Swedish watchdog slams home builder contracts
TT/Vivian Tse · 28 Dec 2010, 16:36
Published: 28 Dec 2010 16:36 GMT+01:00
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The Swedish Consumer Agency (Konsumentverket) scrutinised 15 single-unit house builders over allegations of unfair contract terms. The 15 companies represent about 80 percent of small house production in Sweden.
In most cases, the contracts run contrary to existing legislation. The agency has now demanded the industry clean itself up or face legal consequences.
"It is unclear whether the housing companies are ignorant of the laws and current legal situation or if they simply ignore it. It is very serious," Gunnar Larsson, director general of the agency and the the Consumer Ombudsman (Konsumentsombudsmannen, KO), said in a statement on Tuesday.
"This implies that the entire industry shape up or we will be forced to take legal measures to resolve the problems," he added.
About 7,000 self-contained homes are built in Sweden every year.
According to the agency, conditions should be fair and there should be a balance between consumer and the homebuilder. However, the agency's review of the terms offered by Sweden's 15 largest home builders showed that none of the companies live to these standards.
"It is deplorable," said Mari Gremlin, an agency lawyer.
The agency highlighted the nine terms that are unfair and directly contrary to law. All the terms restricted consumer rights in different ways in relation to the home builders.
A common and illegal term is the appointment of the surveyor by the insurer. When a consumer buys a single-family home, it often includes faulty construction coverage. Switching can be expensive for the consumer.
After passing the final inspection, there are often some construction faults that exist. As such, consumers have the legal right to withhold the final installment to the firm to ensure their demands.
"However, there are conditions that say one must immediately pay the final sum," noted Gremlin.
In some cases, the claim is valid for only seven days. By law, contracts should last up to two months after the fault has been detected.
In addition, 13 of the 15 companies have terms stating that prices will increase according to a delay index - regardless of who caused it.
"The consumer suffers, both in waiting for a delayed house and getting a price increase," said Gremlin.
Kent Johansson, CEO of Älvsbyhus, one of the companies scrutinised and criticised by agency, could not explain why there are many gaps in the industry.
"Our agreements, and almost the entire industry's, have been like this, for many years," he said.
However, he pledged to follow through with the agency's recommendations.
"We will try to find the points that concern us and we will simply make the changes that we believe that the Consumer Agency wants," said Johansson.
The agency will follow up with the companies in the spring and review the terms.
"If they have not changed, we will demand that they do so. If they do not do it voluntarily, it may go to market court," said Gremlin.
The Swedish Homeowners Association (Villaägarnas Riksförbund) recommends getting professional help when buying a house from a construction consultant or specialist lawyer.
"This is really bad. You cannot go in and buy a house and believe that the agreement presented under your nose is the most optimal for you," said the association's chef lawyer Ulf Stenberg.