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Housing: construction defects
Standard Note: SN/SP/2030
Last updated:
14 April 2011
Author: Wendy
Wilson

Social Policy Section

This note provides background on the scheme of assistance that was set up for people who
bought public sector housing that was subsequently found to be defective (usually
constructed using non-traditional methods). As this scheme has now ended the note discusses
other possible options for owners of these properties.

Contents
A.
Part XVI of the 1985 Housing Act
2
B.
Non-designated & designated properties after the scheme
3
C.
Failure to disclose the existence of a defect
5
D.
Tenanted properties
5
E.
Getting a mortgage
5

Standard Notes are compiled for the benefit of Members of Parliament and their personal staff. Authors are
available to discuss the contents of these papers with Members and their staff but cannot advise others.

A.
Part XVI of the 1985 Housing Act
The post-war housing shortage led to a boom in new ‘non-traditional’ methods of house
construction which were mainly taken up by local and public authorities. In the early 1980s
studies carried out by the Building Research Establishment revealed problems with some of
these methods, for example, where prefabricated reinforced concrete had been used it was
found that steel reinforcing rods had rusted causing the surrounding concrete to crack.

In 1984 the Government introduced a statutory scheme of assistance for people who had
purchased a 'designated defective' type of property from a public authority without
knowledge of the defect. The 1984 Housing Defects Act, which was later consolidated into
Part XVI of the 1985 Housing Act, provided for a 90% grant towards the cost of repairing the
defect, subject to an expenditure limit, or repurchase at 95% of the defect free value.

The following types of properties were ‘designated defective’ by the Secretary of State:

Type
Cut-off
date
Airey
8.9.82
Boot
26.4.84
Boswell   23.12.86
*Cornish Unit (1)
26.4.84
+Cornish Unit (2)
26.4.84
*Dorran (1)

26.4.84
+Dorran (2)

26.4.84
Dyke
26.4.84
Gregory   26.4.84
*Myton (1)

26.4.84
+Myton (2)

26.4.84
*Newland (1)
26.4.84
+Newland (2)
26.4.84
Orlit
26.4.84
Parkinson   26.4.84
Reema Hollow Panel 26.4.84
Schindler &
Hawksley SGS
26.4.84
Smith
19.12.85
Stent
26.4.84
Stonecrete
26.4.84
*Tarran (1)

26.4.84
+Tarran (2)

26.4.84
Underdown
26.4.84
*Unity & Butterley (1) 26.4.84
+Unity & Butterley (2) 26.4.84
Waller
26.4.84
Wates
26.4.84
*Wessex (1)
26.4.84
+Wessex (2)
26.4.84
Winget
26.4.84
Woolaway
26.4.84
2

link to page 3 * PRC components in ground storey only
+ PRC components in ground and first storey

The cut of date represents the date by which the defects in a particular type of designated
property became generally known. To be eligible for assistance the owner must have bought
the property:

• Before the cut off date; or
• Within 12 months of that date, provided that the purchaser bought in ignorance of the
designated defect and at a price which did not take proper account of it.

Properties were only designated if they were defective by reason of their design or
construction and their value had been reduced substantially because the defects had become
generally known. Designation was reserved for serious inherent defects that owners,
councils, or professional advisors could not have known about on survey, sale or purchase. In
addition to the national designation of the property types listed above, local authorities had
the power to designate some local property types.

Local authorities estimated that owners of around 31,000 properties would qualify for
assistance under the statutory scheme.1

The Housing Defects scheme has now ended; the last date by which owners of most
designated dwelling types could apply for assistance was 30 November 1994. Owners of
Smith properties had until 30 April 1996 and Boswell owners until 7 April 1997. Department
of the Environment Circular 3/94 advised local authorities with outstanding statutory
obligations of the need to ensure that they had taken reasonable steps to inform all owners
who were potentially eligible for assistance of their right to apply under the scheme. The
Circular noted that over 90% of eligible owners had already been assisted under the scheme
by February 1994.

B.
Non-designated & designated properties after the scheme
Aside from those ‘designated defective’ construction methods there are other similar methods
of construction that were used by local authorities around the same period that were not
designated by the Secretary of State. Some people have also bought a ‘designated defective’
property after the cut-off date for claiming assistance with knowledge of the existence of the
defect.

The question of assistance for ex-tenants who have bought one of these properties has been
raised in parliamentary questions:

Dr. Tonge: To ask the Secretary of State for the Environment, Transport and the
Regions if the Government will take steps to assist people who have bought their
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link to page 4 link to page 4 link to page 4 council houses and subsequently find them to have major structural defects; and if he
will ensure that they are eligible to apply for home improvement loans from their
local council.

