Persimmon addresses snags with 1.5pc homebuyer's retention
Persimmon announced on Thursday that it would become the first major UK housebuilder to adopt a policy of providing a homebuyer's retention, by writing into its standard contract that 1.5% of the total home value - equating to around 6% of the build fabric costs - could be withheld by the buyer's solicitor until any faults identified at the point of key release were resolved.
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The new policy comes hot on the heels of speculation that the FTSE 100 company could be blocked from participating in the government's Help to Buy scheme because of its sub-standard housing. The Help to Buy scheme represents over 55% of its annual completions.
Persimmon said the average amount withheld, based on its current selling prices, would be around £3,600 per home.
It said it had instructed its legal advisers to start work on drawing up the detail of its new standard contract, and expected the policy to be fully in place by the end of June.
“Persimmon is listening hard to all of its stakeholders and we hear the message that we need to continue to raise our game in customer care,” said Persimmon chief executive officer Dave Jenkinson.
“The initiatives we have already announced, including the action taken in the new year to deliver greater accuracy of anticipated moving in dates by adopting a more targeted approach to the phasing of sales on specific sites and the improvements and investments that we have made in our customer care team, operations and technology over the last few months are beginning to take effect.
“We are now accelerating the pace of change through the introduction of a contracted retention which will give homebuyers far greater satisfaction at the completion of the purchase.”
Jenkinson said moving into a new home should be a “positive experience”, enhanced by the benefits of a new build that was designed for modern living.
“We are determined that the experience is not overshadowed by teething problems and providing a homebuyer's retention is an important step towards achieving this.”
Roger Devlin, Persimmon's chairman, added that it was a “first” among the UK's large housebuilders.
“I hope [this] will lead the way in change across the sector.
“This move, and the urgency with which we will introduce it, is a clear and unambiguous signal of cultural and operational change at Persimmon, putting customer care at the very centre of the business.”
Persimmon shares fell more than 2% to 2,160p on Thursday.
Broker Goodbody estimated that at the upper end of the scale, assuming 50% of the retention fee is not recouped, this will be equivalent to circa 3% of group PBT.
Shore Capital analyst Robin Hardy said: "The danger for Persimmon is, we believe, that this will allow a far greater number of buyers to come forwards and demand that their new home is put right and this is likely to have an impact on margins.
"Additional costs will need to be incurred post-sale (this would likely to be the case in the early days of the scheme) but longer term more money will need to be spent on core construction and inspection costs."
For the wider sector this is also seen as a bearish development for the sector that will put pressure on working cash flows and margins.