Consumer Code for Home Builders: A Summary

What is the Code for Home Builders Scheme?

The Code for Home Builders Scheme (‘the Code’) came into force on 1 April 2010.

It was formed by agreement between NHBC and MD Insurance Services Ltd (trading as Premier Guarantee) and LABC New Home Warranty. These organisations have agreed that builders and developers registered with them will adopt the Code.

The Code is a voluntary code of practice; however its requirements are mandatory for those who are registered with one of the home warranty providers listed above.

The purpose of the Code

To provide buyers with additional protection and ensure that buyers:

are treated fairly;
know what service levels to expect;
are given reliable information upon which to make their decisions; and
know how to access speedy, low-cost dispute-resolution arrangements if they are dissatisfied.

The Code provides an alternative source of redress for a buyer which goes beyond the cover provided by the home warranty schemes participating in the Code, and in certain circumstances it will enable a buyer to get a remedy without having to take court action against the developer.

Penalties for Non-Compliance

Failure of a participating builder or developer to comply with the Code can result in the home warranty providers applying a range of sanctions which include:

Removal from the home warranty provider’s register
Exclusion from the registers run by other participating home warranty providers

A builder or developer remains liable for an award, even if they are removed from a home warranty provider’s register.

A Buyer’s Right to Complain – the Complaint’s Procedure

If a buyer has the benefit of the Code and there has been a breach, the buyer must make a complaint within two years from the start date of the home warranty cover. The initial fee for making a complaint is £100 + VAT; however this increases to £300 +VAT if adjudication is required.

The buyer should initially complain to the participating builder or developer. If the buyer is not satisfied then they should then contact the home warranty provider. If the complaint cannot be adequately dealt with by the provider then the provider must offer the buyer the opportunity to have the matter referred to the independent disputed resolution scheme. Disputes are resolved through an adjudication process which is summarised in Appendix A to the Code.

If the claim is not rejected by the adjudicator then the following awards can be made:

A performance award ordering the builder or developer to take some positive step
A financial award ordering a builder or developer to pay a sum of money to the buyer
A combination of a performance award and a financial award

The maximum value of an award under the Code is limited to £15k (inclusive of VAT).

The buyer has no right of appeal against the decision of the adjudicator.

The Code does not apply to:

Personal Injury Claims
Loss of property value or blight
Claims relating to land conveyed and its registered area
Claims where the amount claimed exceeds £15k

Who Can Benefit from the Code?

Buyers either reserving or buying a property from a builder or developer that is registered with one of the home warranty providers on or after 1 April 2010 can benefit from the Code, provided the following do not apply:

A buyer will not be able to benefit if they are:

A registered social landlord
A corporate body
A partnership
Buying for investment purposes

The Code does not apply to the following properties:

New houses and flats that are purchased from builders and developers who are not registered with one of the home warranty providers
Second-hand properties that a builder or developer takes in part exchange and subsequently sells
Properties built by self-builders for their own occupation
Properties built under architects certificates

Practical steps builders and developers should take

Participating builders and developers should ensure that they do the following:

Familiarise themselves with Code requirements
Review standard brochures and supporting literature, reservation agreements and precedent sales contracts
Seek legal advice to ensure documents are Code compliant.

Further Information

Click here to visit the website for the Consumer Code for Home Builders.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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