What’s just happened?
While this year has undoubtedly been one for the history books, seeing a housing ‘boom’ is something many wouldn’t have predicted. However, it turns out that not only being cooped up with in-laws, parents, and partners has been a blessing for the stable family unit, it’s seemingly worked wonders for the property market too.
While it’s great to see a large part of the property market succeeding, is flipping secretly flawed?
What does this mean?
Though it was predicted that the property market would see an inevitable economic crash this year - from the national uncertainty surrounding job security - it seems time in lockdown has allowed for houses to be renovated, or ‘flipped’, and then sold again within a much shorter period of time.[1]
In a recent report, it was understood that the housing industry was experiencing a “12 year high with the majority of homes sold in England and Wales were those that had been bought, renovated, and sold again, all within 12 months.”[2]
Indeed, while the rest of us were binge watching our way through Netflix and Amazon Prime, those in the renovation sector were plastering their way through the pandemic.
Since the beginning of the year, one in every 40 homes that was sold in the UK was a renovated property, and in Burnley alone, it was one home in every 12 that had been flipped, all within 12 months.[3]
However, the UK isn’t the only nation seeing a substantial increase in flipped properties. In the United States of America, ‘flipping’ was described as the “pandemic-proof career” within the first 3 months of 2020, seeing a high of 7.5%, where houses that were sold were actually flipped homes, with an increase that had last been seen in 2006.[4] [5]
What is the impact on the legal sector?
Though home renovation may seem like the pandemic proof profession, there are many legal and ethical aspects that come into play that could ultimately leave a damaging effect on those purchasing the house, including first time buyers and home sellers.
While flipping is perfectly legal, one of the main legal and ethical aspects of flipping a property is to fix it rather than cover up any damage. Do you really want to be sued over a leaky roof? Selling a property is the same as selling any quality product, meaning that if you know a problem exists, the ethical responsibility is to remedy it, not to pretend it doesn’t exist in the hope the buyer never uncovers the real issue.[6] Or you could be facing court action from the buyer.
Covering up defects is just the tip of the iceberg for legal issues surrounding renovation.
Misselling has caught many renovators and house builders out in the past. Recently, Watch-Dog uncovered that the four largest home builders and renovators in England could see the inside of a courthouse, as opposed to a 3 bed-semi dethatched.
Ben Chapman of the Independent reported that there was ‘troubling evidence’ of misleading first-time home buyers, purchasers of leasehold properties, and renovated homes. The Competition and Markets Authority (CMA) has launched enforcement action into Barratt Development, Country Properties, Permission Homes and Taylor Wimpey, stating it is “unacceptable for housing developers and renovators to take advantage of homebuyers, and selling unfair, or mis-sold contracts will not be tolerated”, with further legal action being taken in the upcoming months. [7] [8]
Though this is an ongoing legal battle between the named groups and the CMA, the majority of renovated homes sold and purchased in the UK do meet the needs of the buyer. But if a leaky roof is taking the luxury out of your new property, then by all means seek legal advice.
Written by Emily Kavanagh
Assessing Firms:
#HowardKennedyLLP #TraversSmithLLP #MacFarlanesLLP #HoganLovells #HerbertSmithFreehills #DLAPiper #IrwinMitchell #BurgesSalmonLLP #White&CaseLLP #AkinGump #Bird&Bird #Dentons
References:
[1] Larry Elliot ‘House Price Boom Will Crash’ (The Guardian, 30th October 2020) <Accessed 22nd November > https://www.theguardian.com/money/2020/oct/30/uk-house-price-buyers-covid-stamp-duty-cut-property-market
[2] Joanna Partridge ‘Home Flipping in the UK reaches 12 year high despite Coronavirus’ (The Guardian, 23 November 2020) < Accessed 23rd November > https://www.theguardian.com/business/2020/nov/23/home-flipping-in-the-uk-reaches-12-year-high-despite-covid-crisis
[3] Joanna Partridge ‘Home Flipping in the UK reaches 12 year high despite Coronavirus’ (The Guardian, 23 November 2020) < Accessed 23rd November > https://www.theguardian.com/business/2020/nov/23/home-flipping-in-the-uk-reaches-12-year-high-despite-covid-crisi
[4] Tribune News Service ‘House Flipping seems to be a Pandemic-proof Career’ (Boston Herald, 10th August 2020) < Accessed 23rd November > https://www.bostonherald.com/2020/08/10/house-flipping-seems-to-be-pandemic-proof-career/
[5] Tribune News Service ‘House Flipping seems to be a Pandemic-proof Career’ (Boston Herald, 10th August 2020) < Accessed 23rd November > https://www.bostonherald.com/2020/08/10/house-flipping-seems-to-be-pandemic-proof-career/
[6] Ethan Roberts ‘Ethical Standers for Home Flippers’ (Auction.com, 15 November 2018) < Accessed 23 November > https://www.auction.com/blog/ethical-standards-for-home-flippers/
[7] Ben Chapamn ‘Housebuilders threatned with Court Action over Leasehold Scandal’ (The Independent, 4th September 2020) <Accessed 23rd November > https://www.independent.co.uk/news/business/news/leasehold-scandal-housebuilders-court-barrat-persimmon-taylor-wimpey-a9705386.html
[8] Ben Chapamn ‘Housebuilders threatned with Court Action over Leasehold Scandal’ (The Independent, 4th September 2020) <Accessed 23rd November > https://www.independent.co.uk/news/business/news/leasehold-scandal-housebuilders-court-barrat-persimmon-taylor-wimpey-a9705386.html
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.