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Guest Article: Shareholder Action!

By Pratik Patel

21 November 2019

About the author

I purchased a new build home from a national housebuilder in 2017. This article is based on my personal experiences following a disappointing response from the housebuilder to construction defects reported to them in line with their normal customer service policy.

I have prepared this article to be published by New Build Guru in the hope other new build owners find it useful in their own quest to get construction defects put right. I'm sure many buyers could use some help!

My Twitter handle is @Pratik70027029

Promises v Performance

One of the big draws for me when purchasing my new build home was the housebuilder’s assurances over construction quality and customer service. Their website, for example, stated “Our award-winning homes regularly achieve recognition for their design excellence, build quality and customer satisfaction”, and their sales team gave these and other assurances as we were negotiating the purchase. This all seemed credible and was backed by an HBF “five-star rating”. No doubt most housebuilders offer similar assurances.

In my case, however, the construction quality fell a long way short of what I was expecting (and was confirmed as substandard by my snagging surveyor) and I found the customer service I received when I brought these issues to their attention in the normal way to be appalling. Trying to get them to accept responsibility for defects was time consuming, stressful and largely fruitless.

How can you ensure that you get the construction quality and customer service you were promised? More to the point, how can you do this under your own steam and without incurring significant costs?

I have explored all sorts of options. This article deals with one that has worked well for me and which may offer other owners who are struggling to get defects put right a novel and effective way of getting their housebuilder’s attention and securing better outcomes for themselves.

Public Liability Companies & AGMs

If you have bought your new home from a plc housebuilder whose shares are publicly traded – as the majority of buyers these days will have done – you can easily and inexpensively become a shareholder with as little as a single share in the company.

As a shareholder you can attend the company’s Annual General Meeting (AGM). The AGM will normally be attended by senior executive and non-executive directors, institutional investors, financial analysts, journalists and others with an interest not only in how much profit the company has made (in the case of many national housebuilders, record amounts over the last few years) but also with the company’s general corporate governance, risk management, reputation and so on.

Institutional investors are also likely to have their own investment policies which may include requirements for companies in which they invest to comply with prevailing laws and regulations, industry best practice and so on, and they will be concerned to ensure the housebuilder is complying with these.

It does not matter that you hold only a single or small number of shares. Just like all the others present at the AGM, you have a right to put questions to the board during the AGM.

This is your opportunity to speak to the board about your personal experiences and ask them what they are going to do about it. More than that, it is your chance to do so in front of a very influential audience. You can be sure the board will be anxious to address your concerns in a way that the many interested parties present will consider appropriate. This can be particularly useful if you have been ignored by local management or forced to liaise with the housebuilder’s legal team, or otherwise found yourself battling with the housebuilder in ways that allow them to avoid outside scrutiny.

Preparing to speak at the AGM

You will be speaking as a shareholder, not just a customer. Your legitimate interests as a shareholder will be concerned with corporate governance, reputation, risk management and so on. Your experience as a customer will be relevant to why you have concerns over those things.

Prepare written questions to the board accordingly:

  • Set the scene. For example, explain that you held the company in high esteem before you bought your new home based on its prevailing reputation and assurances over quality and customer service etc., but that your experience as a customer has severely damaged your confidence in the company and that you no longer believe in their stated brand values. Give specific examples of why and how this has happened (e.g. poor construction quality and lack of action on reported defects). Say if you think your experience is typical of the company’s treatment of its customers generally rather than a one-off. Say if you are concerned about the company’s reputation being damaged e.g. by rising complaints by existing customers on social media or in the press, or by routine health and safety failings possibly leading to death or injury of its customers. Explain if you think the company’s refusal to deal with documented non-compliances with building regulations suggests poor corporate governance etc. If you have a surveyor’s report confirming relevant defects, this will help you focus on legitimate issues and avoid speculation which could be counterproductive. Be sure to take copies along and offer to distribute copies to the board as necessary.
  • Ask your question(s). For example, ask what the management will do to address your stated concerns. Ask if they will honour their marketing and brand promises of quality and customer service by making good on reported defects in your home without further delay and paying compensation or a goodwill gesture in recognition of their failings to you, to help restore your confidence in the brand. Ask if your outstanding issues can be assigned to a named person on site and for a named board member to take responsibility to ensure all matters are resolved satisfactorily. Maybe ask the board to review their quality and customer service policies and practices and report their findings at the next AGM.

Other tips:

  • Do some research on the issues you want to raise e.g. that you consider your situation to be typical, not a one-off, and reference it as you see fit. Try searching the company’s Twitter feed and see how many people are complaining of similar issues over a given period. Check out housebuilder-specific Facebook groups and make a note of the number of people who are signed up there and what the content reveals.
  • Read the company’s Annual Report (which will normally be published a few weeks before the AGM, and which will be a main focus of the AGM) and see if they address any of the issues you want to raise. If so, what are they saying about those issues? What do you want to say to them about that? If not, why not? Don’t be afraid to challenge them on lack of coverage in the Annual Report of the issues you are raising. Why are they not taking these things seriously or addressing them at the AGM?
  • Keep your questions relatively brief and short. If it takes you more than a couple of minutes to read your comments and ask your questions, your point may get lost or you may risk being cut off altogether.

On the day

Aim to arrive at least an hour early. You might get a chance to speak directly to a director before the AGM starts which could be informative. It should also ensure you have time to work out where you need to be, check with staff about timings and formalities once the AGM begins, etc.

You may be feeling angry and upset at the company. It is important you keep calm and don’t give the company any opportunity to eject you from the AGM. Being prepared and having written notes should help with this.

How & where to buy shares

A quick search of the internet will bring up numerous options and guides. A good starting point might be this article by Money Saving Expert:

https://www.moneysavingexpert.com/savings/cheap-online-sharedealing/

Popular investment platforms for buying your shareholding include Hargreaves Lansdown https://www.hl.co.uk/ (mentioned in the Money Saving Expert article). Other options include high street banks with brokerage services etc.

Timings; Proxy Forms

Be sure to buy your share(s) if possible at least a three or more weeks before the AGM, to ensure you are registered on the shareholder member register in time for the AGM and can deal with any administrative requirements there may be before then.

Beware if you hold the share(s) through a “nominee account”. If so, you will not be named as the legal owner of the share(s) in the company’s share register. You will not therefore be sent a copy of the Annual Report as of right – you’ll need to get a copy from their website. More to the point, you will not be on the company’s share register for the purposes of gaining entry to the AGM. For that, you will need a “proxy form” or “letter of representation” from the nominee account provider to confirm you are the beneficial owner and be sure to gain entry to the AGM. Check with whoever holds your shares for the right form and make sure you take it with you on the day.

Coordinated efforts

If you are planning to go to an AGM, speak to other affected neighbours and fellow residents on your development and/or customers from further afield, and see about joining forces. The impact you are likely to have at the AGM will normally be far greater if a number of you attend and raise similar issues. Among other things, the board – and audience generally – will find it harder to dismiss or minimise your concerns on the basis of being the exception rather than the norm. It will also speak to the likelihood of you continuing to raise the profile of your collective plight if they fail to address your concerns there and then.

Other shareholder perks

Being a shareholder may also give you other perks and benefits, such as a discount on the purchase price of a new home. Check with the broker or company when deciding what investment to make to get those perks, as they may be related to the number or value of your shareholding.

Further reading

Further information on shareholder activism can be found here:

https://shareaction.org/agm-activism/

https://shareaction.org/wp-content/uploads/2016/10/MissionAGMActivism.pdf

All the best, and good luck!

Pratik

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