On 17 December, the New Homes Quality Code was published by the New Homes Quality Board. The Board, which is an independent body, was set up at the beginning of 2021 to "champion quality new homes and better consumer outcomes for buyers".
From January 2022, housebuilders will be expected to register with the Board, complete training and ensure they have the necessary complaints and other procedures in place to meet the requirements of the Code (see below). Developers must register by no later than 31 December 2022. Regional subsidiaries can be activated at different times, depending on their readiness to transition to the new arrangements. During the transitional period during which registrations are permitted to take place, developers must clearly advise customers whether the provisions of the Code apply to them. The new Code will replace the current Consumer Code for Home Builders.
Aims of the New Code
The new Code aims to drive up the quality of new build homes and strengthen protections for customers, address the gaps in existing protections. An earlier draft of the code was consulted on in the summer.
The new Consumer Code aims to ensure that every aspect of a new home purchase is covered for the first two years following completion.
At a glance
The new Code:
- protects vulnerable customers, prohibits high pressure selling and requires any deposit the customer pays to their builder to be protected;
- requires the builder to provide all relevant information about the home during the sales process - including its tenure and any future management or service charges - that allows the customer to make an informed decision about their purchase;
- sets out requirements for a fair reservation agreement, including a 'cooling off' period, and sales contract requirements;
- allows the customer to have a "suitably qualified inspector" carry out a pre-completion inspection of their home on their behalf if they wish (against a standard form Pre-Completion Template);
- specifies that a home must be 'complete', preventing builders paying customers to move into a new home early;
- requires builders to have an effective after-care service in place to deal with any issues or 'snagging' problems customers have with their new home;
- requires builders to have a robust complaints process that responds to customers' concerns in a timely manner. Should a customer not be satisfied with how their complaint is dealt with, they will be able to refer their case to the new independent New Homes Ombudsman Service.
Things to note
Many major housebuilders have already changed their policies and procedures to enhance their customer journey. However, the new Code will require changes to standard form documents (for example reservation agreements and checklists, agreements for extras and contracts for sale) and to processes for building and selling new build properties. There is also a decision to be made about when to register and adopt the new Code (and whether to do it on a region-by-region basis). We anticipate that as publicity about the new Code increases that customers will expect their purchase to be dealt with by the new Code (rather than the existing Consumer Code).
We will be conducting a more thorough analysis of the new Code in due course, but there are a number of provisions which have already caught our eye. In particular:
1. Adoption by regional subsidiaries
Helpfully, the Code has confirmed that housebuilders are not obliged to register their entire business at once. Instead, a housebuilder can choose to register each regional office (or even development-specific subsidiaries) separately. However, it is worth noting that the Code does expect the entire business to be registered on or before the end of the transition period (i.e. 31 December 2022).
This will come as welcome news to housebuilders, as it means a single region or development can be used to trial the implementation of the Code and address any underlying issues before implementing the Code nationwide. However, not implementing the Code to a particular region or development will likely be unattractive to customers who are aware of the protection it intends to provide them. This lack of implementation may also have reputational implications if customers interpret this as an unwillingness by the housebuilder to accept the new Code with open arms.
2. Vulnerable customers
One of the fundamental principles of the new Code is that housebuilders should take steps to identify and support vulnerable customers. The new Code requires developers to take the lead on identifying vulnerable customers - which could lead to potentially difficult conversations in the sales office. Our suggestion would be that including a question about whether a customer considers themselves to be vulnerable should be included on the reservation form to save any issues in the future.
3. Pre-completion snagging checks
One of the more contentious points to come out of the consultation about the draft Code was the idea of pre-completion snagging checks. The final text of the new Code has tightened up the wording around pre-completion snagging checks. It allows the customer (and/or a "suitably qualified inspector") to visit the property before completion and from 5 calendar days after the Notice to Complete has been served. Importantly (and in a departure from the draft provided before the consultation) the new Code now makes provision for a Template Pre-Completion Inspection Checklist which is the only checklist which can be used for the pre-completion check.
Helpfully (and in response to comments which we, amongst others, made on the consultation) the new Code also clarifies that the Pre-Completion Inspection Checklist does not operate to delay or prevent completion. We are yet to see a copy of the checklist.
The new Code (in the Developer Guidance) does now set out what it means by a "suitably qualified inspector" (which was another concern which we flagged in the consultation). They must:
a. Be a member of a recognised professional association undertaking surveying services in the residential housing sector;
b. Hold relevant PI insurance; and
c. Only work within their competency (query how this will be assessed or enforced!).
4. Complaints procedure and the New Homes Ombudsman
The new Code also makes provision for minimum steps that must now be incorporated into all complaints procedures.
In summary, the new Code requires housebuilders to send a written acknowledgment of the complaint to the customer within five calendar days of receipt and to update the customer in writing no later than day 10, day 30 and day 56 from receipt of the complaint. Thereafter, there is an obligation requiring the housebuilder to provide frequent updates to the customer for the duration of the complaints process until resolution, which must not be more than 28 days apart.
Should the complaint remain unresolved the house builder must send a closure letter to the customer. This letter must include (i) a list of the complaints that are resolved (if any) / that are outstanding (ii) details on how the customer can refer this matter to the New Homes Ombudsman Service.
It is then open to the customer to refer their unsolved complaint to the New Homes Ombudsman Service for determination. The decision when or if the complaint is accepts sits with the New Homes Ombudsman Service.
Here to help
We are planning a series of training sessions for legal, sales and customer care teams in the New Year. In the meantime if you have any queries about the new Code or how it will apply to your business, please contact our dedicated team of housebuilder litigation lawyers.
To get further detailed analysis on the New Homes Quality Code, as well as information on training sessions and other events, subscribe to our mailing list.