There has been a lot of press recently around Andy Burnham's support for a new scheme that is designed to protect homeowners from cowboy builders. I suspect everyone has heard of the builder taking money and not finishing the intended works.  That is what the scheme is intended to prevent, but will it work?  In many cases yes; in others, no.

The Proposal

Builders and home improvement businesses will be able to participate in the Approved Code intended to demonstrate they meet certain standards.  It offers another check in addition to things like  Google reviews and trade checker websites that offer reviews of businesses.  It will indicate a business has agreed to operate within defined standards.

Whilst the proposal is good in theory, the biggest flaw is that it's voluntary.  The firms that are already good today will sign up and continue to offer good services.  The others will simply not register.  Infer from that what you will.  Are they not registering because they're not good, or are they not registering because this new scheme is more effort than it's worth?  That remains to be seen.

The biggest benefit for me is protecting the homeowner by protecting the money!

Protecting the money

Under the new scheme, the most interesting part is the Trusted Payments system.

Larger projects can require homeowners to hand over a large amount of money before work has been completed.  That, as we all know, creates risk.

Say you have a £60k extension project; that can lead to tens of thousands or, in some cases, the whole amount being paid to the builder on a trust basis, the work will be completed to the required standard and on time.  Not that I would ever recommend a builder receiving all, or even most, up front.  All it takes is for a builder to experience financial difficulties, abandon the project or simply disappear, and not only will getting the money back be difficult, but also getting the work completed.

Trusted Payments is a way to change the relationship.  Instead of handing over anything, the funds can be lodged with the Trusted Payments system, this gives the builder confidence the homeowner has the money in full, and it gives the homeowner the ability to release funds in stages.  For example:

Imagine a £60,000 extension:

• £10k — foundations completed
• £15k — structure/walls completed
• £15k — roof/windows completed
• £10k — first fix completed
• £10k — completion/sign-off

Each amount is released in stages.  If something goes wrong, you have only released money for completed stages.  This gives you greater control and reduces risk.  It resolves an important problem people don't always see.  Not every failed building project begins with someone intentionally defrauding a homeowner.  Cash flow is a major construction issue.  A builder takes money from Customer A and may use some of it to finish Customer B's project.  Money from Customer C is used to finish Customer A, and so on.  It all works until it doesnt.  All it takes is a delayed project or unexpected bill.

Will it really stop Cowboy Builders?

That's the headline claim after all: will it stop the cowboys?  As mentioned above, probably not.  Good builders are exactly that; they won't hesitate to sign up to a scheme that demonstrates they are good.  But as it's voluntary, the cowboys won't.  So the issues this scheme is trying to prevent will continue to exist outside of the new system.  A system that many homeowners, especially the vulnerable, will likely never know about.

Can consumers make it work?

This is where it could have significant impact.  If the scheme is good and works in the right way, consumers could be more likely to insist on using builders that are part of the scheme and use the Protected Payments system.

Not only consumers, but also mortgage lenders, insurers, letting/estate agents and others could require membership of the scheme.

Not being part of the scheme could be disadvantageous without it being compulsory.

Having said that, there are schemes out there, but they have little in the way of being able to apply punitive measures on poor builders. Until we see this new scheme in more detail, we won't know if it's any different.  The framework is still being developed.

For now, it's positive for sure, especially the Protected Payments system.  How far the scheme will go to protect and support homeowners remains to be seen.  One to watch.