So, the argument goes a little like this: in what is universally regarded as a ‘challenging’ market, after care is perceived to be a luxury many developers conclude they simply cannot afford. And I get this. After care does not directly generate income, it is a cost centre and so detracts from the bottom line. I also get that every developer must keep a tight grip on overheads. But it’s no more a luxury than bricks and mortar, windows and doors and a roof. You can’t build a house without buying materials but, I hear you say, “surely you can sell a house without after care, can’t you?”
Of course you can. But it won’t save you a penny. Likely, it will cost you a great deal more than would the service itself. How so?
Well, there are good reasons and after two decades of providing after care for new homes developers, we’re well qualified to explain this, so here we go:
CONTRACTORS
Construction was the biggest contributor to total insolvencies across the overall economy in 2022, accounting for 18.8% (4,354) of total insolvencies. There were increases in the number of insolvencies in construction, which was up 59.4% from 2021. There is clearly a growing resource issue which impacts on the sector’s ability to deliver a ‘snag-free’ property. There’s nothing worse than a purchaser moving into a brand-new home to find 30-50 snags which take up to a year (sometimes longer) to fix. It is the absolute pits, and no homeowner will put up with this (nor should they).
Yet hardly a developer has escaped unscathed by this blight. Here’s what commonly goes wrong:
A contractor leaves site with a shipping list of snags they have failed to address pre-legal completion and then refuses to return to make good.
A sub-contractor folds before they have finished the site.
A main contractor folds before they have finished the site.
In all instances, the watchful and guiding hand of an experienced after care team is essential. Fixing any of these issues can be complex and won’t be achieved on a part-time/inexperienced basis.
PURCHASERS
Consumers generally (and new home buyers specifically) have evolved – a great deal. The world we live in has shaped us all into more demanding, less forgiving customers. We know our rights and we’re not willing to be trampled on. If something is wrong, we expect it to be fixed … NOW!
We know what we want, and we know when we want it. Expectations have risen and continue to rise against a backdrop largely of disappointment. It is rare to read or hear about excellent customer service, yet common to dwell on the misery of this story and that, where someone has been let down or badly treated. And let’s not ignore the fact that buying a house is almost certainly the single greatest purchase most of us will ever make in a lifetime. So, isn’t it reasonable that the experience of this process should be one of the most enjoyable, and positive?
SOCIAL MEDIA
In times gone by, a brave consumer with an axe to grind might have been heard to say, “I’ll go to the newspapers!” Yet rarely did they, because for the most part, few publishers were that interested in what they considered to be a petty grievance.
But now, we’re all publishers and can talk about anything to everyone – instantly and freely. There is a choice of digital platform by which we can air our frustrations, and every day millions do exactly that, very often without evidence, proof, or factual accuracy of their protestations. And the damage is immediate and long lasting. Once a digital message has been created, it remains in the digital world in perpetuity.
INDUSTRY CODE
Your business might not have subscribed to the New Homes Quality Code (and may never) but it almost doesn’t matter, because the noise that the NHQB has been able to create over the last few years has re-invigorated the issue of quality and service, across the industry. If you are a member and you have a problem, your customer will look to the Code to understand what redress they possess. If you’re not a member, maybe your customer will ask the question, “Why not?”
WARRANTY PROVIDER
Aside from all the above, every warranty provider expects (as a minimum) that you provide reliable after care i.e. when a legitimate defect is reported in the first two years, it is dealt with in a prompt and professional way.
So, where is your thinking now? Still believe you don’t need after care. Let’s just review the risk:
Contractors and snags -
Any purchaser starting with snags will be harder to handle over the Builder’s Rectification Period because you began by letting them down.
Purchaser expectations -
They know what they want and when they want it – they’re not prepared to accept disappointment.
·
Social media and harmful digital content -
Complaints quickly emerge and gather momentum as other occupants with similar issues will willingly add their weight.
Code and warranty compliance -
The NHQB has created a code and introduced an ombudsman while all warranty providers impose a degree of contractual obligation.
LET’S BE CLEAR ABOUT WHAT WE MEAN BY AFTER CARE Effective after care must be:
A permanent, full-time resource consisting of no less than two people (phone cover, absenteeism, training, lunch hours, holidays etc.).
Leaving a stick-it note on the Construction Director’s desk is not managing the defect process.
Trained - i.e., your team must know the difference between a legitimate build defect and everything else. They must know what questions to ask and how to create a detailed job instruction for a contractor.
Do they fully understand the relevant warranty build standards?
There must be a dedicated CRM system designed to handle the recording, reporting and management of defects.
Word and Excel spreadsheets won’t cut it.
A ‘joined up’ process to capture, manage and progress a defect must be established and followed.
There are critical deadlines to adhere by.
This is a basic template for any business thinking of setting up an internal after care resource. It’s not a job share, it’s a dedicated, trained resource with enabling systems and software capable of reporting the status of multiple plots/developments at any point in time while handling a wide range of contractors. This is a department with a budget that must be managed and be accountable for the provision of after care to all a developer’s customers.
WHAT THIS BASIC SET UP WOULD COST A DEVELOPER At the new national living wage, the salary (including employers NI and pension contributions) is £26K. Two people for 2 years (after care per plot) is £104K, so on people alone here’s a simple cost analysis:
Plots | Cost per plot | Saving | |
pa | Developer | After Build | Per plot |
5 | £20,844 | £528 | £20,316 |
10 | £10,422 | £506 | £9,916 |
25 | £4,168 | £468 | £3,700 |
50 | £2,084 | £400 | £1,684 |
100 | £1,042 | £300 | £742 |
200 | £521 | £253 | £268 |
The argument that, as annual output increases beyond 200 the developer’s cost per plot becomes less, is flawed because at that volume you would need more than 2 people. AFTER BUILD After Build has been providing fixed price after care for 21 years and has developer clients across the UK. We specialise in SME businesses with an annual build output of anything up to 1,000 plots. Fixed price simply means that we charge a fee per plot to provide the cover you require and handle as many defects as are reported over the 2 years. So, a developer knows how much our service will cost from day 1; and that’s important.
COST What’s the cost? From as little as 0.08% (£220) of the retail value of the average home* … 0.08% - that’s less than a tenth of a percent. Why on earth would any business owner consider that to be either expensive or unnecessary? That’s 30 pence a day - you couldn’t buy a cup of coffee for that. What does 30 pence a day buy? The best people and the latest technology to manage occupant calls for 730 days (and this includes out of hours emergency registration) and over two decades of after care knowledge and experience. We manage the homeowner and organise the original contractors to make good all legitimate defects.
CONCLUSION After care is a fundamental aspect of new homes development. It is essential and needs to be a trained, dedicated resource with the capability of scaling up to manage … anything!
Setting up an internal after care resource is high for the SME developer. It requires a flexible and accommodating budget, space, recruitment, training, and ongoing management. All of which are excellent reasons to outsource this critical component of your business model.
*Source: UK House Price Index February 2024 (£280,000)
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