level of confusion amongst consumers, the sooner a new sole ombudsman is in place offering newfound clarity, the better. However, it is essential that the timeframe for implementation allows for a smooth transition, as firms transfer to the new ombudsman scheme and existing ombudsman and ADR schemes that are not appointed as single ombudsman wind down. 14

15 About Ombudsman Services Established in 2002, Ombudsman Services is a not-for-profit private limited company that runs a number of discrete national ombudsman schemes across a wide range of sectors including energy, communications and property. For consumers, we offer a free and accessible way of resolving complaints, with a focus on swift, impartial resolutions based on the overarching principle of fairness. We also use the insights and data we gather through casework and other sources to bring about wider improvements that deliver benefits to all consumers, not only those who have used our service. For businesses, we help to resolve disputes with consumers in a fast and non-adversarial way, helping with customer retention and brand loyalty. We look beyond individual companies to find broader trends that can be a source of innovation. We also use our expertise to help companies identify opportunities for improvement, which can sharpen competitiveness and help build reputation. Contact us Website 15

16 Methodology Building Balance: Restoring power to consumers in the housing sector was developed as part of Ombudsman Services strategy to improve consumer protection in the housing sector. This report was developed with the expertise of Ombudsman Services sector experts, consumer and industry experiences secured through the Building Balance dialogue, the findings of Ombudsman Services Consumer Action Monitor 2018 and additional market research. Building Balance dialogue Ombudsman Services collected views and experiences of consumers across the UK via an online survey hosted on a bespoke microsite. The site was open to responses from UK adults aged 18 and over for four weeks, between Friday 9 March and Thursday 5 April 2018, collecting 409 responses in total. These responses provided quantitative and qualitative data that has been used throughout this report. Responses were driven by media activity, stakeholder outreach and social media activity. Consumer Action Monitor 2018 The 2018 Consumer Action Monitor is the fifth annual report of its kind produced by Ombudsman Services. Research was commissioned by Ombudsman Services and carried out by ICM Research between 20 and 28 December The online omnibus surveyed a nationally representative sample of 4,168 adults across the UK, with quotas by gender, age and region. Additional market research In preparation for the launch of the Building Balance dialogue, Ombudsman Services commissioned Opinium Research to carry out a short omnibus survey of 2,002 UK adults. This research was undertaken between 23 and 26 February 2018 and the sample was weighted to reflect a nationally representative audience. For further information please contact: Third City OSteam@thirdcity.co.uk /

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