Codes of conduct for house builders

In this article, we provide a reminder of the current framework which new build developers need to comply with under the Consumer Code for Home Builders and New Homes Quality Code.

 

The Consumer Code 

The Consumer Code for Home Builders (“the Consumer Code”) is applicable to the majority of housebuilders as compliance with the Consumer Code is a requirement of the main new home warranty providers, such as NHBC, LABC and Premier Guarantee.

The latest version of the Consumer Code came into force on 1st January 2024 and applies to all relevant homes reserved after that date.

The principal requirements of the Consumer Code impose various obligations on developers, including:

1. An obligation to return reservation fees if a buyer decides not to proceed during the 14 day cooling-off period, which starts on the date of reservation. Reasonable costs can be deducted provided that these are outlined to the Buyer in advance. Developers should consider setting out the relevant terms within their reservation form;
2. Providing protection for buyers deposits in the event of the developer suffering an insolvency prior to completion of the sale;
3. A prohibition on the use of ‘high-pressure’ sales tactics by developers;
4. An ability for a Buyer to withdraw from the purchase after exchange of contracts of a new home if the specification of the unit is significantly changed without the buyer’s agreement, or if there is an unreasonable construction delay;
5. Provision of appropriate “after-sales” assistance, including a complaints process. This is required for a period of up to two years after legal completion.

Failure to comply with the Consumer Code can result in various sanctions, including the developer being removed from the Consumer Code’s register, which may affect the developer’s ability to secure new homes warranty cover.

 

The New Homes Quality Code

In addition to the Consumer Code, developers have also had the ability to register with the New Homes Quality Board. Any developer who has registered with the New Homes Quality Board will be required to comply with the New Homes Quality Code (“NHQC”), and be subject to regulation by the New Homes Ombudsman Service in respect of alleged breaches of the NHQC.

As of 10^th April 2024, more than 50% of new homes sold are covered by the New Homes Quality Code which is principally attributable to the major UK house builders and many SME developers having opted to adopt the NHQC. A register of the house builders that have signed up to the NHQC is available to view online.

The NHQC requires developers and their agents must be aware of the Board’s additional requirements, which seek to prioritise the needs of buyers and to provide a fair and transparent sales process. The New Homes Quality Board.

The requirements of NHCQ are based on 10 fundamental principles covering matters from safety and quality to fairness and inclusivity, which developments should be aware of and understand before registered with NHCQ.

Whilst participation with the NHQC is not compulsory for developers, it has proven very popular with developers and consumers alike. It is anticipated that the uptake will continue to widen.

Developers who have signed up to the NHQC, must:

• Be vigilant for, and aware of the needs of vulnerable buyers;
• Offer a mandatory 14 day cooling off period;
• Provide a reasonable period of not less than 6 weeks from the date of reservation to exchange of contracts;
• Give buyers the opportunity to carry out a pre-completion inspection of their new home with a suitably qualified inspector;
• Provide after-sales assistance for at least 2 years following completion to deal with snagging, complaints and emergency issues.

Developers can also view further details online. 

A breach of the NHQC, or a dispute which has not otherwise been resolved, could lead to a matter being brought to the New Homes Ombudsman Service. The Ombudsman has the power to review complaints and impose sanctions and remedies which can range from requiring the developer apologise and provide explanations to the buyer, correct a defect or paying compensation of up to £75,000. The Ombudsman also has the power to require a developer to take other remedial action that the Ombudsman considers appropriate.

 

Conclusion on codes of conduct for housebuilders

Both schemes reflect the increased self-regulation of the industry, providing greater consumer protections for buyers and an associated increase in regulation for housebuilders. Whilst housebuilders may find the additional regulation burdensome, many of the requirements reflect good practice which many housebuilders will comply with in any event. The industry may reflect that this self-regulation is more acceptable than regulation, which may instead be unilaterally imposed by Government.

 

We can help

If you would like to discuss any requirements related to the sale of new build properties, please contact William Nassau-Lake or Steph Richards within our Development and House Building team on [email protected].

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