Mr. Raynsford: Local authorities already give grants for repairs to owner occupiers.
Renovation grant under Part I of the Housing Grants, Construction and Regeneration
Act 1996 is available at the authority's discretion for making property fit and for other
works of repair or improvement which go beyond making a property fit. Such grants
are subject to a means test. Under separate provisions, certain classes of defective
properties, designated as defective under sections 528 or 559 of the Housing Act
1985, are eligible for assistance under Part XVI of that Act. However, works to
address the defects in such properties are not eligible for grant under the 1996 Act.2

Local authorities’ powers to offer grants under the 1996 Act have now been replaced by
wider powers to provide assistance under The Regulatory Reform (Housing Assistance)
(England and Wales) Order 2002 (see below).

Governments have consistently refused to provide additional assistance for people who find
that they cannot ‘sell on’ their homes:

Gordon Prentice: To ask the Secretary of State for the Environment if he will take
further measures to aid financially persons who knowingly purchased defective
houses under the right to buy scheme and who now find they cannot sell them on.

Sir George Young: No. The housing defects legislation – part XVI of the Housing
Act 1985 – compensates people who purchased designated defective house types
from public sector landlords before it was known that they contained serious inherent
structural defects, and who paid a price which did not reflect the existence of the
defects. People who knowingly purchase defective houses do so at their own risk, and
the purchase price should take account of the defects.3

As noted above, local authorities have been given new powers to assist owner occupiers in
carrying out improvement works to their homes under The Regulatory Reform (Housing
Assistance) (England and Wales) Order 2002. Details are contained in the Library standard
note,  Assistance to improve/repair private sector housing.4 The Coalition Government
discontinued funding for the private sector renewal programme with effect  from
March 2011.

Local authorities can buy-back properties from ex-tenants. Changes made to regulation 104
of the Local Authorities (Capital Finance) Regulations with effect from 1 April 1999
improved the financial viability of this option but it still remains at the discretion of the local
authority.


1   HC Deb 14 June 1994 c343W
2   HC Deb 18 November 1997 c137W
3   HC Deb 11 January 1994 c5W
4   SN/SP/1617
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link to page 5 link to page 5 link to page 5 C.
Failure to disclose the existence of a defect
A 2001 Court of Appeal case established that councils can be liable for damages for breach of
statutory duty where they fail to give full information to tenants exercising the right to buy of
the defects present in the property being purchased.5 However, if a tenant is made fully aware
of the defects present in a dwelling and goes ahead with the purchase there are no schemes of
assistance in existence to help them (other than persuading the council to buy the property
back) if they later find that they have difficulties selling because of the construction method
used.

D.
Tenanted properties
There are no specific schemes that have been developed to give financial support to tenants
of ‘designated defective’ dwellings who want to exercise the right to buy. Local authorities
are not obliged to carry out structural works in order to bring the properties up to a
mortgageable standard to enable tenants to exercise the right to buy. Department of the
Environment housing booklet 18, Designated Defective Housing,6 noted that: 'The properties
are usually quite safe to live in without full scale repair. Councils are therefore free to reach
their own decision on the repairs and improvements (if any) needed to their rented stock, in
the normal way'.

Requests to allow local authorities to issue mortgages to enable tenants of designated
defective homes to buy their homes have been rejected in the past:

Gordon Prentice: To ask the Secretary of State for the Environment if he will
provide additional resources to local authorities that wish to offer mortgages to
tenants who wish to buy homes which have been designated as defective.

Robert B Jones: There are no plans to make additional resources available to local
authorities for this purpose. Local housing authorities receive a housing investment
programme allocation each year. It is for each authority to decide how best to use this
allocation to meet local housing needs.7

E.
Getting a mortgage
Tenants and prospective owners of designated defective properties that have been repaired
under the 1985 Act and other, non-designated property types, sometimes experience
difficulty in getting a mortgage to buy these properties. Lenders are free to decide which
properties they will and will not offer a mortgage on; a survey of the largest building societies
carried out in 1986 by the Building Societies Association “suggested that almost all will
consider, subject to normal conditions and valuation, an application for mortgage on a

5   See Rushton v Worcester CC [2001] EWCA Civ 367. CA, June 2001, Legal Action
6   April 1994
7   HC Deb 25 January 1995 c208W
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link to page 6 defective house repaired under the housing defects legislation. Generally this remains the
position today.”8

8 HC Deb 26 April 1995 c534W
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