House builders 'should drop appalling gagging orders'

By Dan Whitworth
Money Box reporter

Published
image copyrightJames Thomas
image captionClive Betts MP says house developers should stop using "appalling" gagging orders

House builders that carry out repairs on newly built homes need to be more open about what work has been required, according to the chairman of Parliament's Housing Committee.

Some home owners say they were asked to sign non-disclosure agreements (NDAs) as a condition of repairs being done.

The practice was "appalling", Clive Betts MP told Radio 4's Money Box programme.

The Home Builders Federation said NDAs were "not widely used" by developers.

Mr Betts said housebuilders should be obliged to inform home owners when systematic defects were identified that might affect their property, which he said would be normal practice in other areas.

"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 it should be any different when it comes to buying houses," he said.

It is hard to establish an accurate, independent picture of how common such NDAs are. People who have signed them are worried about speaking out because of the threat of legal action.

But Money Box spoke to several industry experts who said these gagging orders were used regularly.

'Despicable practice'

Chris Blythe, former chief executive of the Chartered Institute of Building, said it was "quite common" for developers to use them.

"Unfortunately, because of the nature of the agreement, ie non-disclosure, no-one knows very much about it," he said.

"But it's done for commercial reasons, because if it became known on a particular development that there are problems, other house buyers would be asking the house builder to do remedial work [for them too].

"So they use these to silence people... and it's a despicable practice."

About 250,000 new houses were built in Britain, according to the latest annual figures, and defects in new-build houses are common.

Many are minor and fixed without any problems, but serious defects can cost thousands of pounds to put right.

These include things like poor brickwork, faulty foundations, problems with windows and external doors, structural weaknesses with roofs and issues with plumbing and sewerage systems.

When remedial works cost such large sums of money, developers sometimes delay carrying out work, Money Box was told. The programme was also told of cases where developers fought home owners for years and refused to carry out remedial works at all.

Hidden risk

Geoff Peter is a solicitor and founded Wingrove Law to help homeowners who bought houses and later discovered serious defects with their properties.

"Non-disclosure agreements... are of no practical benefit or use to homeowners," he said.

"The effects of them when they're used at scale, as they are in the [house building] industry, is really just to keep a lid on the true nature and scale of problems.

"So it's really impossible for... the buying public, to have any real idea of the risks they are taking when they buy a new build property... because there's no reliable source of information as to the nature and scale of the problems that they're likely to encounter."

When asked about NDAs industry body, the Home Builders Federation, said: "Settlement Agreements are legal contracts that are used by businesses across all sectors.

"They are not widely used by housebuilders and when they are, it tends to be with regards to details of compensation payments, sometimes at the request of the customer."

If you've been asked to sign a non-disclosure agreement as a condition of getting repair work done to your newbuild house email us in confidence at moneybox@bbc.co.uk and tell us about your experience.

You can hear more on BBC Radio 4's Money Box programme on Saturday at 12pm on Radio 4 or by listening again here shortly after broadcast.

Follow Money Box and Dan on Twitter.

More on this story